WGU - D076 QUESTION AND ANSWER RATED A+

WGU - D076 QUESTION AND ANSWER RATED A+ Terms in this set (112) What area of finance involves deciding which assets to invest in to create wealth in the future? Investments Hannah is the financial manager of a firm. A project that she has recommended has been approved and will cost $5 million. Since the company does not have enough cash on reserve, Hannah must figure out how to raise enough money to start the project. She can choose whether to issue new bonds, new stocks, a mortgage loan, or some combination of those options. What task is Hannah performing in this scenario? Making a financing decision - Since the project has already been approved, Hannah is trying to find a way to finance the investment and considering its capital structure. 0 / 1 Maria and Mateo are setting financial goals. They decide that they need to save $200 each month to reach their goal of taking their children to visit their grandparents in Spain next summer. What is the objective of setting such a goal? To maximize individual utility -While everyone has different personal financial goals, the objectives of such goals is to maximize individual utility. Which professional works with individuals to help them achieve their financial goals? Financial planner - Professional financial planners work with individuals to help them achieve their financial goals. 1 / 1 Omar is about to purchase a new car for $30,000. He knows he wants to buy the car, but he is still trying to decide how to pay for it. He has barely over $30,000 in his bank account. He can either take out an auto loan from a bank or use a mix of cash and an auto loan. Financing a goal - He has already made a decision to purchase the car and is now deciding on financing options. Which area of finance deals with sources of funding and the capital structure of corporations and seeks to increase the value of a firm to its owners? Business finance - Business finance is the area of finance that deals with uses and sources of funding to increase the value of the firm. What is the primary difference between finance and accounting? Finance focuses on the future, while accounting is generally backward-looking. - finance is the management and allocation of capital with the objectives of investing, forecasting, budgeting, saving, lending, and borrowing. Which subspecialty of finance primarily involves deciding which assets will create more wealth and earn positive returns? Investments - investments is the area of finance that seeks to create wealth in the future by deciding where to allocate money What is the primary goal of the financial manager of a firm? To maximize owner wealth - The financial manager should make decisions based on the primary goal of maximizing owner wealth. What should be the main question a firm asks when considering any investment decision? Do the benefits of this investment outweigh the costs? - For any investment, you should expect to receive a benefit worth at least as much as the initial cost. What is the primary aim of personal finance goals? maximize satisfaction from products purchased and services obtained- the objective of personal financial goals is to maximize one's utility. Which task does a financial manager perform when choosing to obtain a loan to purchase a piece of equipment for a new project? Making financing decisions - The manager is deciding where to get the funds to support a new project, which means the manager is making a financing decision Which financial career focuses on investing capital into firms whose shares are not currently sold on any public stock exchange? private equity - Private equity deals with investments in firms that are privately held and whose ownership is not yet bought or sold on any public stock exchange Which task does a financial manager perform when assessing the costs and benefits of potential projects? Making investment decisions -Understanding how benefits weigh up against costs is the first priority before moving forward with financing and managerial decisions. What does the term legal describe? An action that is in accordance with the laws and rules set by an authority. - Jack is a personal financial advisor. He is with a new client, and the client is asking him what he recommends for her portfolio. Jack knows that his firm's investment product performed well last year, but its performance changes from year to year—some years it is better than the market, and some years it is not. Also, the fee to invest in the product is higher than the fee to invest in a market index fund. If Jack sells his company's investment product, the customer's loyalty to the company is doubled. Which actions should Jack take? Give a personal recommendation of the company's product while explaining its performance relative to the market over the past several years.- Giving the recommendation to sell a product is fine, but you should never hide other information. Sharing information about index funds and comparing your product to others is a fair action to take for the client. Why might a manager manipulate accounting procedures? To make the company's performance look good - A manager might manipulate accounting procedures to inflate the earnings of a company, which would optimize bonuses and stock-price-related benefits for management. Which situation is an example of an agency problem? Managers follow their own interests instead of the owners' interest. - An agency problem occurs when the agent (a manager) does not act in the best interest of the owners.