Finance Skills for Managers -
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D076 Questions and Correct Answe
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rs
Which area of finance deals with sources of funding and the capital structure of
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corporationsfandfseeksftofincreasefthefvaluefoffaffirmftofitsfowners?
✓ ~~~f Businessffinance
Whatfisfthefprimaryfdifferencefbetweenffinancefandfaccounting?
✓ ~~~f Financeffocusesfonftheffuture,fwhilefaccountingfisfgenerallyfbackward-looking.
Whichfsubspecialtyfofffinancefprimarilyfinvolvesfdecidingfwhichfassetsfwillfcreate
morefwealthfandfearnfpositivefreturns?
✓ ~~~f Investments
Whatfisfthefprimaryfgoalfofftheffinancialfmanagerfoffaffirm?
✓ ~~~f Tofmaximizefownerfwealth
Whatfshouldfbefthefmainfquestionfaffirmfasksfwhenfconsideringfanyfinvestment
decision?
✓ ~~~f Dofthefbenefitsfoffthisfinvestmentfoutweighfthefcosts?
Whatfisfthefprimaryfaimfoffpersonalffinancefgoals?
✓ ~~~f Tofmaximizefsatisfactionffromfproductsfpurchasedfandfservicesfobtained
,Whichftaskfdoesfaffinancialfmanagerfperformfwhenfchoosingftofobtainfafloanfto
purchasefafpiecefoffequipmentfforfafnewfproject?
✓ ~~~f Makingffinancingfdecisions
Whichffinancialfcareerffocusesfonfinvestingfcapitalfintoffirmsfwhosefsharesfarefnot
currentlyfsoldfonfanyfpublicfstockfexchange?
✓ ~~~f Privatefequity
Whichftaskfdoesfaffinancialfmanagerfperformfwhenfassessingfthefcostsfandfbenefits
offpotentialfprojects?
✓ ~~~f Makingfinvestmentfdecisions
Whatftoolfcanfyoufuseftofunderstandfyourfoverallfpersonalfcashfflows?
✓ ~~~f Budgeting
Whatfisfafreasonablefalternativeftofkeepingfanfemergencyfstashfoffcash?
✓ ~~~f Investingfinfafsavingsfaccount
Youfwantftofbuyfafhouse,fsofyoufobtainfafmortgagefforfwhichfyoufcanfaffordfthe
monthlyfpayments.fWhatfprocessfhavefyoufengagedfinfasfpartfoffyourffinancial
decision-making?
✓ ~~~f Financing
,Whatfareafofffinancefinvolvesfdecidingfwhichfassetsftofinvestfinftofcreatefwealthfin
theffuture?
✓ ~~~f Investments
Hannahfisftheffinancialfmanagerfoffaffirm.fAfprojectfthatfshefhasfrecommendedfhas
beenfapprovedfandfwillfcostf$5fmillion.fSincefthefcompanyfdoesfnotfhavefenough
cashfonfreserve,fHannahfmustffigurefoutfhowftofraisefenoughfmoneyftofstartfthe
project.fShefcanfchoosefwhetherftofissuefnewfbonds,fnewfstocks,fafmortgagefloan,
orfsomefcombinationfoffthosefoptions.fWhatftaskfisfHannahfperformingfinfthis
scenario?
✓ ~~~f Makingfaffinancingfdecision
MariafandfMateofarefsettingffinancialfgoals.fTheyfdecidefthatftheyfneedftofsave
$200feachfmonthftofreachftheirfgoalfofftakingftheirfchildrenftofvisitftheirfgrandparents
infSpainfnextfsummer.fWhatfisfthefobjectivefoffsettingfsuchfafgoal?
✓ ~~~f Tofmaximizefindividualfutility
Whichfprofessionalfworksfwithfindividualsftofhelpfthemfachieveftheirffinancialfgoals?
✓ ~~~f Financialfplanner
Omarfisfaboutftofpurchasefafnewfcarfforf$30,000.fHefknowsfhefwantsftofbuyfthefcar,
butfhefisfstillftryingftofdecidefhowftofpayfforfit.fHefhasfbarelyfoverf$30,000finfhis
bankfaccount.fHefcanfeitherftakefoutfanfautofloanffromfafbankforfusefafmixfoffcash
andfanfautofloan.
, Infthisfscenario,fwhatfisfOmarfdoing?
✓ ~~~f Financingfafgoal
Whatfarefthefpurposesfofffinancialfmarkets?
✓ ~~~f Tofprovidefliquidityfandfdeterminefprices
Infwhichffinancialfmarketfarefsecuritiesfsuchfasfstocksfandfbondsfareftradedfafter
theirfinitialfissuance?
✓ ~~~f Secondaryfmarket
Whatfkindfoffmarketfprimarilyfallowsfinstitutionsftofborrowfandflendfinfthefshort
term?
✓ ~~~f Moneyfmarket
Aflocalfstart-upfcompanyfjustfhitfitsffive-yearfanniversaryfandfisfplanningfanfinitial
publicfofferingfsometimefthisfyear.fInforderftofissuefpublicfstock,fwhichfmarketfwill
thefcompanyfuse?
✓ ~~~f Primaryfmarket
Whatfisfthefprimaryfrolefofffinancialfinstitutions?
✓ ~~~f Tofconductffinancialftransactionsfsuchfasfinvestments,floans,fandfdeposits
Whatfisfafdepositoryfinstitution?
f f f f
D076 Questions and Correct Answe
f f f f f
f f
rs
Which area of finance deals with sources of funding and the capital structure of
f f f f f f f f f f f
corporationsfandfseeksftofincreasefthefvaluefoffaffirmftofitsfowners?
✓ ~~~f Businessffinance
Whatfisfthefprimaryfdifferencefbetweenffinancefandfaccounting?
✓ ~~~f Financeffocusesfonftheffuture,fwhilefaccountingfisfgenerallyfbackward-looking.
Whichfsubspecialtyfofffinancefprimarilyfinvolvesfdecidingfwhichfassetsfwillfcreate
morefwealthfandfearnfpositivefreturns?
✓ ~~~f Investments
Whatfisfthefprimaryfgoalfofftheffinancialfmanagerfoffaffirm?
✓ ~~~f Tofmaximizefownerfwealth
Whatfshouldfbefthefmainfquestionfaffirmfasksfwhenfconsideringfanyfinvestment
decision?
✓ ~~~f Dofthefbenefitsfoffthisfinvestmentfoutweighfthefcosts?
Whatfisfthefprimaryfaimfoffpersonalffinancefgoals?
✓ ~~~f Tofmaximizefsatisfactionffromfproductsfpurchasedfandfservicesfobtained
,Whichftaskfdoesfaffinancialfmanagerfperformfwhenfchoosingftofobtainfafloanfto
purchasefafpiecefoffequipmentfforfafnewfproject?
✓ ~~~f Makingffinancingfdecisions
Whichffinancialfcareerffocusesfonfinvestingfcapitalfintoffirmsfwhosefsharesfarefnot
currentlyfsoldfonfanyfpublicfstockfexchange?
✓ ~~~f Privatefequity
Whichftaskfdoesfaffinancialfmanagerfperformfwhenfassessingfthefcostsfandfbenefits
offpotentialfprojects?
✓ ~~~f Makingfinvestmentfdecisions
Whatftoolfcanfyoufuseftofunderstandfyourfoverallfpersonalfcashfflows?
✓ ~~~f Budgeting
Whatfisfafreasonablefalternativeftofkeepingfanfemergencyfstashfoffcash?
✓ ~~~f Investingfinfafsavingsfaccount
Youfwantftofbuyfafhouse,fsofyoufobtainfafmortgagefforfwhichfyoufcanfaffordfthe
monthlyfpayments.fWhatfprocessfhavefyoufengagedfinfasfpartfoffyourffinancial
decision-making?
✓ ~~~f Financing
,Whatfareafofffinancefinvolvesfdecidingfwhichfassetsftofinvestfinftofcreatefwealthfin
theffuture?
✓ ~~~f Investments
Hannahfisftheffinancialfmanagerfoffaffirm.fAfprojectfthatfshefhasfrecommendedfhas
beenfapprovedfandfwillfcostf$5fmillion.fSincefthefcompanyfdoesfnotfhavefenough
cashfonfreserve,fHannahfmustffigurefoutfhowftofraisefenoughfmoneyftofstartfthe
project.fShefcanfchoosefwhetherftofissuefnewfbonds,fnewfstocks,fafmortgagefloan,
orfsomefcombinationfoffthosefoptions.fWhatftaskfisfHannahfperformingfinfthis
scenario?
✓ ~~~f Makingfaffinancingfdecision
MariafandfMateofarefsettingffinancialfgoals.fTheyfdecidefthatftheyfneedftofsave
$200feachfmonthftofreachftheirfgoalfofftakingftheirfchildrenftofvisitftheirfgrandparents
infSpainfnextfsummer.fWhatfisfthefobjectivefoffsettingfsuchfafgoal?
✓ ~~~f Tofmaximizefindividualfutility
Whichfprofessionalfworksfwithfindividualsftofhelpfthemfachieveftheirffinancialfgoals?
✓ ~~~f Financialfplanner
Omarfisfaboutftofpurchasefafnewfcarfforf$30,000.fHefknowsfhefwantsftofbuyfthefcar,
butfhefisfstillftryingftofdecidefhowftofpayfforfit.fHefhasfbarelyfoverf$30,000finfhis
bankfaccount.fHefcanfeitherftakefoutfanfautofloanffromfafbankforfusefafmixfoffcash
andfanfautofloan.
, Infthisfscenario,fwhatfisfOmarfdoing?
✓ ~~~f Financingfafgoal
Whatfarefthefpurposesfofffinancialfmarkets?
✓ ~~~f Tofprovidefliquidityfandfdeterminefprices
Infwhichffinancialfmarketfarefsecuritiesfsuchfasfstocksfandfbondsfareftradedfafter
theirfinitialfissuance?
✓ ~~~f Secondaryfmarket
Whatfkindfoffmarketfprimarilyfallowsfinstitutionsftofborrowfandflendfinfthefshort
term?
✓ ~~~f Moneyfmarket
Aflocalfstart-upfcompanyfjustfhitfitsffive-yearfanniversaryfandfisfplanningfanfinitial
publicfofferingfsometimefthisfyear.fInforderftofissuefpublicfstock,fwhichfmarketfwill
thefcompanyfuse?
✓ ~~~f Primaryfmarket
Whatfisfthefprimaryfrolefofffinancialfinstitutions?
✓ ~~~f Tofconductffinancialftransactionsfsuchfasfinvestments,floans,fandfdeposits
Whatfisfafdepositoryfinstitution?
