D076 FINANCE SKILLS FOR MANAGERS WGU |
QUESTIONS AND ANSWERS | 100% CORRECT
Real Return Answer - Rate of growth in purchasing power of goods and
services
Holding Period Return Answer - Return over the entire period that an investor
owns a financial security
Beta Answer - A measure of the volatility, or systematic risk, of a security or a
portfolio in comparison to the market as a whole.
standard deviation Answer - Used to measure the total risk of securities
annuity due Answer - an annuity whose payments occur at the beginning of
each period, consecutively
Par Bond Answer - When the bond's coupon rate equals the market yield;
Bonds are typically issued near par value
Pi Answer - Profitability index. At 1, the PI means a internal return rate equal
to the cost of capital
Irr Answer - Internal rate of return (IRR) is a discount rate at which the net
present value (NPV) of an investment is equal to zero.
, If the IRR is higher than the cost of borrowing to fund the investment, the
investment should be profitable. Always shown as percentage.
Net Present Value (NPV) Answer - A method of ranking investment proposals
using the NPV, which is equal to the present value of the project's free cash
flows discounted at the cost of capital. Shown as dollar amount.. At $0 it means
it will neither add nor subtract value.
Inventory Turnover Answer - An activity ratio found by COGS divided by
inventory
dividends in arrears Answer - Feature of preferred stock specifying that if a
company ignores preferred stock dividends it cannot pay anything to it's
common stockholders
Agency Problem Answer - the possibility of conflict of interest between the
owners and management of a firm
Resolved by aligning interests, example giving shares to manangement
Operating Margin Answer - A profitability ratio found by EBIT profit divided by
sales
Capital Structure Answer - the mixture of debt and equity maintained by a firm
Defensive Assets Answer - Companies or securities with betas less than 1.
Variable Expenditure Answer - an expense that you have direct control over
and that can change from period to period
QUESTIONS AND ANSWERS | 100% CORRECT
Real Return Answer - Rate of growth in purchasing power of goods and
services
Holding Period Return Answer - Return over the entire period that an investor
owns a financial security
Beta Answer - A measure of the volatility, or systematic risk, of a security or a
portfolio in comparison to the market as a whole.
standard deviation Answer - Used to measure the total risk of securities
annuity due Answer - an annuity whose payments occur at the beginning of
each period, consecutively
Par Bond Answer - When the bond's coupon rate equals the market yield;
Bonds are typically issued near par value
Pi Answer - Profitability index. At 1, the PI means a internal return rate equal
to the cost of capital
Irr Answer - Internal rate of return (IRR) is a discount rate at which the net
present value (NPV) of an investment is equal to zero.
, If the IRR is higher than the cost of borrowing to fund the investment, the
investment should be profitable. Always shown as percentage.
Net Present Value (NPV) Answer - A method of ranking investment proposals
using the NPV, which is equal to the present value of the project's free cash
flows discounted at the cost of capital. Shown as dollar amount.. At $0 it means
it will neither add nor subtract value.
Inventory Turnover Answer - An activity ratio found by COGS divided by
inventory
dividends in arrears Answer - Feature of preferred stock specifying that if a
company ignores preferred stock dividends it cannot pay anything to it's
common stockholders
Agency Problem Answer - the possibility of conflict of interest between the
owners and management of a firm
Resolved by aligning interests, example giving shares to manangement
Operating Margin Answer - A profitability ratio found by EBIT profit divided by
sales
Capital Structure Answer - the mixture of debt and equity maintained by a firm
Defensive Assets Answer - Companies or securities with betas less than 1.
Variable Expenditure Answer - an expense that you have direct control over
and that can change from period to period
