pre-assessment-final-exam

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Western Governors University *

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D076

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Jan 9, 2024

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StuDocu is not sponsored or endorsed by any college or university Pre-Assessment Final Exam Finance Skills for Managers (Western Governors University) StuDocu is not sponsored or endorsed by any college or university Pre-Assessment Final Exam Finance Skills for Managers (Western Governors University) Downloaded by Dave Guessit (nebhyper@gmail.com) lOMoARcPSD|12921009

Assessment Secton 1 1 In which way is accountng diferent from fnance?  Accountng is focused on allocatng capital, while fnance is focused on bringing in capital.  Correct Accountng is backward looking, while fnance is focused on the future.  You Selected Accountng is about budgetng, saving, and borrowing, while fnance is about investng, forecastng, and lending.  Accountng forecasts future performance, given the past, while fnance records past performance. 2 What is the main queston that both individuals and companies must consider when making fnancial decisions to reach a goal?  Will utlity be maximized through this decision?  Will this decision require debt or equity fnancing?  Correct Will the benefts of the acton outweigh the costs?  Will this decrease the amount of cash available? 3 A fnancial manager at a company is trying to determine whether to issue new stocks or new bonds to cover the costs of a project the company is doing the next year. Which main task in business fnance is this situaton an example of?  Managing working capital  Correct Making fnancing decisions  Making investment decisions  Managing interdepartmental loans Downloaded by Dave Guessit (nebhyper@gmail.com) lOMoARcPSD|12921009

4 How can investng help a person reach personal fnancial goals?  It helps a person understand how money was spent previously in order to reliably predict future expenses.  Correct It provides access to potental revenue or increases in value to help meet goals faster.  It ensures money is placed in a safe, risk-free, and easily accessible fnancial asset.  It provides a guaranteed future outcome in order to predictably meet fnancial goals. 5 A sign company is planning to have an inital public ofering (IPO). In which type of market will its stock frst be sold to the public?  Correct Primary market  Efcient market  Money market  Secondary market 6 Which type of economic indicator changes afer the economy changes and helps identfy trends in the long term?  Yield curve indicator  Correct Lagging indicator  Leading indicator  Coincident indicator 7 How does an investment insttuton, such as a mutual fund, facilitate the circulaton of money in the economy?  Correct By providing individuals and frms access to fnancial markets to buy or sell fnancial securites Downloaded by Dave Guessit (nebhyper@gmail.com) lOMoARcPSD|12921009

 By raising capital on a contractual basis, such as an insurance contract  By acceptng deposits of money, paying interest on deposits, and providing loans to individuals and organizatons  By insuring deposits in investment accounts up to $250,000 to promote public confdence 8 Which type of economic indicator is used by governments and policymakers to implement or alter policies in an efort to avoid or minimize the efects of an economic downturn?  Correlated indicator  Lagging indicator  Correct Leading indicator  Coincident indicator 9 Suppose an individual does not eat chocolate because eatng chocolate goes against his personal beliefs. Which type of standard is this?  Ethical  Financial  Legal  Correct Moral 10 Which acton is based upon moral standards?  As mandated by government regulatons, a fnancial manager fles a registraton statement with the U.S. Securites and Exchange Commission (SEC) before ofering equity securites for sale.  Correct Although there is no company policy regarding it, a fnancial manager chooses not to accept gifs from the company’s clients to ensure that she does not create a confict of interest.  As outlined in the company’s policies, a fnancial manager hires a third-party entty to review all annual report flings to ensure they are compliant with applicable generally accepted accountng principles (GAAP). Downloaded by Dave Guessit (nebhyper@gmail.com) lOMoARcPSD|12921009

 Since it is generally accepted in the company that no personal informaton about clients should be released without writen permission, a fnancial manager denies the request for a third party to access its data. Assessment Secton 1 11 What should a potental bondholder (lender) do to prevent a company (borrower) from taking on risky projects?  Correct Set strict covenants that the company cannot uphold if it chooses a risky project  Release managers who do not atempt to maximize immediate shareholder value  Separate owners from management so their interests do not confict  Encourage manipulaton of accountng procedures to optmize the company’s proft 12 What is the term for an individual’s beliefs concerning what is and is not acceptable to personally do?  Ethics  Laws  Correct Morals  Honesty 13 Which factor contributes to the infaton of the prices of goods and services over tme?  Increase in purchasing power of goods and services  Decrease in employee demand for higher wages  Decrease in costs of producton  Correct Increase in demand for goods and services 14 Why can compounding interest be a good tool but also a signifcant detriment? Downloaded by Dave Guessit (nebhyper@gmail.com) lOMoARcPSD|12921009

 Compounding interest can be a good tool to understand the tme value of money, but it is a detriment because it does not take infaton into account.  Compounding interest can be a good tool to understand opportunity cost, but it is a detriment because it does not take risk into account.  Correct Compounding interest can be a good tool because it allows a lender to gain interest on interest, but it is a detriment because it causes a borrower to pay interest on interest.  Compounding interest can be a good tool because it summarizes the required return, but it is a detriment because it requires a larger cost of capital. 15 Which component of the required rate of return takes into account the loss of potental gain from other alternatves?  Infaton  Risk  Correct Opportunity cost  Hurdle rate 16 How is infaton calculated?  Correct Infaton is calculated by determining the rate at which the average price level of partcular goods and services increases over a period of tme in an economy.  Infaton is calculated by determining the rate at which the demand for partcular goods and services has increased over a period of tme in an economy.  Infaton is built into the economy and will rise as employees receive salary raises.  Infaton is determined by the federal government at a target rate of 2% a year. 17 Based on the following informaton about the stocks of several companies, which stock displays the greatest amount of risk? Stock A: Return = 22.22%, Standard Deviaton = 9.99% Stock B: Return = 15.05%, Standard Deviaton = 7.35% Downloaded by Dave Guessit (nebhyper@gmail.com) lOMoARcPSD|12921009

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