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D076- ALL UNIT TESTS 2024/2025 already graded A+
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D076- ALL UNIT TESTSWhat are the main services offered by financial institutions? - ANSAccepting a wide variety of
deposits, offering investment products, providing loans, and brokering financial transactions
What is the main objective of personal financial goals? - ANSTo maximize individual utility
Which task does the financial manager of a firm perform that involves the issuance of new
stocks and bonds? - ANSMaking financing decisions
Why is understanding the definition of finance important in managing personal finances? - ANSIt
helps individuals compare the costs and benefits of an action to determine whether to take that
action.
In which type of market would a company issue bonds or stocks for the first time? - ANSPrimary
market
Which type of financial institution is a mutual fund? - ANSInvestment institution
Which financial institution specializes in managing and administering retirement funds? -
ANSPension funds
Which type of economic indicator is the consumer price index? - ANSLagging indicator
What does the term ethical refer to? - ANSThe accepted standards of conduct that guide a
person's behavior
A company's officers and board of directors are selling their stocks in the firm at higher prices
due to false accounting reports that made the stock seem more valuable than it truly was. Which
ethical issue is occurring in this situation? - ANSAgency problem due to conflicting interests
Which area of finance involves deciding which assets to invest in to create wealth in the future?
- ANSInvestments
What is the main goal of a firm? - ANSTo maximize owner wealth
What are financial managers doing if they evaluate whether it is worth spending money on
research and development for a new product? - ANSMaking an investment decision
Which type of financial market is where securities such as stocks and bonds are traded after
their initial issuance? - ANSThe secondary financial market
,What type of financial institution is an insurance company? - ANSContractual
Which financial institution invests funds contributed by a company to provide retirement funds
for the company's employees? - ANSPension fund
Personal income is which type of economic indicator? - ANSCoincident
Which term refers to something that conforms with accepted standards of conduct that guide a
person's behavior? - ANSEthical
What is the second step in finding a solution to an ethical dilemma? - ANSConsider alternative
courses of action
Which type of interest rate includes interest on interest in addition to interest on the principal? -
ANSCompound interest
How can agency problems be reduced through corporate control? - ANSExecutive
compensation
What is the rate at which the average price level of particular goods and services in an economy
increases over a period of time? - ANSInflation rate
You signed an apartment contract today. You are going to pay $1,500 at the beginning of each
month for the next 12 months, starting today. What type of cash flows is this contract? - ANSAn
annuity due
What is the term for the return over the entire period that an investor owns a financial security? -
ANSHolding period return
What is used to measure total risk? - ANSStandard deviation
What is the term for the risk that changes in interest rates will impact the value of a bond? -
ANSInterest rate risk
What is another name for the cost of capital? - ANSDiscount rate
What is the name for the minimum rate of return that an investor or lender will accept for
investments? - ANSRequired rate of return
The nominal interest rate of an investment is 8%, and the inflation rate is 3%. What is the real
interest rate? - ANS5%
Which action reduces the future value of cash flows? - ANSReceive all cash flows later than
expected.
, How is risk defined in finance? - ANSThe possibility that the realized or actual return will differ
from what we expect
Which example below is considered a market risk factor? - ANSAn unexpected change in
interest rate occurs.
Why are ratios useful for analyzing and comparing company performance between firms of
different sizes? - ANSThey provide standardization.
You are the financial manager of a firm. The firm is small and is struggling to collect cash from
accounts receivable. Also, due to the nature of industry, inventories are illiquid. To make sure
that the firm has enough cash holdings for short-term obligations, you decide to create a new
ratio of cash to short-term obligations. What is this scenario an example of? - ANSFlexibility
Why are activity ratios also called efficiency ratios or asset use efficiency ratios? - ANSBecause
they measure how well a company uses its assets to generate sales or cash.
What type of ratio is used to consider how a firm is financed and to assess a firm's ability to pay
interest and pay back long-term obligations? - ANSFinancing ratios
What does a net margin of 7% indicate? - ANSFor every dollar of revenue, 7 cents remain for
the equity holders after all other costs are covered.
Firm A has an average collection period of 67 days, and the industry norm is 40 days. What can
the firm do in order to be competitive with accounts receivable management in the industry? -
ANSTighten the credit standards for its customers.
What is the difference between the current ratio and the quick ratio? - ANSInventory is excluded
in the calculation of the quick ratio.
Which term is used to describe the stock of a firm with market-to-book ratio of less than 1? -
ANSValue stock
What does inventory turnover assess? - ANSThe inventory management of a firm
You are comparing the return on equity of Firm 1 and Firm 2. Both firms have an identical profit
margin and asset turnover, but Firm 1 has an overall higher return on equity. What must be
true? - ANSFirm 1 is using a higher proportion of debt to finance its operations.
Which method of ratio analysis looks at a firm's performance over time? - ANSTrend analysis
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