D076 OA UPDATED Exam Questions and CORRECT Answers
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Course
D076 OA
Institution
D076 OA
What does the term legal describe?
Encourage manipulation of accounting procedures to optimize the company's profit
Release managers who do not attempt to maximize immediate shareholder value
Set strict covenants that the company cannot uphold if it chooses a risky project
An action that is in ...
D076 OA UPDATED Exam Questions and CORRECT Answers What does the term legal describe? Encourage manipulation of accounting proce dures to optimize the company's profit Release managers who do not attempt to maximize immediate shareholder value Set strict covenants that the company cannot uphold if it chooses a risky project An action that is in accordance with the laws and rules set by an authority. - ✔✔✔ An action that is in accordance with the laws and rules set by an authority. What does high inventory turnover relative to the industry and competitors indicate? Models are required by the SEC when a firm plans to issue additional stock on the public market. The firm holds too much inventory and its successful selling its good and services. Models allow users to see the complex relationships between sales and other aspects of the business. The firm does not hold enough inventory and is making its customers wait longer to receive their purchased goods. - ✔✔✔ The firm does not hold enough inventory and is making its customers wait longer to receive their purchased goods. What is the ratio that tells you on average how long it takes for a firm to collect accounts receivable. Average Benchmarking Opportunity cost Average collection period Leading indicator - ✔✔✔ Average collection period Three different names are used for interest rate for different purposes and perspectives: Discount rate, required rate, and cost of capital. Required rate, correlated indicator, opportunity cost Cost of capital, interest rate, and renew rate required rate, discount method, cost of interest - ✔✔✔ Discount rate, required rate, and cost of capital. What is the main purpose of charging interest? 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. The higher risk an investor takes, the higher return the investor e xpects to receive. Compounding interest can be a good tool to understand the time value of money, but it is a detriment because it does not take inflation into account. It allows borrowers to pay to use the assets of another entity to accomplish their own goals. - ✔✔✔ It allows borrowers to pay to use the assets of another entity to accomplish their own goals. The required rate of return is also known as the BLANK in the context of corporate finance. Inflation Hurdle rate Opportunity cost Risk - ✔✔✔ Hurdle rate. The BLANK is the rate of return or compensation that an investor or lender will accept for investments such as stocks, bonds, or loans. Hurdle rate Inflation Opportunity cost Required rate of return - ✔✔✔ Required rate of return BLANK Is the possib ility that the realized or actual return will differ from the expected return? Hurdle rate. Inflation Opportunity cost Risk - ✔✔✔ Risk Which components of an interest rate is an indicator of inflation and opportunity cost? Capital growth rate Risk-free rate Sustainable growth rate Sales growth rate - ✔✔✔ Risk-free rate What is the name for the interest rate expressed on an annual basis? Sustainable growth rate Historical regression Annual percentage rate Annual Percent of sales - ✔✔✔ Annual per centage rate Why is the required rate of return also known as the hurdle rate? It is simple and helps ensure that users do not spend more than the cash that they have available. It is the minimum rate that a firm must surpass to accept a project. It enab les users to connect bank and credit card accounts to automatically update income and expenses.
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