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D076 Quiz Answers
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Which area of finance deals with sources of funding and the capital structure of corporations and seeks to increase the value of a firm to its owners? Financial institutions Business finance Investments Real estateBusiness finance is the area of finance that deals with uses and sources of fund...

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  • February 3, 2024
  • 78
  • 2023/2024
  • Exam (elaborations)
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D076 Quiz Answers
Which area of finance deals with sources of funding and the capital structure of corporations and seeks
to increase the value of a firm to its owners?

Financial institutions

Business finance

Investments

Real estate✔✔✔Business finance is the area of finance that deals with uses and sources of funding to
increase the value of the firm.



What is the primary difference between finance and accounting?

Accounting focuses on the future, while finance is generally backward-looking.

Finance provides financial data to decision makers, and accounting involves making decisions using that
data.

Accounting involves investing and forecasting, while finance summarizes a company's financial
information.✔✔✔Finance focuses on the future, while accounting is generally backward-looking.
Finance is the management and allocation of capital with the objectives of investing, forecasting,
budgeting, saving, lending, and borrowing.



Which subspecialty of finance primarily involves deciding which assets will create more wealth and earn
positive returns?

Accounting

Financial institutions

Capital structure

Investments✔✔✔Investments. Investments is the area of finance that seeks to create wealth in the
future by deciding where to allocate money.



What is the primary goal of the financial manager of a firm?

To minimize the asset holdings of the firm

,To minimize the costs of the firm

To maximize owner wealth

To maximize the manager's utility✔✔✔To maximize owner wealth. The financial manager should make
decisions based on the primary goal of maximizing owner wealth.



What should be the main question a firm asks when considering any investment decision?✔✔✔Do the
benefits of this investment outweigh the costs? For any investment, you should expect to receive a
benefit worth at least as much as the initial cost.



What is the primary aim of personal finance goals?✔✔✔To maximize satisfaction from products
purchased and services obtained



Which task does a financial manager perform when choosing to obtain a loan to purchase a piece of
equipment for a new project?

Making credit standard decisions

Making investment decisions

Making inventory control decisions

Making financing decisions✔✔✔Making financing decisions. The manager is deciding where to get the
funds to support a new project, which means the manager is making a financing decision.



Which financial career focuses on investing capital into firms whose shares are not currently sold on any
public stock exchange?

Private equity

Financial planning

Insurance

Corporate finance✔✔✔Private equity deals with investments in firms that are privately held and
whose ownership is not yet bought or sold on any public stock exchange.

,Which task does a financial manager perform when assessing the costs and benefits of potential
projects?

Managing working capital

Making financing decisions

Making investment decisions

Implementing financial policies✔✔✔Making investment decisions. Understanding how benefits weigh
up against costs is the first priority before moving forward with financing and managerial decisions.



What tool can you use to understand your overall personal cash flows?

Setting financial goals

Budgeting

Investing

Saving✔✔✔Budgeting helps you to understand your income and expenses and to analyze your cash
flows.



What is a reasonable alternative to keeping an emergency stash of cash?

Investing in a savings account

Investing the money in a nicer car

Investing in high-risk growth stocks

Investing in long-term bonds✔✔✔Investing in a savings account. Investing in a readily withdrawable
account that still earns some interest is a value-preserving alternative.



You want to buy a house, so you obtain a mortgage for which you can afford the monthly payments.
What process have you engaged in as part of your financial decision-making?

Analyzing data

Financing

Assessing

, Investing✔✔✔Financing. Part of the personal finance process is figuring out how to finance your goals
in a way that is within your means.



What area of finance involves deciding which assets to invest in to create wealth in the future?

Investments

Organizational finance

Financial institutions

Investment banking✔✔✔Investments are an area of finance that involves deciding which assets to
invest in to create wealth in the future.



Hannah is the financial manager of a firm. A project that she has recommended has been approved and
will cost $5 million. Since the company does not have enough cash on reserve, Hannah must figure out
how to raise enough money to start the project. She can choose whether to issue new bonds, new
stocks, a mortgage loan, or some combination of those options. What task is Hannah performing in this
scenario?

Making an investment decision

Managing financial investments

Managing working capital

Making a financing decision✔✔✔Making a financing decision. Since the project has already been
approved, Hannah is trying to find a way to finance the investment and considering its capital structure.



Maria and Mateo are setting financial goals. They decide that they need to save $200 each month to
reach their goal of taking their children to visit their grandparents in Spain next summer. What is the
objective of setting such a goal?

To minimize personal expenses

To set priorities in personal finances

To maximize individual utility

To make personal finances predictable✔✔✔To maximize individual utility. While everyone has
different personal financial goals, the objectives of such goals is to maximize individual utility.

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