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D076 Test Answers 2024/2025 already graded A+
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D076 Test AnswersIn which way is accounting different from finance?
Accounting is backward looking, while finance is focused on the future.
Accounting is focused on allocating capital, while finance is focused on bringing in capital.
Accounting is about budgeting, saving, and borrowing, while finance is about investing,
forecasting, and lending. - ANSAccounting is backward looking, while finance is focused on the
future.
What is the main question that both individuals and companies must consider when making
financial decisions to reach a goal?
Will the benefits of the action outweigh the costs?
Will this decision require debt or equity financing?
Will utility be maximized through this decision? - ANSWill the benefits of the action outweigh the
costs?
A financial 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 finance is this situation an example of?
Making financing decisions
Making investment decisions
Managing interdepartmental loans - ANSMaking financing decisions
How can investing help a person reach personal financial goals?
It provides access to potential revenue or increases in value to help meet goals faster.
It ensures money is placed in a safe, risk-free, and easily accessible financial asset.
It helps a person understand how money was spent previously in order to reliably predict future
expenses. - ANSIt provides access to potential revenue or increases in value to help meet goals
faster.
A sign company is planning to have an initial public offering (IPO). In which type of market will
its stock first be sold to the public?
Efficient market
Secondary market
Money market
Primary market - ANSPrimary market
Which type of economic indicator changes after the economy changes and helps identify trends
in the long term?
Yield curve indicator
Leading indicator
Coincident indicator
, Lagging indicator - ANSLagging indicator
How does an investment institution, such as a mutual fund, facilitate the circulation of money in
the economy?
By insuring deposits in investment accounts up to $250,000 to promote public confidence
By raising capital on a contractual basis, such as an insurance contract
By providing individuals and firms access to financial markets to buy or sell financial securities -
ANSBy providing individuals and firms access to financial markets to buy or sell financial
securities
Which type of economic indicator is used by governments and policymakers to implement or
alter policies in an effort to avoid or minimize the effects of an economic downturn?
Correlated indicator
Coincident indicator
Lagging indicator
Leading indicator - ANSLeading indicator
What should a potential bondholder (lender) do to prevent a company (borrower) from taking on
risky projects?
Set strict covenants that the company cannot uphold if it chooses a risky project
Encourage manipulation of accounting procedures to optimize the company's profit
Separate owners from management so their interests do not conflict - ANSSet strict covenants
that the company cannot uphold if it chooses a risky project
Which factor contributes to the inflation of the prices of goods and services over time?
Increase in demand for goods and services
Decrease in costs of production
Decrease in employee demand for higher wages - ANSIncrease in demand for goods and
services
Why can compounding interest be a good tool but also a significant detriment?
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.
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. - ANSCompounding 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.
How is inflation calculated?
Inflation is calculated by determining the rate at which the average price level of particular
goods and services increases over a period of time in an economy.
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