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Study guide for D076 Finance Skills for Managers
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Accounting Definition  The system of recording, reporting, and summarizing past financial information and transactions. Activity Ratios  A category of ratios that measure how well a company uses its assets to generate sales or cash, showing the firm’s operational efficiency and profit...

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  • February 3, 2024
  • 10
  • 2023/2024
  • Exam (elaborations)
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  • study guide for d076 finance skills for managers

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  • A/AS Level
  • AQA
  • WGU
  • WGU D076
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Study guide for D076 Finance Skills for
Managers
Accounting

Definition

 The system of recording, reporting, and summarizing past financial information and
transactions.

Activity Ratios

 A category of ratios that measure how well a company uses its assets to generate sales or cash,
showing the firm’s operational efficiency and profitability.

 AR Turnover: An activity ratio found by credit sales divided by accounts receivable.

 ACP: An activity ratio found by the number of days in a year (365) divided by AR turnover.

 FAT: An activity ratio found by sales divided by fixed assets.

 OIROI: An activity ratio found by operating income divided by total assets.

 TAT: An activity ratio found by sales divided by total assets.

 Inventory Turnover: An activity ratio found by COGS divided by inventory.

Additional Funds Needed (AFN)

 Another name for the discretionary financing needed or external financing needed. It represents
the additional financing needed given a firm’s expectations for future growth.

Affirmative Covenants

 A bond covenant that describes things the company pledges itself to do in order to protect
bondholders.

Agency Costs

 Costs that are incurred when management does not act in the best interest of shareholders.

Agency Problem

 When the agent (the management) does not act in the best interest of the principal (the
owners).

Aggressive Assets

,  Companies or securities with beta greater than 1.

Annual Percentage Rate

 The annual interest rate that is charged for borrowing money or that is earned through
investment.

Annuity

 A stream of cash flows of an equal amount paid every consecutive period.

Annuity Due

 A series of equal payments made at the beginning of consecutive periods.

Asset Pricing

 The process of valuing assets.

Auction Market

 A secondary market with a physical location and where prices are determined by investors’
willingness to pay.

Average Collection Period (ACP)

 An activity ratio found by the number of days in a year (365) divided by AR turnover.

Balance Sheet Forecasting

 Using sales growth and the profit forecast to construct a pro forma balance sheet to understand
the future implications of the sources and uses of finances.

Banks and Credit Unions

 Receive deposits and extend loans to individuals and businesses.

Benchmarking

 The process of completing a financial analysis to compare a firm’s financial performance to that
of other similar firms.

Beta

 A variable that describes how the price of a security varies with the market.

Bid-ask Spread

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