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D076 Unit 2: Overview of Finance
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Accounting - The system of recording, reporting, and summarizing past financial information and transactions. Agency Costs - Costs that are incurred when management does not act in the best interest of shareholders; related to the maximization of shareholder value; firms mitigate some of these c...

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  • February 3, 2024
  • 15
  • 2023/2024
  • Exam (elaborations)
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  • d076 unit 2 overview of finance

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  • AQA
  • WGU
  • WGU D076
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D076 Unit 2: Overview of Finance
Accounting - ✔✔✔The system of recording, reporting, and summarizing past financial information and
transactions.



Agency Costs - ✔✔✔Costs that are incurred when management does not act in the best interest of
shareholders; related to the maximization of shareholder value; firms mitigate some of these costs is by
attempting to align managers' interests with shareholders' interests and compensate with shares in the
company



Agency Problem - ✔✔✔When the agent (the management) does not act in the best interest of the
principal (the owners).



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.



Banks and Credit Unions - ✔✔✔Receive deposits and extend loans to individuals and businesses.



Bid-ask Spread - ✔✔✔The difference between the bid and ask prices that compensate the specialist
for the risk that he or she bears for willingness to provide liquidity.



Bondholders - ✔✔✔A person who loans a corporation money by buying debt securities; more
interested in projects that give them a higher chance of getting their investment back while providing
sufficient compensation



Business Finance - ✔✔✔An area of finance that deals with sources of funding, the capital structure of
corporations, the actions that managers take to increase the value of the firm to its owners, and the
tools and analysis used to allocate financial resources.

, Capital - ✔✔✔A financial asset that can be used by a firm or individual. Examples of capital may be
machinery or cash held by a firm.



Capital Markets - ✔✔✔A type of financial market used for long-term assets that are held for greater
than one year.



Capital Structure - ✔✔✔The mixture of debt and equity used to finance a firm.



Cash Management - ✔✔✔Managing the day-to-day finance operations of a firm.



Central Banks - ✔✔✔Ensure that a nation's economy remains healthy by controlling the amount of
money circulating in the economy (example: Federal Reserve Bank).



Corporate Bonds - ✔✔✔A debt instrument that is issued by a corporation in order to raise capital.



Credit Analysts - ✔✔✔A commercial bank position with the responsibility to assess the riskiness of
lending to borrowers and determining whether or not loans should be extended to potential bank
clients.



Current Market Value - ✔✔✔What someone would pay right now for an asset.



Dealer Market - ✔✔✔A secondary market made up of multiple dealers that hold an inventory of
securities and quote prices.



Efficient market - ✔✔✔A market in which prices fully reflect all the available information about a
specific security.

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