D076 Test Answers
1. In 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, wh...
D076 Test Answers
1. In 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.: Accounting is backward looking, while fi- nance is
focused on the future.
2. What is the main question that both individuals and companies must con- sider
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?: Will the benefits of the action
outweigh the costs?
3. 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: Making financing decisions
4. 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.: It provides access to potential revenue
or increases in value to help meet goals faster.
5. 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?
1/9
, D076 Test Answers
Efficient market
Secondary market
Money market
Primary market: Primary market
6. Which type of economic indicator changes after the economy changes and helps
identify trends in the long term?
Yield curve indicator
Leading indicator
2/9
, D076 Test Answers
Coincident indicator
Lagging indicator: Lagging indicator
7. 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: By providing individuals and firms access to financial markets
to buy or sell financial securities
8. Which type of economic indicator is used by governments and policymak- ers 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: Leading indicator
9. 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: Set strict
covenants that the company cannot uphold if it chooses a risky project
10. Which factor contributes to the inflation of the prices of goods and ser- vices
over time?
Increase in demand for goods and services
Decrease in costs of production
3/9
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