Finance Skills for Managers Exam Questions With Verified Answers
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Finance Skills for Managers
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Finance Skills For Managers
Finance Skills for Managers Exam Questions
With Verified Answers
Which area of finance involves deciding which assets to invest in to create wealth in the future? -
answerInvestments
What is the main goal of a firm? - answerTo maximize owner wealth
What are the financial managers doing if they...
Finance Skills for Managers Exam Questions
With Verified Answers
Which area of finance involves deciding which assets to invest in to create wealth in the future? -
answer✔Investments
What is the main goal of a firm? - answer✔To maximize owner wealth
What are the financial managers doing if they evaluate whether it is worth spending money on
research and development for a new product? - answer✔Making an investment decision
Which type of financial market is where securities such as stocks and bonds are traded after their
initial issuance? - answer✔Secondary Financial Market
What type of financial institution is an insurance company? - answer✔Contractual
Which financial institutions invest funds contributed by a company to provide retirement funds
for the company's employees? - answer✔Pension Fund
Personal income is which type of economic indicator? - answer✔Coincident
Which term refers to something that conforms with accepted standards of conduct that guide a
person's behavior? - answer✔Ethical
What is the second step in finding a solution to an ethical dilemma? - answer✔Consider
alternative courses of action
How can agency problems be reduced through corporate control? - answer✔Executive
compensation
What are the main services offered by financial institutions? - answer✔Accepting a wide variety
of deposits, offering investment products, providing loans, and brokering financial transactions.
What is the main objective of personal financial goals? - answer✔To maximize individual utility.
Which task does the financial manager of a firm perform that involves the issuance of new stocks
and bonds? - answer✔Making financing decisions
Why is understanding the definition of finance important in managing personal finances? -
answer✔It helps individuals compare the costs and benefits of an action to determine whether to
take that action.
In which type of market would a company issue bonds or stocks for the first time? -
answer✔Primary Market
Which type of financial institution is a mutual fund? - answer✔Investment institution
Which financial institution specializes in managing and administering retirement funds? -
answer✔Pension funds
Which type of economic indicator is the consumer price index? - answer✔Lagging indicator
What does the term ethical refer to? - answer✔The accepted standards of conduct that guide a
person's behavior
A company officers and board of directors are selling their stocks in the firm at higher prices due
to false accounting reports that made the stock seem more valuable than it truly was. Which
ethical issue is occurring in this situation? - answer✔Agency problems due to conflicting
interests
What is the name for the interest rate expressed on an annual basis? - answer✔Annual
percentage rate
Why is the required rate of return also known as the "hurdle rate"? - answer✔It is the minimum
rate that a firm must surpass to accept a project
What is the inflation rate? - answer✔The rate at which the average price level of a basket of
goods and services in an economy increases
What does the risk-free rate indicate? - answer✔Inflation and Opportunity Cost
Suppose Sophia is considering a new stock investment for her retirement account. This stock has
significant risk, but is quite popular in the market. Inflation for the next few years is expected to
be 2-3% per year, and the current U.S. Treasury rates are about 2%. How should she use this
information to decide what type of return she can expect from the stock? - answer✔Based on the
inflation rate, she should expect this stock to provide a return higher than this for the associated
risk.
Twenty years ago, Mateo started an investment account with $2,000. He then invested $100 into
the account every month at the end of each month. Today, he has $46,528 in the same account.
What is the term for the $100 monthly cash flows? - answer✔Annuity
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