D076 Finance Skills for Managers - Set 2 - Part 2

Test your knowledge of technical writing concepts with these practice questions. Each question includes detailed explanations to help you understand the correct answers.

Question 21: An activity ratio found by credit sales divided by accounts receivable is known as what?

Profit margin

Accounts receivable turnover

Asset turnover

Current ratio

Question 22: 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 is called what?

Liquidity ratios

Activity ratios

Profitability ratios

Leverage ratios

Question 23: Another name for the discretionary financing needed or external financing needed is what?

Debt

Additional Funds Needed (AFN)

Equity financing

Cash reserves

Question 24: A bond covenant that describes things the company pledges itself to do in order to protect bondholders is called what?

Negative covenants

Affirmative covenants

Equity covenants

Financial covenants

Question 25: Costs that are incurred when management does not act in the best interest of shareholders are called what?

Administrative costs

Agency costs

Operational costs

Legal costs

Question 26: When the agent (the management) does not act in the best interest of the principal (the owners), this is called what?

Principal-agent problem

Shareholder conflict

Managerial discretion

Governance issue

Question 27: Companies or securities with a beta greater than 1 are referred to as what?

Defensive assets

Neutral assets

Aggressive assets

Conservative assets

Question 28: The annual interest rate that is charged for borrowing money or that is earned through investment is called what?

Nominal rate

Compound rate

Real rate

Annual Percentage Rate (APR)

Question 29: A stream of cash flows of an equal amount paid every consecutive period is called what?

Perpetuity

Annuity

Balloon payment

Sinking fund

Question 30: Which term describes a bond that has no maturity date and pays interest indefinitely?

Zero-coupon bond

Convertible bond

Perpetuity bond

Callable bond

Question 31: The financial market where new securities are issued and sold to initial buyers is called what?

Primary market

Secondary market

Money market

Futures market

Question 32: What type of financial market facilitates the trade of securities after their initial issuance?

Primary market

Secondary market

Money market

Derivatives market

Question 33: What type of risk is reduced by diversification in a portfolio?

Market risk

Systematic risk

Firm-specific risk

Interest rate risk

Question 34: What is the compensation for risk given to investors called?

Risk premium

Risk-free rate

Opportunity cost

Interest rate

Question 35: The rate at which invested money grows for a certain period of time is called what?

Real interest rate

Nominal interest rate

Risk-adjusted return

Compound interest

Question 36: Which term refers to a type of loan with equal payments over time?

Balloon loan

Sinking fund loan

Amortizing loan

Bullet loan

Question 37: When inflation increases, what typically happens to the purchasing power of money?

It increases

It decreases

It stays the same

It fluctuates randomly

Question 38: The concept that money today is worth more than the same amount in the future is known as what?

Time value of money

Risk-adjusted return

Opportunity cost

Future value

Question 39: What is the term used to describe the minimum return required by investors to compensate them for investing in a particular asset?

Interest rate

Risk-free rate

Required rate of return

Expected return

Question 40: When a firm uses borrowed funds to finance its operations, this is called what?

Equity financing

Debt financing

Retained earnings

Dividend reinvestment

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