WGU C708 Principles of Finance Exact Proctored Exam Questions

13

What is a dealer market?

• A market where government bonds are traded in a blockchain-centered platform for

transparency

• A market where commodities are bought and sold to permit hedging of risk to both the

buyer and the seller

• A market where transactions are facilitated by market makers who buy and sell

securities for their own accounts

• A market where all buy and sell orders are aggregated in a centralized mechanism to

increase efficiencies

14

What distinguishes a dealer market from an auction market?

⁌ Dealer markets increase transparency, while auction markets obfuscate both prices and

volume, thus decreasing transparency.

⁌ Dealer markets involve electronic trading, while auction markets involve manual trading

with trading floors and call outs.

⁌ Dealer markets have market makers who buy and sell for their own accounts, while

auction markets aggregate buy and sell orders.

⁌ Dealer markets trade government bonds for their own accounts, while auction markets

trade corporate bonds instead.

15

What is the role of major financial exchanges like the New York Stock Exchange (NYSE) and the

National Association of Securities Dealers Automated Quotations (NASDAQ)?

•  To regulate financial markets
•  To provide platforms for trading securities
•  To issue new securities
•  To provide loans to businesses

16

Which institution is an example of a depository institution?

• Hedge fund
• Mutual fund
• Insurance company
• Commercial bank

17

What is public equity raising?

•  Providing loans to the public through public stock exchanges
•  Selling shares of a company to the public through stock exchanges
•  Selling bonds of a company to the public through public stock exchanges
•  Offering insurance policies to the public through public stock exchanges

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18

What does the unemployment rate measure?

•  The percentage of the labor force that is unemployed and actively seeking employment

•  The total number of people employed in a given geographic area over a period of time

•  The level of government spending on welfare relative to those that have full employment

•  The rate of inflation in the economy as compared to the wage growth of those employed

19

What does legal compliance ensure in finance?

○ Ethical behavior in all situations

○ Maximizing market share

○ Reducing the need for corporate governance

○ Adherence to laws and regulations

20

What does sustainability in finance involve?

○ Adhering to the goal of maximizing shareholder wealth through net present value

calculations

○ Focusing on short-term profits in an optimal manner to enhance stakeholder well-being

○ Integrating environmental, social, and governance factors into financial decision-making

○ Relying on the government to dictate environmental and social factors that a firm must

follow

23

How do financial ratios support management in strategic planning?

• By identifying areas for improvement
• By ensuring consistent market growth
• By setting government economic policies
• By determining the exact future profits

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22

How do financial ratios aid in economic analysis for a company?

• By ensuring a company’s success in the market
• By setting government regulations for financial reporting
• By summarizing the company’s financial health and performance
• By dictating the company’s marketing and sales strategies

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TEST NAME: BJO1

27 An aeronautics company plans to issue a 30-year long-term corporate bond to raise capital for its new product development project.

What is one reason for the company choosing to raise capital through corporate bonds?

○ Because the company will be able to reduce its tax liabilities

○ Because the company will be able to raise capital at a rate similar to that of public bonds

○ Because the company will be able to lower its financial risks

○ Because the company will be required to make repayments only if it earns a profit

I’m sorry, I can’t assist with that.

28

Which ratios would an investor use to determine whether a stock was undervalued?

• Liquidity
• Market
• Leverage
• Activity

24

How can financial ratios guide internal financial management?

• They highlight opportunities for cost reduction or investment.
• They dictate changes in market trends.
• They set employee performance metrics.
• They ensure the company’s market dominance.

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21

How can companies demonstrate a commitment to corporate social responsibility (CSR)?

• Refusing to be a publicly traded firm
• Using only audited statements
• Finding profitable projects
• Engaging in fair trade practices

25

What do activity ratios indicate?

• Profit margins
• Stock price valuation
• Cash reserve levels
• Asset usage efficiency

What is a focus area of business finance?

• Historical data analysis
• Capital budgeting
• Personal budgeting
• Tax collection

2

Why is understanding the cost of capital important in business finance?

• To manage individual retirement accounts
• To comply with tax regulations
• To determine the best financing options for projects
• To prepare accurate financial statements

3

What does risk management in business finance involve?

• Filing government reports
• Managing potential financial losses
• Preparing income statements
• Balancing personal budgets

6

What are the primary purposes of financial derivatives?

•  To provide ownership in companies or provide voting options for shareholders
•  To hedge against risks or speculate on the future price movements
•  To pay dividends to shareholders or allow for the reinvestment of dividends
•  To issue government debt or refinance previously-issued government debt