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A comprehensive set of questions and answers related to finance skills for managers. It covers various topics, including ethical issues in finance, investment evaluation, capital budgeting, accounts receivable management, risk management, and financial institutions. Designed to help managers and financial analysts develop a strong understanding of key finance concepts and ethical considerations in decision-making.
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o Answer: Some sales were made on credit. (The difference arises because certain transactions were conducted on credit, with some amounts expected to be collected in future months.)
o Answer: Primary market. (This market facilitates the initial issuance of securities.)
Utility of Ratios in Performance Analysis o Ratios standardize financial data for effective comparison across firms of varying sizes. Fundamentals of Personal Budgeting o Essential principles include record-keeping, understanding savings, expenses, income, and eliminating consumer debt. Long-term Financial Forecasts o Used for guiding investment and financing decisions. What Net Margin Indicates o A net margin of 7% signifies that for every dollar of revenue, 7 cents remain after covering costs. Inventory Turnover o Evaluates the firm's efficiency in managing inventory. Understanding Ethical Behavior o Refers to the accepted standards governing conduct. Current vs. Quick Ratio o The quick ratio excludes inventory because it is the least liquid current asset. Disadvantage of Debt Financing
o Answer: Agency problem due to conflicting interests.
o Answer: By analyzing the different inherent risks that change the cost of capital to the firm.
o Answer: Non-spontaneous accounts.