WGU D076 Finance Skills for Managers 2024

Annuity - ANSWER--A stream of cash flows of an equal amount paid every consecutive period.

Additional Funds Needed (AFN) - ANSWER--Another name for the discretionary financing needed or external financing needed. It represents the additional financing needed given a firm's expectations for future growth.

Affirmative Covenants - ANSWER--A bond covenant that describes things the company pledges itself to do in order to protect bondholders.

Agency Costs - ANSWER--Costs that are incurred when management does not act in the best interest of shareholders.

Agency Problem - ANSWER--When the agent (the management) does not act in the best interest of the principle (the owners).

Aggressive Assets - ANSWER--Companies or securities with beta greater than 1.
Activity Ratios - ANSWER--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

Annuity Due - ANSWER--A series of equal payments made at the beginning of consecutive periods.

Accounting - ANSWER--The system of recording, reporting, and summarizing past financial information and transactions.

Asset Pricing - ANSWER--The process of valuing assets.

Auction Market - ANSWER--A secondary market with a physical location and where prices are determined by investors' willingness to pay.
Annual Percentage Rate - ANSWER--The annual interest rate that is charged for borrowing money or that is earned through investment.

Average Collection Period (ACP) - ANSWER--An activity ratio found by the number of days in a year (365) divided by AR turnover.

Balance Sheet Forecasting - ANSWER--Using sales growth and the profit forecast to construct a pro forma balance sheet to understand the future implications of the sources and uses of finances.

Banks and Credit Unions - ANSWER--Receive deposits and extend loans to individuals and businesses.
Accounts Receivable Turnover (AR Turnover) - ANSWER--An activity ratio found by credit sales divided by accounts receivable.

Beta - ANSWER--A variable that describes how the price of a security varies with the market.

Bid-ask Spread - ANSWER--The difference between the bid and ask prices that compensate the specialist for the risk that he or she bears for willingness to provide liquidity.

Board of Directors - ANSWER--A group of people who jointly supervise the activities of an organization.

Bond Indenture - ANSWER--A legal contract that governs the relationship between a firm and its bondholders.
Benchmarking - ANSWER--The process of completing a financial analysis to compare a firm's financial performance to that of other similar firms.



Business Finance - ANSWER--An area of finance that deals with sources of funding, the capital structure of corporations, the actions that managers take to increase the value of the firm to its owners, and the tools and analysis used to allocate financial resources.

Cannibalization - ANSWER--The reduction in sales of a company's own products due to introduction of another similar product.
Bondholders - ANSWER--A person who loans a corporation money by buying debt securities.

Capital Asset Pricing Model (CAPM) - ANSWER--A model used to determine the risk-return relationship for an asset.

Capital Budgeting Criteria - ANSWER--Metrics and calculations used to determine whether a project or asset will add value and be a worthwhile investment.


Capital Investment - ANSWER--The sum of money invested in a business to purchase long-term assets to further its objective of maximizing owner wealth.

Capital Markets - ANSWER--A type of financial market used for long-term assets that are held for greater than one year.

Capital Structure - ANSWER--The mixture of debt and equity used to finance a firm.

Capital - ANSWER--A financial asset that can be used by a firm or individual. Examples of capital may be machinery or cash held by a firm.
Capital Budgeting - ANSWER--The process of evaluation and planning for purchases of long-term assets.


Cash Budgets - ANSWER--A plan for controlling cash inflows and outflows business to balance income with expenditures.

Cash Management - ANSWER--Managing the day-to-day finance operations of a firm.

Central Banks - ANSWER--Ensure that a nation's economy remains healthy by controlling the amount of money circulating in the economy.

Common Stock - ANSWER--A type of stock that represents equity in a firm and confers the right to vote at shareholder meetings.

Compounding Interest - ANSWER--The interest on the principal plus the interest on earned interest.
Capital-constrained Environment - ANSWER--When a limited amount of funds are available.

Compounding - ANSWER--Finding a future value given a present value.

Corporate Bonds - ANSWER--A debt instrument that is issued by a corporation in order to raise capital.

Corporate Governance - ANSWER--The system of rules, practices, and processes by which a firm is directed and controlled.

Correlation - ANSWER--The measure of the relationship between two variables that move in relation to each other.

Cost of Capital - ANSWER--The cost to a firm to use an investor's capital; see interest rate.

Coupon Rate - ANSWER--The stated interest rate of a bond; also known as coupon yield.

Coupon Yield - ANSWER--The stated interest rate of a bond; also known as coupon rate.

Covenants - ANSWER--Statements in a bond indenture that outline things the company will obligate itself to do or not do in order to protect bondholders.

Credit Analysts - ANSWER--A commercial bank position with the responsibility to assess the riskiness of lending to borrowers and determining whether or not loans should be extended to potential bank clients.

Cross-sectional Analysis - ANSWER--Comparing a firm's financial ratios to other firms' ratios or industry averages.

Cumulative - ANSWER--A feature of preferred stock specifying that if a company skips payment of a preferred stock dividend one year, it is still required to pay that dividend sometime in the future before paying any common dividends.

Current Market Value - ANSWER--What someone would pay right now for an asset.

Current Ratio - ANSWER--A liquidity ratio found by current assets divided by current liabilities.

Dealer Market - ANSWER--A secondary market made up of multiple dealers that hold an inventory of securities and quote prices.

Debt Ratio - ANSWER--A financing ratio found by total liabilities divided by total assets.

Debt-to-equity Ratio - ANSWER--A financing ratios found by total liabilities divided by total equity.

Default Risk - ANSWER--The probability of a loss resulting from a borrower's failure to repay a contractual obligation; also called credit