Finance Skills for Managers (D076)
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Free Finance Skills for Managers (D076) Questions
Increase in importance as managers rise through the management hierarchy
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Spatial skills
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Conceptual skills
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Technical skills
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Informational skills
Explanation
Correct Answer B: Conceptual skills
Explanation:
As managers advance in the hierarchy, their role shifts from hands-on tasks to strategic decision-making. Conceptual skills become increasingly important because senior managers need to see the "big picture," develop long-term strategies, and understand complex relationships within the organization and the external environment.
Why other options are wrong:
A) Spatial skills: These are related to physical and visual understanding, which is not a core management skill.
C) Technical skills: These decrease in importance as managers rise, as they delegate technical tasks to lower-level employees.
D) Informational skills: While managing information is important, conceptual skills are more critical for higher-level strategic planning.
An investor really cares about having voting rights in a firm. Which type of financial security should this investor purchase
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Preferred stock
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Zero-coupon bonds
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Common stock
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Secured bonds
Explanation
Correct Answer C. Common stock
Explanation:
Common stockholders have voting rights in a company, typically at the company’s annual general meeting (AGM) or special meetings, where they can vote on corporate matters such as electing the board of directors or approving major corporate actions. Preferred stockholders, on the other hand, generally do not have voting rights, and bondholders (such as zero-coupon bonds or secured bonds) have no voting rights in the company.
Why other options are wrong:
A. Preferred stock: While preferred stockholders may receive dividends before common stockholders, they typically do not have voting rights in the company.
B. Zero-coupon bonds: These are debt instruments that do not provide voting rights, as they represent a loan to the company rather than ownership.
D. Secured bonds: Secured bonds are debt instruments backed by collateral and do not confer voting rights to the bondholder.
The responsibility for setting a company's mission, objectives, broad strategies, and policies primarily lies with its
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Finance department
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Research department
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Top management
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Marketing managers
- Human resource managers
Explanation
Correct Answer C: Top management
Explanation:
Top management (such as CEOs, presidents, and senior executives) is responsible for defining the company's mission, setting objectives, and establishing broad strategies and policies to ensure long-term success.
Why other options are wrong:
A) Finance department: While finance is important for budgeting and resource allocation, it does not define the company's overall mission and strategy.
B) Research department: The research department focuses on innovation and product development, not company-wide strategy.
D) Marketing managers: Marketing managers develop market strategies, but they do not set the overall mission and policies of the company.
E) Human resource managers: HR managers handle recruitment, training, and employee policies, but they do not determine the company’s overall strategic direction.
Supervisory managers spend most of their time on
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Conceptual and financial skills.
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Technical and human relations skills.
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Strategic planning.
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External efforts such as meeting with stockholders and other stakeholders.
Explanation
Correct Answer B. Technical and human relations skills.
Explanation:
Supervisory managers, also known as first-line managers, focus on day-to-day operations, ensuring employees complete tasks efficiently. They require technical skills to understand job processes and human relations skills to manage and motivate employees effectively.
Why other options are wrong:
A. Conceptual and financial skills: Conceptual skills are more critical for top managers, while financial skills are mainly used by finance professionals.
C. Strategic planning: Supervisory managers focus on operational execution, not long-term strategic planning, which is handled by top management.
D. External efforts such as meeting with stockholders and other stakeholders: First-line managers typically do not engage in external relations, as this is the responsibility of top executives.
Managers with ________ skills have the ability to communicate with a wide range of employees
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Conceptual
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Interpersonal
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Technical
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Functional
Explanation
Correct Answer B. Interpersonal
Explanation:
Interpersonal skills, also known as human skills, enable managers to communicate effectively, build relationships, and work well with diverse employees at all levels of an organization. Strong interpersonal skills are crucial for leadership, conflict resolution, and team collaboration.
Why other options are wrong:
A. Conceptual: These skills help managers understand the bigger picture and strategic planning, but they are not directly related to everyday communication with employees.
C. Technical: Technical skills relate to job-specific knowledge and expertise, not interpersonal communication.
D. Functional: This is a broad term that does not specifically refer to communication skills.
Managers will utilize __________ skills with increasing frequency as they rise within an organization
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Professional
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Technical
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Conceptual and decision
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Interpersonal and communication
Explanation
Correct Answer C. Conceptual and decision
Explanation:
As managers move up the organizational hierarchy, they focus less on technical work and more on big-picture thinking, problem-solving, and strategic decision-making. Conceptual skills help them analyze complex situations and set long-term goals, while decision-making skills enable them to make high-impact choices for the company.
Why other options are wrong:
A. Professional: This term is too broad and does not specifically address the changing skillset required at higher levels.
B. Technical: Technical skills are most crucial for lower-level managers but decrease in importance as managers move up.
D. Interpersonal and communication: While these skills remain important at all levels, conceptual and decision-making skills are the ones that increase in frequency at higher levels.
Which of the following represents the most useful way of describing the manager's job
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Roles
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Functions
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Skills
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Organizational level
Explanation
Correct Answer A. Roles
Explanation:
Management experts like Henry Mintzberg describe a manager's job in terms of roles (e.g., interpersonal, informational, and decisional roles), which provide a realistic picture of what managers actually do on a daily basis. These roles help define how managers interact with employees, make decisions, and process information.
Why other options are wrong:
B. Functions: While functions (planning, organizing, leading, controlling) are important, they are broad categories rather than a direct description of daily managerial work.
C. Skills: Skills (technical, human, conceptual) are necessary but do not fully explain the diverse responsibilities of a manager.
D. Organizational level: Organizational levels (top, middle, first-line) indicate position, not job responsibilities.
The primary goal of the financial manager of a firm should be to ____
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maximize the firm's net income
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minimize the expenses incurred by the firm
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maximize stockholder wealth (stock price)
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maximize his/her paycheck
Explanation
Correct Answer C. maximize stockholder wealth (stock price)
Explanation:
The primary goal of a financial manager is to maximize the wealth of the shareholders, which is typically reflected in the company's stock price. By focusing on the long-term value of the company, the financial manager can ensure the company's success and provide returns to the investors.
Why other options are wrong:
A. maximize the firm's net income: While net income is important, it is not the ultimate goal. The firm could maximize net income in the short term by cutting costs or making decisions that may not maximize long-term stockholder wealth.
B. minimize the expenses incurred by the firm: Minimizing expenses may help profitability, but focusing solely on cost reduction could harm the firm's ability to grow, invest in new projects, or meet other strategic goals, which in turn could reduce stockholder wealth.
D. maximize his/her paycheck: The financial manager's compensation should be aligned with the success of the company and the wealth of the shareholders. Focusing on personal gain over company performance could conflict with the interests of the stockholders.
In the context of the skills that good managers should possess, which of the following statements is true of managers with a motivation to manage
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Managers with a strong motivation to manage are unable to behave assertively toward others.
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Managers at lower levels usually have a stronger motivation to manage than managers at higher levels.
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Managers with a strong motivation refrain from participating in competitive situations.
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Managers with a strong motivation to manage are rated as better managers by their employees.
Explanation
Correct Answer D. Managers with a strong motivation to manage are rated as better managers by their employees.
Explanation:
Managers with a high motivation to manage are more engaged in leading, decision-making, and problem-solving, which often results in better management performance and higher employee satisfaction. These managers tend to assert themselves effectively, take initiative, and perform well in competitive environments.
Why other options are wrong:
A. Managers with a strong motivation to manage are unable to behave assertively toward others: Incorrect—strong managers are often assertive and confident in their decision-making.
B. Managers at lower levels usually have a stronger motivation to manage than managers at higher levels: Incorrect—higher-level managers typically have greater motivation to lead, as they handle broader responsibilities.
C. Managers with a strong motivation refrain from participating in competitive situations: Incorrect—successful managers thrive in competitive environments and seek opportunities for growth and leadership.
A company that manufactures televisions must obtain financing to increase the company's inventory levels. A manager at the company knows that current investment markets are tight, and it may be difficult for the company to obtain additional financing for the next year. The manager wants to propose a way for the firm to reduce its discretionary financing needed (DFN). What should the manager suggest to reduce next year's DFN
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Lower the amount of dividends that are paid out to shareholders next year
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Lower the net margin by decreasing the sales prices and maintaining current costs
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Increase the amount spent on fixed assets to increase production capacity
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Increase sales growth, resulting in a larger amount of revenue coming into the firm
Explanation
Correct Answer A. Lower the amount of dividends that are paid out to shareholders next year
Explanation:
By reducing dividend payouts, the company can retain more of its earnings, which can help finance operations and reduce the need for external financing. This is a direct way to reduce discretionary financing needs (DFN) by using internal funds rather than relying on external sources.
Why other options are wrong:
B. Lower the net margin by decreasing the sales prices and maintaining current costs: Lowering net margins by reducing prices is not a viable strategy to reduce DFN, as it would decrease profitability, making it harder to finance operations.
C. Increase the amount spent on fixed assets to increase production capacity: Increasing spending on fixed assets would increase the company's financing needs, not reduce them.
D. Increase sales growth, resulting in a larger amount of revenue coming into the firm: While increasing sales may improve revenue, it typically also requires additional working capital and financing, which would not reduce DFN in this context.
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