Finance Skills for Managers (D076)
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Free Finance Skills for Managers (D076) Questions
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.
Which type of economic indicator is used by governments and policymakers to implement or alter policies in an effort to avoid or minimize the effects of an economic downturn
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Leading indicator
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Correlated indicator
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Coincident indicator
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Lagging indicator
Explanation
Correct Answer A: Leading indicator
Explanation:
Leading indicators are used by governments and policymakers to predict future economic activity. They help in making decisions and implementing policies to avoid or mitigate the effects of an economic downturn, as they change before the economy as a whole changes.
Why other options are wrong:
B) Correlated indicator: This term is not typically used in economic analysis in this context.
C) Coincident indicator: These indicators reflect the current state of the economy and move simultaneously with it, but are not used to predict or avoid downturns.
D) Lagging indicator: Lagging indicators reflect past economic activity and help confirm trends, but they are not useful in preventing or minimizing economic downturns.
Conceptual skills are most essential for
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lower-level managers and employees.
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mid-level managers.
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front-line employees.
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top-level managers.
Explanation
Correct Answer D: top-level managers.
Explanation:
Conceptual skills involve the ability to think strategically, analyze complex situations, and understand how different parts of an organization fit together. These skills are most crucial for top-level managers, such as CEOs and executives, who set the organization's direction and make high-level decisions.
Why other options are wrong:
A) Lower-level managers and employees: They rely more on technical and human skills, as their focus is on daily tasks rather than broad strategic planning.
B) Mid-level managers: They need a balance of technical, human, and conceptual skills, but conceptual skills are not as critical as they are for top managers.
C) Front-line employees: They primarily use technical skills for their specific job functions and do not require high-level conceptual thinking.
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.
An agreement in which managers share their organization's resources, knowledge, and skills with a foreign company is a(n) __
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Strategic alliance
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Joint venture
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Both a and b
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None of these
Explanation
Correct Answer C. Both a and b
Explanation:
A strategic alliance and a joint venture both involve companies collaborating to share resources, expertise, and market access. However, there is a distinction:
Strategic alliance: A partnership where companies work together without forming a new entity.
Joint venture: A more formal agreement where companies create a new, jointly owned business entity.
Since both involve sharing resources, knowledge, and skills with a foreign company, option C is correct.
Why other options are wrong:
A. Strategic alliance: This is correct but does not cover joint ventures.
B. Joint venture: This is correct but does not include strategic alliances.
D. None of these: Incorrect because both a and b apply.
Which ratio helps an analyst evaluate whether a company can cover its short-term obligations
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Market-to-book ratio
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Net margin
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Return on equity
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Current ratio
Explanation
Correct Answer D. Current ratio
Explanation:
The current ratio is a liquidity ratio that helps analysts assess whether a company has enough short-term assets to cover its short-term liabilities. It is calculated by dividing current assets by current liabilities. A ratio greater than 1 indicates that the company can meet its short-term obligations.
Why other options are wrong:
A. The market-to-book ratio compares a company's market value to its book value, which is not directly related to its ability to cover short-term obligations.
B. Net margin measures profitability, not liquidity or the ability to cover short-term debts.
C. Return on equity (ROE) is a profitability ratio that measures how effectively a company uses shareholders' equity to generate profits, not its ability to meet short-term obligations.
A company is developing a financial forecast for the next year. The company plans to implement a new factory that will increase production and resulting sales by 20%. Since the company's assets are increasing significantly, what else must increase
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Financing
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Accounts receivable turnover
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Gross margin
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Profit turnover
Explanation
Correct Answer A. Financing
Explanation:
As the company increases its assets by implementing a new factory, it will likely need additional financing to cover the costs of these new assets and operations. Financing ensures that the company can maintain liquidity and continue its expansion.
Why other options are wrong:
B. Accounts receivable turnover: This ratio measures how efficiently the company collects receivables, but it does not directly relate to the need for financing when assets increase significantly.
C. Gross margin: Gross margin is related to sales and production efficiency, but it does not automatically increase just because assets or production are increasing.
D. Profit turnover: Profit turnover measures the relationship between profits and total assets, but increasing assets typically means the company needs more financing rather than impacting profit turnover directly.
An investor is considering purchasing stock in a certain company, but the investor's financial advisor suggests purchasing stocks in multiple companies instead of just one.
Which risk management technique is this financial advisor suggesting
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Risk diversification
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Risk separation
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Risk avoidance
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Risk transfer
Explanation
Correct Answer A. Risk diversification
Explanation:
Risk diversification involves spreading investments across different assets, such as stocks in various companies, to reduce the overall risk. By investing in multiple companies, the investor minimizes the potential negative impact that a poor performance of a single company can have on the entire investment portfolio.
Why other options are wrong:
B. Risk separation: This term typically refers to keeping different types of assets or liabilities separate, but it is not the standard term used for spreading investment across multiple assets to reduce risk.
C. Risk avoidance: Risk avoidance means not engaging in activities or investments that involve any risk, but the strategy in this scenario is about managing and reducing risk, not avoiding it.
D. Risk transfer: Risk transfer refers to shifting risk to another party, such as through insurance, rather than reducing risk through diversification.
In most small businesses, which of the following is the lowest priority for managers
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Sales
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Finance
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Production
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HR management
Explanation
Correct Answer:
D) HR management
Explanation:
In most small businesses, managers prioritize sales, finance, and production because these areas directly impact revenue, cash flow, and operations. HR management, while important, is often handled informally or given less attention in the early stages due to limited resources.
Why other options are wrong:
A) Sales: Sales are critical for small businesses to generate revenue and sustain operations.
B) Finance: Proper financial management ensures cash flow, budgeting, and profitability, making it a high priority.
C) Production: If the business produces goods, production efficiency and quality control are crucial for meeting demand and maintaining competitiveness.
Which type of expense is a magazine subscription
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Asset expense
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Variable expense
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Monitored expense
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Fixed expense
Explanation
Correct Answer D. Fixed expense
Explanation:
A magazine subscription is typically considered a fixed expense because it is a recurring cost that remains constant over a period of time, usually for the duration of the subscription. It does not vary based on the level of activity or sales, making it a predictable cost.
Why other options are wrong:
A. An asset expense would relate to the cost of acquiring a long-term asset, such as property or equipment, not a subscription.
B. A variable expense changes based on usage or activity (e.g., raw materials or utilities), which is not the case with a fixed magazine subscription.
C. "Monitored expense" is not a standard financial term.
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