Exam (elaborations)
WGU - D076 GLOSSARY QUESTIONS AND ANSWERS 2024
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WGU - D076 GLOSSARY QUESTIONS AND ANSWERS 2024
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WGU - D076 GLOSSARYGross Margin - ANSWERS-A profitability ratio found by gross profit divided by
sales.
Harvest - ANSWERS-Generating cash or stock from the sales or IPO of companies
in the portfolio of investments.
Holding Period Return - ANSWERS-The return over the entire period that an
investor owns a financial security.
Hurdle Rate - ANSWERS-The required rate of return that a company expects to
earn in order to consider a project.
Hybrid Security - ANSWERS-A security that has some elements that resemble
equity and others that resemble debt.
Idiosyncratic Risk - ANSWERS-Risk that results from factors at a particular firm and
can be reduced through diversification; also called firm-specific risk or
nonsystematic risk.
Incremental Cash Flows - ANSWERS-Cash flows that result from accepting a
project.
,Inflation - ANSWERS-The rate at which the average price level of a basket of
chosen goods and services in an economy increases over a period of time.
Initial Public Offering (IPO) - ANSWERS-When a privately held company first offers
shares of stock to outside investors to raise capital, therefore becoming a publicly
owned company.
Insurance Companies - ANSWERS-Charge premiums to invest in bonds and stocks
to pay claims.
Interest Rate - ANSWERS-The percentage of the principal that a lender charges a
borrower for the use of assets.
Interest Rate Risk - ANSWERS-The probability that changes in interest rates will
impact the value of a bond.
Internal Rate of Return (IRR) - ANSWERS-The rate of return that a firm earns on its
capital projects.
Accounting - ANSWERS-The system of recording, reporting, and summarizing past
financial information and transactions.
Accounts Receivable Turnover (AR Turnover) - ANSWERS-An activity ratio found
by credit sales divided by accounts receivable.
, Activity Ratios - ANSWERS-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.
Additional Funds Needed (AFN) - ANSWERS-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 - ANSWERS-A bond covenant that describes things the
company pledges itself to do in order to protect bondholders.
Agency Costs - ANSWERS-Costs that are incurred when management does not act
in the best interest of shareholders.
Agency Problem - ANSWERS-When the agent (the management) does not act in
the best interest of the principal (the owners).
Aggressive Assets - ANSWERS-Companies or securities with beta greater than 1.
Annual Percentage Rate - ANSWERS-The annual interest rate that is charged for
borrowing money or that is earned through investment.
Annuity - ANSWERS-A stream of cash flows of an equal amount paid every
consecutive period.
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