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In which way is accounting different from finance? Accounting is about budgeting, saving, and borrowing, while finance is about investing, forecasting, and lending. Accounting is focused on allocating capital, while finance is focused on bringing in capital. Accounting is backward looking, whil...

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  • February 3, 2024
  • 12
  • 2023/2024
  • Exam (elaborations)
  • Questions & answers

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  • d076 pa questions and answers verified 100

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D076 - PA Questions and Answers
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In which way is accounting different from finance?

Accounting is about budgeting, saving, and borrowing, while finance is about investing, forecasting, and
lending.

Accounting is focused on allocating capital, while finance is focused on bringing in capital.

Accounting is backward looking, while finance is focused on the future.

Accounting forecasts future performance, given the past, while finance records past performance.

Accounting is backward looking, while finance is focused on the future.

A financial manager at a company is trying to determine whether to issue new stocks or new bonds to
cover the costs of a project the company is doing the next year.

Which main task in business finance is this situation an example of?

Managing working capital

Making investment decisions

Making financing decisions

Managing interdepartmental loans

Making financing decisions

What is the main question that both individuals and companies must consider when making financial
decisions to reach a goal?

Will this decrease the amount of cash available?

Will utility be maximized through this decision?

Will this decision require debt or equity financing?

Will the benefits of the action outweigh the costs?

Will the benefits of the action outweigh the costs?

How can investing help a person reach personal financial goals?

It ensures money is placed in a safe, risk-free, and easily accessible financial asset.

, It provides a guaranteed future outcome in order to predictably meet financial goals.

It helps a person understand how money was spent previously in order to reliably predict future
expenses.

It provides access to potential revenue or increases in value to help meet goals faster.

It provides access to potential revenue or increases in value to help meet goals faster.

How does an investment institution, such as a mutual fund, facilitate the circulation of money in the
economy?

By raising capital on a contractual basis, such as an insurance contract

By providing individuals and firms access to financial markets to buy or sell financial securities

By insuring deposits in investment accounts up to $250,000 to promote public confidence

By accepting deposits of money, paying interest on deposits, and providing loans to individuals and
organizations

By providing individuals and firms access to financial markets to buy or sell financial securities

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?

Leading indicator

Lagging indicator

Correlated indicator

Coincident indicator

Leading indicator

What should a potential bondholder (lender) do to prevent a company (borrower) from taking on risky
projects?

Separate owners from management so their interests do not conflict

Release managers who do not attempt to maximize immediate shareholder value

Encourage manipulation of accounting procedures to optimize the company's profit

Set strict covenants that the company cannot uphold if it chooses a risky project

Set strict covenants that the company cannot uphold if it chooses a risky project

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