Finance PI's
Explain the time value of money.
- Definition: Money grows over time due to interest or dividends.
- Core Idea: Money today is worth more than the same amount in the future.
What is finance?
The process of managing money for an individual, business or other organization
Which of the following is a challenge that entrepreneurs often face:
A. Tax breaks
B. Increased resources
C. Potential financial loss
D. Extra vacation time
C. Potential financial loss
A business may use accounting to keep track of ...
A. competitor information.
B. customer information.
C. amounts owed to it.
D. marketing campaigns.
C. amounts owed to it.
Cocoa beans and corn are examples of investments that people make in which of the following financial markets:
A. Soft commodities
B. Selective property
C. Money
D. Insurance
A. Soft commodities
Describe the role of financial institutions.
- A financial institution conducts transactions such as investments, loans or deposits
What is investing?
- Investment involves risking money short-term for long-term profit
- Focuses on future financial gain or growth
How can you easily and automatically track your bank account withdrawals and deposits?
A. Save your receipts and compare them to your bank statement.
B. Organize your financial paperwork.
C. Make a list of all of your bills and when they are due.
D. Use a mobile banking or budgeting app
D. Use a mobile banking or budgeting app
When Jeremy develops his personal budget, he should categorize the money that he spends on food, clothing, and entertainment as ...
A. relational outflows.
B. variable expenses.
C. fixed costs.
D. periodic investments
B. variable expenses
Which of the following would afford finance professionals the best opportunity to build long-lasting relationships with other finance professionals?
A. Actively participating in a local professional association for the finance industry
B. Regularly attending trade shows for the finance industry
C. Actively attending meetings sponsored by the local chamber of commerce
D. Occasionally auditing classes at a local postsecondary institution
A. Actively participating in a local professional association for the finance industry
Explain the purposes and importance of credit
- Credit allows individuals and businesses to obtain products or money with a promise to pay later
- Businesses use credit to purchase materials and supplies from other companies
- Credit enables people and companies to buy goods/services they otherwise couldn’t afford
- Extending credit encourages customer purchases, boosting sales revenue
What is Financial Analysis?
- Involves analyzing financial statements
- Purpose: assess profitability of the organization
- Can focus on a specific division, event, or project
- Helps identify financial strengths and weaknesses
- Supports decision-making and strategic planning
- Ensures accountability and performance tracking
Insurance is a key element in lifelong financial planning that ...
A. protects a person from unethical salespeople.
B. provides protection against financial losses.
C. guarantees a solid financial future.
D. is available only to property owners
B. provides protection against financial losses.
A company's computer network allows many users to access the same programs on different computer units throughout the company. What type of computer operating system is the company using?
A. Augmented
B. Hosted
C. Multiprocessing
D. Multithreading
C. Multiprocessing
What are the two major sections of a statement of changes in stockholders' equity?
A. Capital stock and retained earnings
B. Net income and retained earnings
C. Capital stock and dividends declared
D. Net income and total stockholder's equity
A. Capital stock and retained earnings
Discuss the role of ethics in accounting.
- Accountants must follow laws and regulations relevant to their jurisdiction and profession.
- Professionals should avoid actions that could harm the reputation of the accounting field.
- Ethical behavior is expected by business partners and stakeholders.
- Ethics help maintain high standards and credibility in the profession.
- Ethical conduct safeguards both individual and corporate reputations.
What are the two main types of financial institutions?
- Depository institutions: banks, credit unions
- Non-depository institutions: insurance companies, mutual funds
- Depository institutions accept deposits and offer loans
- Non-depository institutions invest funds but don’t accept traditional deposits
Max earned $1,500 over the summer working at a restaurant. If Max puts his money in a savings account with 1% simple annual interest rate, how much will Max have in 5 years?
A. $1,515
B. $1,575
C. $1,725
D. $1,875
B. $1,575.
1% X $1,500 X 5 = $75
$1,500 + 75 = $1,575
When a business has too much inventory on hand for an extended period of time, what type of business cost increases?
A. Holding
B. Stockout
C. Production
D. Maintenance
A. Holding
Why are financial institutions using tokenization?
A. To protect online transactions
B. To overcome government-regulated quotas
C. To provide incentives for increased investing
D. To create credit cards
A. To protect online transactions
Explain the role of finance in business
The financial department of a business seeks to lower costs and utilize the budget through methods such as budgeting, reporting, and forecasting.
What's Risk Management?
- Risk management involves controlling potential for damage, loss, or injur
- Applies to individuals, businesses, and organizations
- Aims to protect the community, environment, and meet legal obligations
- Includes monitoring risks that could lead to financial or operational loss
- Helps ensure safety, compliance, and long-term sustainability
Amelia places $250 in a savings account that pays 6.25% interest compounded annually. Calculate the value of her savings account in two years.
A. $274.86
B. $290.60
C. $282.23
D. $297.77
C. $282.23
$250 X .0625 or 6.25% = $15.63; $250 + 15.63 = $265.63
$265.63 X .0625 or 6.25% = $16.60
$265.63 + $16.60 = $282.23
Alyssa needs a reliable car to maintain employment. She has saved $1,500 for a down payment on a used car and budgeted $250 for monthly car payments. Unfortunately, the used cars Alyssa can afford are older models at risk of needing repairs. Instead of taking that risk, she decides to lease a reliable new car with a monthly payment of $300 and no money down. She is thinking of using the $1,500 originally planned for a down payment to pay for a vacation. What would be the best way for Alyssa to use the $1,500, though?
A. Use $1,500 as a down payment on a used car that fits in her budget
B. Give $1,500 to the dealer to cover the first five lease payments
C. Set aside $1,500 to cover the first five lease payments and save for the vacation
D. Put $1,500 in savings to help cover the extra $50 per month for lease payments
D. Put $1,500 in savings to help cover the extra $50 per month for lease payments
Erica is looking at a stock that has a current price of $50.75, a 52-week high of $53.64, and a 52-week low of $42.45. The dividend of the stock is 2.50, while the net change is at +.10. Based on this information, what is the yield percentage of this stock?
A. 20.3%
B. 4.9%
C. 5.9%
D. 21.4%
HINT: The yield percentage is determined by dividing the dividend by the actual closing price/current price of the stock!
B. 4.9 %