D076 Finance Skills for Managers - Set 2 - Part 1

Correct Answer: An institution that accepts and pays interest on deposits of money

A depository institution is a financial institution that accepts deposits from the public and pays interest on those deposits. It also provides loans.

Correct Answer: To conduct financial transactions such as investments, loans, and deposits

Financial institutions play a vital role in conducting transactions that facilitate the flow of money through the economy, including investments, loans, and deposits.

Correct Answer: Investment bank

Investment banks specialize in large and complex financial transactions, including mergers, acquisitions, and helping companies raise capital.

Correct Answer: Pension fund

Pension funds manage and invest money on behalf of employees to provide them with retirement benefits.

Correct Answer: They use returns from stocks and bonds

Insurance companies invest the premiums they collect into stocks, bonds, and other investments to earn returns, which they use to pay out claims.

Correct Answer: Central bank

The central bank regulates the economy by controlling the money supply and interest rates to ensure economic stability.

Correct Answer: Leading, Lagging, and Coincident

Economic indicators are classified as leading, lagging, or coincident based on their relationship to economic changes.

Correct Answer: Lagging

The unemployment rate is a lagging indicator because it reflects economic changes after they have occurred.

Correct Answer: To regulate inflation and unemployment

The Federal Reserve uses interest rate adjustments to control inflation and manage unemployment levels in the economy.

Correct Answer: Economic downturn

An inverted yield curve indicates that short-term interest rates are higher than long-term rates, which can signal a future economic downturn.

Correct Answer: They provide information about the current state of the economy

Coincident indicators are analyzed during economic shifts to show the current condition of the economy.

Correct Answer: To protect investors

The U.S. Securities and Exchange Commission (SEC) is responsible for protecting investors by enforcing laws to ensure fair practices in financial markets.

Correct Answer: Investment institutions

Investment institutions facilitate access to financial markets by providing individuals and firms with the opportunity to invest and raise capital.

Correct Answer: Private equity

Private equity firms invest in underperforming companies, improve their operations, and seek to sell them or take them public for profit.

Correct Answer: Leading

The yield curve is a leading indicator because it often predicts changes in economic activity.

Correct Answer: Legal

Legal errors involve violations of laws or regulations, which can result in government-imposed penalties.

Correct Answer: Moral

Lucas is facing a moral dilemma, where the actions may be legal but conflict with ethical standards.

Correct Answer: It is based on accepted standards of conduct

Ethical actions are guided by standards that are widely accepted as proper behavior in society.

Correct Answer: Moral

Morals refer to a person’s beliefs about what is right or wrong, and good or bad.

Correct Answer: Accounting

Accounting involves recording, reporting, and summarizing financial transactions for a business or individual.