WGU D076 – Finance Skills for
Managers Exam Final Exam Prep (Latest
Update ) Questions and
Verified Answers | 100% Correct |
Grade A.
1. A manager is evaluating whether a company has enough
resources to meet its short-term obligations. Which financial
statement provides the most direct information for this
assessment?
A. Income statement
B. Statement of retained earnings
C. Balance sheet
D. Statement of cash flows
Rationale: The balance sheet reports a company's assets, liabilities, and
equity at a specific point in time. Comparing current assets with current
liabilities helps managers assess short-term financial strength and
liquidity.
2. Which financial statement primarily reports revenues and
expenses over a specified period?
A. Balance sheet
B. Income statement
C. Statement of cash flows
D. Statement of stockholders' equity
,Rationale: The income statement summarizes revenues earned and
expenses incurred during a period. The resulting net income or net loss
helps managers evaluate operating performance.
3. A company has current assets of $120,000 and current liabilities of
$80,000. What is the company's current ratio?
A. 0.67
B. 1.25
C. 1.50
D. 2.00
Rationale: The current ratio is calculated as current assets divided by
current liabilities. Therefore, $120,000 ÷ $80,000 = 1.50. This means the
company has $1.50 of current assets for every $1 of current liabilities.
4. Which financial ratio is most directly used to evaluate a company's
ability to meet its short-term obligations without relying on the
sale of inventory?
A. Debt-to-equity ratio
B. Gross profit margin
C. Quick ratio
D. Return on equity
Rationale: The quick ratio excludes inventory and other less-liquid
current assets from the numerator. It therefore provides a more
conservative measure of short-term liquidity than the current ratio.
5. A company has total liabilities of $300,000 and total equity of
$200,000. What is its debt-to-equity ratio?
,A. 0.67
B. 1.00
C. 1.50
D. 2.50
Rationale: The debt-to-equity ratio is calculated by dividing total
liabilities by total equity. Thus, $300,000 ÷ $200,000 = 1.50. A higher
ratio generally indicates greater reliance on debt financing relative to
equity financing.
6. Which principle states that a dollar received today is generally
worth more than a dollar received in the future?
A. Risk-return tradeoff
B. Diversification principle
C. Time value of money
D. Matching principle
Rationale: The time value of money recognizes that money available
today can be invested and earn a return. Consequently, a current dollar
has greater economic value than the same nominal dollar received later.
7. An investor deposits $10,000 into an account earning 5% annual
interest. Assuming annual compounding, approximately how
much will the investment be worth after one year?
A. $10,050
B. $10,250
C. $10,500
D. $11,000
Rationale: Future value is calculated as present value × (1 + interest
rate)^number of periods. Thus, $10,000 × 1.05 = $10,500 after one year.
, 8. Which of the following best describes the net present value (NPV)
of an investment?
A. The project's total accounting profit
B. The amount of revenue generated by the project
C. The present value of future cash inflows minus the initial
investment and other relevant cash outflows
D. The project's total future cash inflows without discounting
Rationale: NPV incorporates the time value of money by discounting
future cash flows to their present value. A positive NPV generally
indicates that an investment is expected to create value above the
required return.
9. A project requires an initial investment of $50,000 and is expected
to generate cash inflows of $10,000 per year. Ignoring the time
value of money, what is the simple payback period?
A. 2 years
B. 4 years
C. 5 years
D. 10 years
Rationale: The simple payback period is calculated by dividing the initial
investment by the expected annual cash inflow when annual inflows are
equal. $50,000 ÷ $10,000 = 5 years.
10. Which capital budgeting method explicitly accounts for the
time value of money?
A. Simple payback period
B. Accounting rate of return
Managers Exam Final Exam Prep (Latest
Update ) Questions and
Verified Answers | 100% Correct |
Grade A.
1. A manager is evaluating whether a company has enough
resources to meet its short-term obligations. Which financial
statement provides the most direct information for this
assessment?
A. Income statement
B. Statement of retained earnings
C. Balance sheet
D. Statement of cash flows
Rationale: The balance sheet reports a company's assets, liabilities, and
equity at a specific point in time. Comparing current assets with current
liabilities helps managers assess short-term financial strength and
liquidity.
2. Which financial statement primarily reports revenues and
expenses over a specified period?
A. Balance sheet
B. Income statement
C. Statement of cash flows
D. Statement of stockholders' equity
,Rationale: The income statement summarizes revenues earned and
expenses incurred during a period. The resulting net income or net loss
helps managers evaluate operating performance.
3. A company has current assets of $120,000 and current liabilities of
$80,000. What is the company's current ratio?
A. 0.67
B. 1.25
C. 1.50
D. 2.00
Rationale: The current ratio is calculated as current assets divided by
current liabilities. Therefore, $120,000 ÷ $80,000 = 1.50. This means the
company has $1.50 of current assets for every $1 of current liabilities.
4. Which financial ratio is most directly used to evaluate a company's
ability to meet its short-term obligations without relying on the
sale of inventory?
A. Debt-to-equity ratio
B. Gross profit margin
C. Quick ratio
D. Return on equity
Rationale: The quick ratio excludes inventory and other less-liquid
current assets from the numerator. It therefore provides a more
conservative measure of short-term liquidity than the current ratio.
5. A company has total liabilities of $300,000 and total equity of
$200,000. What is its debt-to-equity ratio?
,A. 0.67
B. 1.00
C. 1.50
D. 2.50
Rationale: The debt-to-equity ratio is calculated by dividing total
liabilities by total equity. Thus, $300,000 ÷ $200,000 = 1.50. A higher
ratio generally indicates greater reliance on debt financing relative to
equity financing.
6. Which principle states that a dollar received today is generally
worth more than a dollar received in the future?
A. Risk-return tradeoff
B. Diversification principle
C. Time value of money
D. Matching principle
Rationale: The time value of money recognizes that money available
today can be invested and earn a return. Consequently, a current dollar
has greater economic value than the same nominal dollar received later.
7. An investor deposits $10,000 into an account earning 5% annual
interest. Assuming annual compounding, approximately how
much will the investment be worth after one year?
A. $10,050
B. $10,250
C. $10,500
D. $11,000
Rationale: Future value is calculated as present value × (1 + interest
rate)^number of periods. Thus, $10,000 × 1.05 = $10,500 after one year.
, 8. Which of the following best describes the net present value (NPV)
of an investment?
A. The project's total accounting profit
B. The amount of revenue generated by the project
C. The present value of future cash inflows minus the initial
investment and other relevant cash outflows
D. The project's total future cash inflows without discounting
Rationale: NPV incorporates the time value of money by discounting
future cash flows to their present value. A positive NPV generally
indicates that an investment is expected to create value above the
required return.
9. A project requires an initial investment of $50,000 and is expected
to generate cash inflows of $10,000 per year. Ignoring the time
value of money, what is the simple payback period?
A. 2 years
B. 4 years
C. 5 years
D. 10 years
Rationale: The simple payback period is calculated by dividing the initial
investment by the expected annual cash inflow when annual inflows are
equal. $50,000 ÷ $10,000 = 5 years.
10. Which capital budgeting method explicitly accounts for the
time value of money?
A. Simple payback period
B. Accounting rate of return
