WGU D076 FINANCIAL SKILLS FOR
MANAGERS FINAL EXAM
COMPREHENSIVE PREP QUESTIONS
AND ANSWERS
1. What is the primary goal of financial management in a publicly traded corporation?
A. To maximize the net income for each fiscal year
B. To maximize the current value per share of the existing stock
C. To minimize the total costs of the organization
D. To increase the total assets of the company
Answer: B
Conceptual Explanation: In a corporation, the primary goal of management is to act in the
best interest of the shareholders by maximizing the current value of their stock.
2. Which financial statement reports a firm’s financial position at a specific point in time?
A. Balance Sheet
B. Statement of Cash Flows
,C. Income Statement
D. Statement of Retained Earnings
Answer: A
Conceptual Explanation: The Balance Sheet provides a snapshot of assets, liabilities, and
equity at a specific point in time, unlike the others which cover a period.
3. A company has a Current Ratio of 2.5. What does this indicate about the company’s
liquidity?
A. The company has 2.5 times more debt than equity.
B. The company’s profit margin is 2.5%.
C. The company has $2.50 in current assets for every $1.00 of current liabilities.
D. The company turns over its inventory 2.5 times per year.
Answer: C
Conceptual Explanation: The current ratio is calculated as Current Assets divided by
Current Liabilities. A ratio of 2.5 means the firm has $2.50 in liquid assets for every dollar
of short-term debt.
4. Which of the following is considered a non-cash expense on the income statement?
A. Salaries Expense
B. Depreciation
C. Interest Expense
, D. Rent Expense
Answer: B
Conceptual Explanation: Depreciation is the allocation of a tangible asset’s cost over its
useful life; no actual cash leaves the firm when this expense is recorded.
5. When using the Net Present Value (NPV) method for capital budgeting, a project should be
accepted if:
A. The NPV is less than the cost of capital
B. The NPV is greater than zero
C. The Internal Rate of Return is zero
D. The payback period is exactly 5 years
Answer: B
Conceptual Explanation: A positive NPV indicates that the project is expected to add value
to the firm and exceed the required rate of return.
6. What is the Weighted Average Cost of Capital (WACC)?
A. The cost of the most expensive source of financing
B. The return on equity divided by the return on assets
C. The interest rate charged by the bank for a commercial loan
D. The average rate a company pays to finance its assets, weighted by the proportion of
debt and equity
MANAGERS FINAL EXAM
COMPREHENSIVE PREP QUESTIONS
AND ANSWERS
1. What is the primary goal of financial management in a publicly traded corporation?
A. To maximize the net income for each fiscal year
B. To maximize the current value per share of the existing stock
C. To minimize the total costs of the organization
D. To increase the total assets of the company
Answer: B
Conceptual Explanation: In a corporation, the primary goal of management is to act in the
best interest of the shareholders by maximizing the current value of their stock.
2. Which financial statement reports a firm’s financial position at a specific point in time?
A. Balance Sheet
B. Statement of Cash Flows
,C. Income Statement
D. Statement of Retained Earnings
Answer: A
Conceptual Explanation: The Balance Sheet provides a snapshot of assets, liabilities, and
equity at a specific point in time, unlike the others which cover a period.
3. A company has a Current Ratio of 2.5. What does this indicate about the company’s
liquidity?
A. The company has 2.5 times more debt than equity.
B. The company’s profit margin is 2.5%.
C. The company has $2.50 in current assets for every $1.00 of current liabilities.
D. The company turns over its inventory 2.5 times per year.
Answer: C
Conceptual Explanation: The current ratio is calculated as Current Assets divided by
Current Liabilities. A ratio of 2.5 means the firm has $2.50 in liquid assets for every dollar
of short-term debt.
4. Which of the following is considered a non-cash expense on the income statement?
A. Salaries Expense
B. Depreciation
C. Interest Expense
, D. Rent Expense
Answer: B
Conceptual Explanation: Depreciation is the allocation of a tangible asset’s cost over its
useful life; no actual cash leaves the firm when this expense is recorded.
5. When using the Net Present Value (NPV) method for capital budgeting, a project should be
accepted if:
A. The NPV is less than the cost of capital
B. The NPV is greater than zero
C. The Internal Rate of Return is zero
D. The payback period is exactly 5 years
Answer: B
Conceptual Explanation: A positive NPV indicates that the project is expected to add value
to the firm and exceed the required rate of return.
6. What is the Weighted Average Cost of Capital (WACC)?
A. The cost of the most expensive source of financing
B. The return on equity divided by the return on assets
C. The interest rate charged by the bank for a commercial loan
D. The average rate a company pays to finance its assets, weighted by the proportion of
debt and equity
