WGU D076 FINANCE SKILLS FOR
MANAGERS FINAL EXAM PREP
QUESTIONS AND ANSWERS
1. Which financial statement provides a snapshot of a company’s financial position at a
specific point in time?
A. Balance Sheet
B. Statement of Retained Earnings
C. Income Statement
D. Statement of Cash Flows
Answer: A
Conceptual Explanation: The Balance Sheet lists assets, liabilities, and equity at a specific
point in time, unlike the others which cover a period.
2. If a firm has a Current Ratio of 2.5 and Current Liabilities of $400,000, what are its Current
Assets?
A. $160,000
B. $1,000,000
,C. $800,000
D. $400,000
Answer: B
Conceptual Explanation: Current Ratio = Current Assets / Current Liabilities. Therefore,
Current Assets = 2.5 * $400,000 = $1,000,000.
3. Which of the following would decrease a company’s Net Working Capital?
A. Purchasing inventory with cash
B. Paying off a long-term loan with cash
C. Selling inventory for a profit on credit
D. An increase in Accounts Payable
Answer: D
Conceptual Explanation: Net Working Capital = Current Assets - Current Liabilities. An
increase in Accounts Payable (a current liability) decreases NWC.
4. A company reports Net Income of $50,000, Depreciation of $10,000, and an increase in
Accounts Receivable of $5,000. What is the Operating Cash Flow?
A. $65,000
B. $55,000
C. $45,000
, D. $60,000
Answer: B
Conceptual Explanation: Operating Cash Flow = Net Income + Depreciation - Increase in
AR. $50,000 + $10,000 - $5,000 = $55,000.
5. What is the primary goal of financial management in a publicly traded corporation?
A. Maximize market share
B. Maximize the current value per share of existing stock
C. Maximize current dividends
D. Minimize total costs
Answer: B
Conceptual Explanation: The primary goal is to maximize shareholder wealth, which is
reflected in the stock price.
6. In the DuPont Identity, Return on Equity (ROE) is the product of which three ratios?
A. Net Profit, Current Ratio, and Debt Ratio
B. Profit Margin, Total Asset Turnover, and Equity Multiplier
C. Gross Margin, Inventory Turnover, and ROA
D. Operating Margin, Asset Turnover, and Interest Coverage
Answer: B
MANAGERS FINAL EXAM PREP
QUESTIONS AND ANSWERS
1. Which financial statement provides a snapshot of a company’s financial position at a
specific point in time?
A. Balance Sheet
B. Statement of Retained Earnings
C. Income Statement
D. Statement of Cash Flows
Answer: A
Conceptual Explanation: The Balance Sheet lists assets, liabilities, and equity at a specific
point in time, unlike the others which cover a period.
2. If a firm has a Current Ratio of 2.5 and Current Liabilities of $400,000, what are its Current
Assets?
A. $160,000
B. $1,000,000
,C. $800,000
D. $400,000
Answer: B
Conceptual Explanation: Current Ratio = Current Assets / Current Liabilities. Therefore,
Current Assets = 2.5 * $400,000 = $1,000,000.
3. Which of the following would decrease a company’s Net Working Capital?
A. Purchasing inventory with cash
B. Paying off a long-term loan with cash
C. Selling inventory for a profit on credit
D. An increase in Accounts Payable
Answer: D
Conceptual Explanation: Net Working Capital = Current Assets - Current Liabilities. An
increase in Accounts Payable (a current liability) decreases NWC.
4. A company reports Net Income of $50,000, Depreciation of $10,000, and an increase in
Accounts Receivable of $5,000. What is the Operating Cash Flow?
A. $65,000
B. $55,000
C. $45,000
, D. $60,000
Answer: B
Conceptual Explanation: Operating Cash Flow = Net Income + Depreciation - Increase in
AR. $50,000 + $10,000 - $5,000 = $55,000.
5. What is the primary goal of financial management in a publicly traded corporation?
A. Maximize market share
B. Maximize the current value per share of existing stock
C. Maximize current dividends
D. Minimize total costs
Answer: B
Conceptual Explanation: The primary goal is to maximize shareholder wealth, which is
reflected in the stock price.
6. In the DuPont Identity, Return on Equity (ROE) is the product of which three ratios?
A. Net Profit, Current Ratio, and Debt Ratio
B. Profit Margin, Total Asset Turnover, and Equity Multiplier
C. Gross Margin, Inventory Turnover, and ROA
D. Operating Margin, Asset Turnover, and Interest Coverage
Answer: B
