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WGU D775 Introduction to Business Finance Objective
Assessment EXAM QUESTIONS AND CORRECT VERIFIED
SOLUTIONS LATEST UPDATE THIS YEAR – JUST RELEASED
Line Exam Coverage
1. Foundations of business finance, financial management, and the goal of maximizing
shareholder wealth.
2. Financial statements, accounting relationships, cash flows, and interpretation of
business financial information.
3. Financial ratio analysis, including liquidity, profitability, efficiency, leverage, and market-
value ratios.
4. Time value of money, present value, future value, annuities, perpetuities, and
compounding.
5. Bond and stock valuation, required returns, market prices, dividends, and security
valuation.
6. Risk and return, diversification, systematic and unsystematic risk, beta, and required
rates of return.
7. Capital budgeting, project cash flows, NPV, IRR, payback period, profitability index, and
investment decisions.
8. Cost of capital, debt and equity financing, WACC, capital structure, and financing
decisions.
9. Working capital management, cash conversion cycle, inventory, receivables, payables,
and short-term financing.
10. Financial markets, sources of business financing, corporate governance, agency
problems, and financial decision-making.
1. What is generally considered the primary financial objective of a publicly traded
corporation when making long-term financial decisions?
A. Maximize the number of employees regardless of cost
B. Maximize shareholder wealth through decisions that increase firm value
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C. Maximize accounting revenue during every quarter
D. Minimize all business expenditures regardless of their potential returns
Answer: B.
Rationale: Corporate financial management generally focuses on maximizing shareholder
wealth by increasing the market value of the firm's securities.
2. Which financial management decision involves determining which long-term assets or
projects a company should acquire?
A. Capital budgeting decision
B. Dividend decision
C. Working capital financing decision
D. Accounts payable decision
Answer: A.
Rationale: Capital budgeting evaluates long-term investments such as equipment, facilities,
technology, and expansion projects.
3. Which decision concerns determining how a corporation should obtain funds needed to
finance its assets and operations?
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A. Capital structure decision
B. Inventory decision
C. Revenue recognition decision
D. Depreciation decision
Answer: A.
Rationale: Capital structure decisions involve choosing among debt, equity, and other financing
sources.
4. Why is shareholder wealth maximization generally preferred over simply maximizing
reported accounting profit?
A. Market value incorporates expectations about future cash flows, risk, and timing
B. Accounting profits never matter to financial managers
C. Share prices are completely unrelated to company performance
D. Accounting statements cannot contain useful information
Answer: A.
Rationale: Shareholder wealth reflects expected future cash flows and their risk and timing,
whereas accounting profit is a historical reporting measure.
5. Which concept explains why receiving $1,000 today is generally preferable to receiving
exactly $1,000 several years from now?
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A. Capital structure
B. Time value of money
C. Operating leverage
D. Accounting conservatism
Answer: B.
Rationale: Money available today can potentially earn a return, making its economic value
greater than an identical amount received later.
6. Which financial statement reports a company's assets, liabilities, and shareholders' equity
at a specific point in time?
A. Income statement
B. Balance sheet
C. Statement of retained earnings only
D. Cash budget
Answer: B.
Rationale: The balance sheet presents the firm's financial position at a particular date through
assets, liabilities, and equity.
7. Which accounting relationship must always hold on a properly prepared balance sheet?
WGU D775 Introduction to Business Finance Objective
Assessment EXAM QUESTIONS AND CORRECT VERIFIED
SOLUTIONS LATEST UPDATE THIS YEAR – JUST RELEASED
Line Exam Coverage
1. Foundations of business finance, financial management, and the goal of maximizing
shareholder wealth.
2. Financial statements, accounting relationships, cash flows, and interpretation of
business financial information.
3. Financial ratio analysis, including liquidity, profitability, efficiency, leverage, and market-
value ratios.
4. Time value of money, present value, future value, annuities, perpetuities, and
compounding.
5. Bond and stock valuation, required returns, market prices, dividends, and security
valuation.
6. Risk and return, diversification, systematic and unsystematic risk, beta, and required
rates of return.
7. Capital budgeting, project cash flows, NPV, IRR, payback period, profitability index, and
investment decisions.
8. Cost of capital, debt and equity financing, WACC, capital structure, and financing
decisions.
9. Working capital management, cash conversion cycle, inventory, receivables, payables,
and short-term financing.
10. Financial markets, sources of business financing, corporate governance, agency
problems, and financial decision-making.
1. What is generally considered the primary financial objective of a publicly traded
corporation when making long-term financial decisions?
A. Maximize the number of employees regardless of cost
B. Maximize shareholder wealth through decisions that increase firm value
, Page 2 of 124
C. Maximize accounting revenue during every quarter
D. Minimize all business expenditures regardless of their potential returns
Answer: B.
Rationale: Corporate financial management generally focuses on maximizing shareholder
wealth by increasing the market value of the firm's securities.
2. Which financial management decision involves determining which long-term assets or
projects a company should acquire?
A. Capital budgeting decision
B. Dividend decision
C. Working capital financing decision
D. Accounts payable decision
Answer: A.
Rationale: Capital budgeting evaluates long-term investments such as equipment, facilities,
technology, and expansion projects.
3. Which decision concerns determining how a corporation should obtain funds needed to
finance its assets and operations?
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A. Capital structure decision
B. Inventory decision
C. Revenue recognition decision
D. Depreciation decision
Answer: A.
Rationale: Capital structure decisions involve choosing among debt, equity, and other financing
sources.
4. Why is shareholder wealth maximization generally preferred over simply maximizing
reported accounting profit?
A. Market value incorporates expectations about future cash flows, risk, and timing
B. Accounting profits never matter to financial managers
C. Share prices are completely unrelated to company performance
D. Accounting statements cannot contain useful information
Answer: A.
Rationale: Shareholder wealth reflects expected future cash flows and their risk and timing,
whereas accounting profit is a historical reporting measure.
5. Which concept explains why receiving $1,000 today is generally preferable to receiving
exactly $1,000 several years from now?
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A. Capital structure
B. Time value of money
C. Operating leverage
D. Accounting conservatism
Answer: B.
Rationale: Money available today can potentially earn a return, making its economic value
greater than an identical amount received later.
6. Which financial statement reports a company's assets, liabilities, and shareholders' equity
at a specific point in time?
A. Income statement
B. Balance sheet
C. Statement of retained earnings only
D. Cash budget
Answer: B.
Rationale: The balance sheet presents the firm's financial position at a particular date through
assets, liabilities, and equity.
7. Which accounting relationship must always hold on a properly prepared balance sheet?
