WGU D775 OA Objective Assessment
(PDF) 2026-2027 Introduction to
Business Finance Practice Questions &
Answers Instant PDF Download
1. What is the primary goal of financial management in a for-profit business?
A. Maximize employee satisfaction
B. Maximize shareholder wealth
C. Minimize all business expenses
D. Maximize sales regardless of profitability
Answer: B. Maximize shareholder wealth
Rationale: Financial management focuses on making decisions that increase the long-term
value of the firm for its owners.
2. Which three major decisions are central to financial management?
A. Hiring, training, and marketing
B. Capital budgeting, financing, and working capital management
C. Production, advertising, and sales
D. Accounting, auditing, and taxation
Answer: B. Capital budgeting, financing, and working capital management
Rationale: Financial managers decide which long-term investments to make, how to finance
them, and how to manage short-term assets and liabilities.
3. What does capital budgeting primarily involve?
A. Managing employee salaries
B. Evaluating long-term investment opportunities
C. Preparing tax returns
D. Managing inventory records only
,Answer: B. Evaluating long-term investment opportunities
Rationale: Capital budgeting evaluates projects such as equipment purchases, expansions, and
new facilities.
4. Which financial statement reports a company's assets, liabilities, and equity at a specific
point in time?
A. Income statement
B. Balance sheet
C. Statement of cash flows
D. Retained earnings statement
Answer: B. Balance sheet
Rationale: The balance sheet presents the company's financial position at a particular date.
5. Which equation represents the fundamental accounting equation?
A. Assets = Revenue − Expenses
B. Assets = Liabilities + Equity
C. Equity = Assets + Liabilities
D. Liabilities = Assets + Revenue
Answer: B. Assets = Liabilities + Equity
Rationale: Every company's resources are financed through either liabilities or owners' equity.
6. Which of the following is an asset?
A. Accounts payable
B. Common stock
C. Inventory
D. Long-term debt
Answer: C. Inventory
Rationale: Inventory is an economic resource controlled by the business and therefore qualifies
as an asset.
,7. Which item is a current liability?
A. Accounts payable
B. Building
C. Equipment
D. Common stock
Answer: A. Accounts payable
Rationale: Accounts payable represents obligations generally due within the company's normal
operating cycle or within one year.
8. What does the income statement primarily measure?
A. Financial position at one date
B. Revenues and expenses over a period
C. Cash balance only
D. Market value of stock
Answer: B. Revenues and expenses over a period
Rationale: The income statement summarizes financial performance during a specified period.
9. Net income is generally calculated as:
A. Assets − liabilities
B. Revenue − expenses
C. Cash − inventory
D. Equity − liabilities
Answer: B. Revenue − expenses
Rationale: Net income represents the amount remaining after expenses are deducted from
revenues.
10. Which statement focuses specifically on cash inflows and outflows?
A. Balance sheet
B. Income statement
, C. Statement of cash flows
D. Statement of retained earnings
Answer: C. Statement of cash flows
Rationale: The statement of cash flows explains changes in cash through operating, investing,
and financing activities.
Financial Ratios
11. What does the current ratio measure?
A. Profitability
B. Liquidity
C. Market valuation
D. Financial leverage only
Answer: B. Liquidity
Rationale: The current ratio measures a company's ability to meet short-term obligations using
current assets.
12. The current ratio is calculated as:
A. Current assets ÷ current liabilities
B. Current liabilities ÷ current assets
C. Total assets ÷ equity
D. Net income ÷ sales
Answer: A. Current assets ÷ current liabilities
Rationale: A higher current ratio generally indicates greater short-term liquidity.
13. A company has current assets of $100,000 and current liabilities of $50,000. What is its
current ratio?
A. 0.5
B. 1.0
C. 2.0
D. 5.0
(PDF) 2026-2027 Introduction to
Business Finance Practice Questions &
Answers Instant PDF Download
1. What is the primary goal of financial management in a for-profit business?
A. Maximize employee satisfaction
B. Maximize shareholder wealth
C. Minimize all business expenses
D. Maximize sales regardless of profitability
Answer: B. Maximize shareholder wealth
Rationale: Financial management focuses on making decisions that increase the long-term
value of the firm for its owners.
2. Which three major decisions are central to financial management?
A. Hiring, training, and marketing
B. Capital budgeting, financing, and working capital management
C. Production, advertising, and sales
D. Accounting, auditing, and taxation
Answer: B. Capital budgeting, financing, and working capital management
Rationale: Financial managers decide which long-term investments to make, how to finance
them, and how to manage short-term assets and liabilities.
3. What does capital budgeting primarily involve?
A. Managing employee salaries
B. Evaluating long-term investment opportunities
C. Preparing tax returns
D. Managing inventory records only
,Answer: B. Evaluating long-term investment opportunities
Rationale: Capital budgeting evaluates projects such as equipment purchases, expansions, and
new facilities.
4. Which financial statement reports a company's assets, liabilities, and equity at a specific
point in time?
A. Income statement
B. Balance sheet
C. Statement of cash flows
D. Retained earnings statement
Answer: B. Balance sheet
Rationale: The balance sheet presents the company's financial position at a particular date.
5. Which equation represents the fundamental accounting equation?
A. Assets = Revenue − Expenses
B. Assets = Liabilities + Equity
C. Equity = Assets + Liabilities
D. Liabilities = Assets + Revenue
Answer: B. Assets = Liabilities + Equity
Rationale: Every company's resources are financed through either liabilities or owners' equity.
6. Which of the following is an asset?
A. Accounts payable
B. Common stock
C. Inventory
D. Long-term debt
Answer: C. Inventory
Rationale: Inventory is an economic resource controlled by the business and therefore qualifies
as an asset.
,7. Which item is a current liability?
A. Accounts payable
B. Building
C. Equipment
D. Common stock
Answer: A. Accounts payable
Rationale: Accounts payable represents obligations generally due within the company's normal
operating cycle or within one year.
8. What does the income statement primarily measure?
A. Financial position at one date
B. Revenues and expenses over a period
C. Cash balance only
D. Market value of stock
Answer: B. Revenues and expenses over a period
Rationale: The income statement summarizes financial performance during a specified period.
9. Net income is generally calculated as:
A. Assets − liabilities
B. Revenue − expenses
C. Cash − inventory
D. Equity − liabilities
Answer: B. Revenue − expenses
Rationale: Net income represents the amount remaining after expenses are deducted from
revenues.
10. Which statement focuses specifically on cash inflows and outflows?
A. Balance sheet
B. Income statement
, C. Statement of cash flows
D. Statement of retained earnings
Answer: C. Statement of cash flows
Rationale: The statement of cash flows explains changes in cash through operating, investing,
and financing activities.
Financial Ratios
11. What does the current ratio measure?
A. Profitability
B. Liquidity
C. Market valuation
D. Financial leverage only
Answer: B. Liquidity
Rationale: The current ratio measures a company's ability to meet short-term obligations using
current assets.
12. The current ratio is calculated as:
A. Current assets ÷ current liabilities
B. Current liabilities ÷ current assets
C. Total assets ÷ equity
D. Net income ÷ sales
Answer: A. Current assets ÷ current liabilities
Rationale: A higher current ratio generally indicates greater short-term liquidity.
13. A company has current assets of $100,000 and current liabilities of $50,000. What is its
current ratio?
A. 0.5
B. 1.0
C. 2.0
D. 5.0
