D775 Intro to Business Finance Pre-
Assessment Review WGU EXAM
QUESTIONS AND VERIFIED CORRECT
ANSWERS GRADED A+ LATEST 2026-
2027
What does a high times interest earned ratio signify? - CORRECT ANSWER-Ability to cover debt
payments
What does a high return on assets suggest? - CORRECT ANSWER-Effective asset usage
Which ratio reflects an ability to pay interest on debt as it becomes due? - CORRECT ANSWER-
Times Interest Earned ratio
What does the current ratio measure? - CORRECT ANSWER-Short-term liquidity
What is the primary difference between fixed asset turnover and return on assets? - CORRECT
ANSWER-Fixed asset turnover is an activity ratio, return on assets is a profitability ratio.
What ratio identifies profitability relative to equity? - CORRECT ANSWER-Return on Equity (ROE)
In what type of business would a manager expect to see the widest disparity between the quick
ratio and the current ratio? - CORRECT ANSWER-Firm with high inventory
, How might a retail company use its inventory turnover ratio? - CORRECT ANSWER-By ensuring
optimal inventory management to balance sales demand and inventory levels.
What step will help increase inventory turnover in a sporting goods store? - CORRECT ANSWER-
Feature products for sports and activities that are in season.
What does a high quick ratio indicate during an economic downturn? - CORRECT ANSWER-It
shows the company can cover obligations without selling inventory.
What should management do to finance a venture if the company has favorable leverage ratios?
- CORRECT ANSWER-Use debt as the firm has favorable leverage ratios and debt is less
expensive.
What conclusion can an investor draw from Company A and Company B's profit margins? -
CORRECT ANSWER-Company B is more efficient operationally.
What does Company B's 47% margin compared to Company A's 35% indicate? - CORRECT
ANSWER-Company B earns more profit per dollar of revenue, signaling superior operational
efficiency.
During the busiest sales season, which two components within a retailer's ratios will change the
most? - CORRECT ANSWER-Revenue and inventory.
What strategy should a company with a high current ratio and low cash ratio use to improve
liquidity? - CORRECT ANSWER-Increase its liquidity through faster collection of receivables.
What should a company do if it has a low total asset turnover (TAT) ratio? - CORRECT ANSWER-
Eliminate inefficient or unproductive assets.
Assessment Review WGU EXAM
QUESTIONS AND VERIFIED CORRECT
ANSWERS GRADED A+ LATEST 2026-
2027
What does a high times interest earned ratio signify? - CORRECT ANSWER-Ability to cover debt
payments
What does a high return on assets suggest? - CORRECT ANSWER-Effective asset usage
Which ratio reflects an ability to pay interest on debt as it becomes due? - CORRECT ANSWER-
Times Interest Earned ratio
What does the current ratio measure? - CORRECT ANSWER-Short-term liquidity
What is the primary difference between fixed asset turnover and return on assets? - CORRECT
ANSWER-Fixed asset turnover is an activity ratio, return on assets is a profitability ratio.
What ratio identifies profitability relative to equity? - CORRECT ANSWER-Return on Equity (ROE)
In what type of business would a manager expect to see the widest disparity between the quick
ratio and the current ratio? - CORRECT ANSWER-Firm with high inventory
, How might a retail company use its inventory turnover ratio? - CORRECT ANSWER-By ensuring
optimal inventory management to balance sales demand and inventory levels.
What step will help increase inventory turnover in a sporting goods store? - CORRECT ANSWER-
Feature products for sports and activities that are in season.
What does a high quick ratio indicate during an economic downturn? - CORRECT ANSWER-It
shows the company can cover obligations without selling inventory.
What should management do to finance a venture if the company has favorable leverage ratios?
- CORRECT ANSWER-Use debt as the firm has favorable leverage ratios and debt is less
expensive.
What conclusion can an investor draw from Company A and Company B's profit margins? -
CORRECT ANSWER-Company B is more efficient operationally.
What does Company B's 47% margin compared to Company A's 35% indicate? - CORRECT
ANSWER-Company B earns more profit per dollar of revenue, signaling superior operational
efficiency.
During the busiest sales season, which two components within a retailer's ratios will change the
most? - CORRECT ANSWER-Revenue and inventory.
What strategy should a company with a high current ratio and low cash ratio use to improve
liquidity? - CORRECT ANSWER-Increase its liquidity through faster collection of receivables.
What should a company do if it has a low total asset turnover (TAT) ratio? - CORRECT ANSWER-
Eliminate inefficient or unproductive assets.
