WGU D076 Finance Skills for Managers
|OA| Latest 2025 Update with complete
solutions
When you perform capital budgeting analysis, you want to understand the overall impact of the
project on the company.
The idea of incremental cash flows will prevent others from allocating cash flows (especially
expenses) to your project. - - CORRECT ANSWER IS Why is the concept of incremental cash
flows important?
For the capital budgeting process of capital investment, it is essential to consider the time value
of money, the risk of a project, and all the cash flows of a project to evaluate whether the
project is worthwhile. - - CORRECT ANSWER IS What should you considering in the capital
budgeting process of capital investment?
The cost of capital accounts for the risk of a project, because investors demand a certain
required rate of return on their investment given the level of risk they have to take. - - CORRECT
ANSWER IS How is cost of capital used in the capital budgeting process?
It includes all cash flows that occur during the life of the project.
It considers the time value of money.
It incorporates the cost of capital—or in other words, the required rate of return on the project.
- - CORRECT ANSWER IS What is the ideal evaluation method for capital investment?
,In most cases, you should use NPV as the primary method and use the other methods to
supplement when making capital investment decisions. - - CORRECT ANSWER IS What equation
should you usually for capital investment calculations?
If there are capital constraints when choosing multiple projects, use the PI to rank the projects
and then decide which projects to do based on the PI ranking. - - CORRECT ANSWER IS What
equation should you usually use for capital investment calculations if there are mutually
exclusive projects?
There are five major types of financial ratios: liquidity, activity, leverage, profitability, and
market. - - CORRECT ANSWER IS What are the five major types of ratios?
Liquidity ratios measure a firm's ability to meet short-term obligations. - - CORRECT ANSWER IS
What do liquidity ratios measure?
Activity ratios measure how well a company uses its assets to generate sales or cash. - -
CORRECT ANSWER IS What do activity ratios measure?
Leverage ratios consider how a firm is financed and how financially risky a firm is. - - CORRECT
ANSWER IS What do leverage ratios measure?
Profitability ratios are used to directly judge how well management is maximizing shareholder
wealth. - - CORRECT ANSWER IS What do profitability ratios measure?
Market ratios are used to evaluate the current share prices of a public firm's stock. - - CORRECT
ANSWER IS What do market ratios measure?
Quick Ratio equation - - CORRECT ANSWER IS Quick Ratio=Current Assets − (Inventory/Current
Liabilities)
,Current Ratio equation - - CORRECT ANSWER IS Current Ratio=Current Assets/Current Liabilities
AR Turnover equation - - CORRECT ANSWER IS AR Turnover=Credit Sales/Accounts Receivable
Average Collection Period equation - - CORRECT ANSWER IS Average Collection Period=365/AR
Turnover
(AR Turnover=Credit Sales/Accounts Receivable)
Inventory Turnover equation - - CORRECT ANSWER IS Inventory Turnover=COGS/Inventory
Total Asset Turnover equation - - CORRECT ANSWER IS Total Asset Turnover=Sales/Total Assets
Operating Margin equation - - CORRECT ANSWER IS Operating Margin=EBIT/Sales
Fixed Asset Turnover equation - - CORRECT ANSWER IS Fixed Asset Turnover=Sales/Fixed Assets
Operating Income Return on Investment equation - - CORRECT ANSWER IS OIROI=Operating
Income/Total Assets
Debt Ratio equation - - CORRECT ANSWER IS Debt Ratio=Total Liabilities/Total Assets
Debt-to-Equity Ratio equation - - CORRECT ANSWER IS Debt-to-Equity Ratio=Total
Liabilities/Total Owners' Equity
, Accounting - - CORRECT ANSWER IS The system of recording, reporting, and summarizing past
financial information and transactions.
Accounts Receivable Turnover (AR Turnover) - - CORRECT ANSWER IS An activity ratio found by
credit sales divided by accounts receivable.
Activity Ratios - - CORRECT ANSWER IS A category of ratios that measure how well a company
uses its assets to generate sales or cash, showing the firm's operational efficiency and
profitability.
Additional Funds Needed (AFN) - - CORRECT ANSWER IS Another name for the discretionary
financing needed or external financing needed. It represents the additional financing needed
given a firm's expectations for future growth.
Affirmative Covenants - - CORRECT ANSWER IS A bond covenant that describes things the
company pledges itself to do in order to protect bondholders.
Agency Costs - - CORRECT ANSWER IS Costs that are incurred when management does not act
in the best interest of shareholders.
Agency Problem - - CORRECT ANSWER IS When the agent (the management) does not act in the
best interest of the principle (the owners).
Aggressive Assets - - CORRECT ANSWER IS Companies or securities with beta greater than 1.
Annual Percentage Rate - - CORRECT ANSWER IS The annual interest rate that is charged for
borrowing money or that is earned through investment.
|OA| Latest 2025 Update with complete
solutions
When you perform capital budgeting analysis, you want to understand the overall impact of the
project on the company.
The idea of incremental cash flows will prevent others from allocating cash flows (especially
expenses) to your project. - - CORRECT ANSWER IS Why is the concept of incremental cash
flows important?
For the capital budgeting process of capital investment, it is essential to consider the time value
of money, the risk of a project, and all the cash flows of a project to evaluate whether the
project is worthwhile. - - CORRECT ANSWER IS What should you considering in the capital
budgeting process of capital investment?
The cost of capital accounts for the risk of a project, because investors demand a certain
required rate of return on their investment given the level of risk they have to take. - - CORRECT
ANSWER IS How is cost of capital used in the capital budgeting process?
It includes all cash flows that occur during the life of the project.
It considers the time value of money.
It incorporates the cost of capital—or in other words, the required rate of return on the project.
- - CORRECT ANSWER IS What is the ideal evaluation method for capital investment?
,In most cases, you should use NPV as the primary method and use the other methods to
supplement when making capital investment decisions. - - CORRECT ANSWER IS What equation
should you usually for capital investment calculations?
If there are capital constraints when choosing multiple projects, use the PI to rank the projects
and then decide which projects to do based on the PI ranking. - - CORRECT ANSWER IS What
equation should you usually use for capital investment calculations if there are mutually
exclusive projects?
There are five major types of financial ratios: liquidity, activity, leverage, profitability, and
market. - - CORRECT ANSWER IS What are the five major types of ratios?
Liquidity ratios measure a firm's ability to meet short-term obligations. - - CORRECT ANSWER IS
What do liquidity ratios measure?
Activity ratios measure how well a company uses its assets to generate sales or cash. - -
CORRECT ANSWER IS What do activity ratios measure?
Leverage ratios consider how a firm is financed and how financially risky a firm is. - - CORRECT
ANSWER IS What do leverage ratios measure?
Profitability ratios are used to directly judge how well management is maximizing shareholder
wealth. - - CORRECT ANSWER IS What do profitability ratios measure?
Market ratios are used to evaluate the current share prices of a public firm's stock. - - CORRECT
ANSWER IS What do market ratios measure?
Quick Ratio equation - - CORRECT ANSWER IS Quick Ratio=Current Assets − (Inventory/Current
Liabilities)
,Current Ratio equation - - CORRECT ANSWER IS Current Ratio=Current Assets/Current Liabilities
AR Turnover equation - - CORRECT ANSWER IS AR Turnover=Credit Sales/Accounts Receivable
Average Collection Period equation - - CORRECT ANSWER IS Average Collection Period=365/AR
Turnover
(AR Turnover=Credit Sales/Accounts Receivable)
Inventory Turnover equation - - CORRECT ANSWER IS Inventory Turnover=COGS/Inventory
Total Asset Turnover equation - - CORRECT ANSWER IS Total Asset Turnover=Sales/Total Assets
Operating Margin equation - - CORRECT ANSWER IS Operating Margin=EBIT/Sales
Fixed Asset Turnover equation - - CORRECT ANSWER IS Fixed Asset Turnover=Sales/Fixed Assets
Operating Income Return on Investment equation - - CORRECT ANSWER IS OIROI=Operating
Income/Total Assets
Debt Ratio equation - - CORRECT ANSWER IS Debt Ratio=Total Liabilities/Total Assets
Debt-to-Equity Ratio equation - - CORRECT ANSWER IS Debt-to-Equity Ratio=Total
Liabilities/Total Owners' Equity
, Accounting - - CORRECT ANSWER IS The system of recording, reporting, and summarizing past
financial information and transactions.
Accounts Receivable Turnover (AR Turnover) - - CORRECT ANSWER IS An activity ratio found by
credit sales divided by accounts receivable.
Activity Ratios - - CORRECT ANSWER IS A category of ratios that measure how well a company
uses its assets to generate sales or cash, showing the firm's operational efficiency and
profitability.
Additional Funds Needed (AFN) - - CORRECT ANSWER IS Another name for the discretionary
financing needed or external financing needed. It represents the additional financing needed
given a firm's expectations for future growth.
Affirmative Covenants - - CORRECT ANSWER IS A bond covenant that describes things the
company pledges itself to do in order to protect bondholders.
Agency Costs - - CORRECT ANSWER IS Costs that are incurred when management does not act
in the best interest of shareholders.
Agency Problem - - CORRECT ANSWER IS When the agent (the management) does not act in the
best interest of the principle (the owners).
Aggressive Assets - - CORRECT ANSWER IS Companies or securities with beta greater than 1.
Annual Percentage Rate - - CORRECT ANSWER IS The annual interest rate that is charged for
borrowing money or that is earned through investment.
