WGU - D775 EXAM PREP EXAM SCRIPT EXAM
STUDY SHEET 2026 GRADED A+.
⫸ Which decision should a company make if it has a low total asset
turnover (TAT) ratio? Answer: Eliminate inefficient or unproductive
assets
⫸ An aircraft manufacturer wants to make sure it can pay year-end
bonuses to employees in 30 days.
Which metric should managers use to determine whether bonuses can
be paid? Answer: Quick ratio
⫸ The finance team in a firm that manufactures cabinets is analyzing
the firm's recent financial performance. Labor costs, which are the
single largest expense to the process, have increased significantly over
the last year, reducing the firm's profit margin and return on equity
(ROE) significantly.
Which action would the finance team recommend to management to
restore profit margins and ROE? Answer: Use debt to purchase
equipment that would automate tasks with high labor costs
⫸ An employee makes a one-time deposit today of $5,000 into a
company-sponsored retirement account.
,Which term and rate combination would provide the greatest
retirement savings for the employee? Answer: $5,000 for 30 years,
earning 8%
⫸ A homebuilder uses all of the firm's available cash to pay annual
bonuses to employees.
Which example illustrates an opportunity cost to the homebuilder?
Answer: Inability to take a cash discount from a key supplier by
paying early
⫸ A restaurant chain is offered $2 million to sign an exclusive
partnership with a beverage supplier, with the payment to be made by
the supplier to the restaurant in three years. The supplier also
proposed a $1 million payment for a 2-year agreement.
What does the restaurant chain need to calculate to compare the
contracts assuming the same interest rate applies to both? Answer:
Present value of $2 million paid in 3 years, and present value of $1
million paid in 2 years
⫸ Why is the present value of an annuity important for retirement
planning? Answer: It determines how much needs to be saved today
to meet future financial goals.
⫸ Whole Pine, Inc. is considering using a payment plan for
marketing consulting services it purchases. Under the plan, Whole
Pine will make annual payments of $15,000 to its consultant over the
, next 6 years. Whole Pine's finance team wants to calculate the future
value of this annuity. The finance team has determined that 5% is an
appropriate interest rate.
Which factors influence this payment plan's future value interest
factor for an annuity (FVIFA)? Answer: The number of payments (6),
interest rate (5%), and payment amount ($15,000)
⫸ Which example shows an annuity? Answer: Credit card payments
of equal amounts at 21% APR to retire an outstanding balance
⫸ Which factor increases the future value interest factor for an
annuity (FVIFA)? Answer: A higher interest rate
⫸ Freedom Rock Bicycles is evaluating new production equipment.
The expected cash inflows from the equipment are projected to be
$50,000 in year 1, $80,000 in year 2, $60,000 in year 3, $45,000 in
year 4, and $70,000 in year five. To determine if the investment is
worthwhile, the finance team calculates the net present value (NPV)
using a discount rate of 8%.
How does NPV assess the equipment's annual cash inflows? Answer:
By calculating the present value of each annual cash inflow for the
appropriate number of periods at 8%, then adding those together
⫸ Why might a business prefer using an internal rate of return (IRR)
over net present value (NPV) for evaluating investments? Answer:
STUDY SHEET 2026 GRADED A+.
⫸ Which decision should a company make if it has a low total asset
turnover (TAT) ratio? Answer: Eliminate inefficient or unproductive
assets
⫸ An aircraft manufacturer wants to make sure it can pay year-end
bonuses to employees in 30 days.
Which metric should managers use to determine whether bonuses can
be paid? Answer: Quick ratio
⫸ The finance team in a firm that manufactures cabinets is analyzing
the firm's recent financial performance. Labor costs, which are the
single largest expense to the process, have increased significantly over
the last year, reducing the firm's profit margin and return on equity
(ROE) significantly.
Which action would the finance team recommend to management to
restore profit margins and ROE? Answer: Use debt to purchase
equipment that would automate tasks with high labor costs
⫸ An employee makes a one-time deposit today of $5,000 into a
company-sponsored retirement account.
,Which term and rate combination would provide the greatest
retirement savings for the employee? Answer: $5,000 for 30 years,
earning 8%
⫸ A homebuilder uses all of the firm's available cash to pay annual
bonuses to employees.
Which example illustrates an opportunity cost to the homebuilder?
Answer: Inability to take a cash discount from a key supplier by
paying early
⫸ A restaurant chain is offered $2 million to sign an exclusive
partnership with a beverage supplier, with the payment to be made by
the supplier to the restaurant in three years. The supplier also
proposed a $1 million payment for a 2-year agreement.
What does the restaurant chain need to calculate to compare the
contracts assuming the same interest rate applies to both? Answer:
Present value of $2 million paid in 3 years, and present value of $1
million paid in 2 years
⫸ Why is the present value of an annuity important for retirement
planning? Answer: It determines how much needs to be saved today
to meet future financial goals.
⫸ Whole Pine, Inc. is considering using a payment plan for
marketing consulting services it purchases. Under the plan, Whole
Pine will make annual payments of $15,000 to its consultant over the
, next 6 years. Whole Pine's finance team wants to calculate the future
value of this annuity. The finance team has determined that 5% is an
appropriate interest rate.
Which factors influence this payment plan's future value interest
factor for an annuity (FVIFA)? Answer: The number of payments (6),
interest rate (5%), and payment amount ($15,000)
⫸ Which example shows an annuity? Answer: Credit card payments
of equal amounts at 21% APR to retire an outstanding balance
⫸ Which factor increases the future value interest factor for an
annuity (FVIFA)? Answer: A higher interest rate
⫸ Freedom Rock Bicycles is evaluating new production equipment.
The expected cash inflows from the equipment are projected to be
$50,000 in year 1, $80,000 in year 2, $60,000 in year 3, $45,000 in
year 4, and $70,000 in year five. To determine if the investment is
worthwhile, the finance team calculates the net present value (NPV)
using a discount rate of 8%.
How does NPV assess the equipment's annual cash inflows? Answer:
By calculating the present value of each annual cash inflow for the
appropriate number of periods at 8%, then adding those together
⫸ Why might a business prefer using an internal rate of return (IRR)
over net present value (NPV) for evaluating investments? Answer:
