WGU - D366 - PRE ASSESSMENT CONCEPTUAL
PREPARATION FOR OA | 2025/2026 UPDATE |
QUESTIONS AND ANSWERS | WITH COMPLETE
SOLUTION
A financial analyst is required to analyze the financial statements of Alliah
Company. While analyzing, the analyst discovered that the company does not
have adequate current assets to meet its total current liabilities. Thus, the
company might face difficulties in meeting its upcoming payments toward its
current liabilities. Which method did the financial analyst use to make this
analysis? Answer - The financial analyst calculated various short-term liquidity
ratios.
A financial analyst who was analyzing Company P's financial statements
concluded that this year, the company's revenue increased by 20%, gross
income by 16%, and net income by 10%. Last year, the same items increased by
12%, 6%, and 4%, respectively. Which financial statement analysis tool did the
financial analyst use to conclude? Answer - Percentage change financial
statements
A company evaluates the industry's economic conditions using Porter's five
forces model. Using the analysis, the company wishes to identify the vertical
competition in the value chain and its impact on its performance. Which one of
Porter's five forces should the company refer to? Answer - Buyer power
A start-up's chief executive officer (CEO) plans to expand the business by
acquisition of a mature company. The CEO is particularly interested in
companies that exhibit superior sales volume and market share and is willing to
,accept low profit margins.Which company meets the CEO's investment criteria
based on the framework for strategic analysis? Answer - A company that sells
nondifferentiated products
Corollary Marketing has prepared the common-size balance sheet for the
current year and has determined the following percentages:
Cash and equivalents: 15%
Receivables: 20%
Property, plant, and equipment: 12%
Accumulated depreciation: (5%)
Accounts payable: 9%
How does Corollary Marketing calculate these percentages? Answer - All items
are a percentage of total assets.
Orange Zest Company specializes in household goods and appliances. In recent
years, the market has become increasingly competitive with the emergence of
new entrants. In light of this, the business decided to continue selling its
nondifferentiated items while taking a smaller profit margin in exchange for
increased market share and sales volume. Which strategy did the company
choose to compete in its industry? Answer - Low-cost leadership strategy
A company's financial analyst identified that the cost of goods sold in a
common-size income statement was 18% in the previous year. However, it
changed to 21% in the current year. What does this analysis indicate? Answer -
The cost of goods sold as a percentage of sales has increased.
A company's financial analyst analyzes the current year's income statement
and balance sheet. The analyst has already calculated some of the profitability
and risk ratios. The company wants the analyst to determine what a reasonable
price for the company's common shares is. Which ratio will help the analyst in
fulfilling the requirement? Answer - Price-earnings ratio
, A firm's management team is examining the income statement and is
concerned that while revenues are growing, gross profit is declining. Which
financial activity caused the decline? Answer - An increase in cost of sales
A hardware manufacturing firm has high expenditures on property, plant, and
equipment (PPE). Where in the statement of cash flows are the net additions
reflected? Answer - Investing
A financial analyst analyzes a company's recently published annual report to
estimate the company's future earnings. While adjusting the company's net
income to estimate the company's future profitability, the company excluded
the income on investment securities deemed available for sale. Why did the
analyst exclude the income on investment securities deemed available for sale?
Answer - Because the income is treated as transitory
A financial analyst is analyzing Sparkit's financial statement. The analyst noticed
that the company uses special purpose entities (SPE) to meet its short-term
needs and treats this transaction as a collateralized loan. What should the
analyst consider while analyzing Sparkit's liabilities? Answer - Sparkit enjoys
the benefits and takes the economic risks of the receivables.
A financial analyst excluded other comprehensive items reported in the income
statement while estimating the company's future earnings.Why did the analyst
exclude this item from the analysis? Answer - As these are considered
transitory income or loss
While analyzing the financial statements of a company, a financial analyst
noticed a contingent liability of $2 million reported on its balance sheet. This
contingent liability is related to a lawsuit filed by one of the customers for the
damage caused by the malfunction of the company's product.Which
interpretation should the financial analyst make for this item? Answer - The
PREPARATION FOR OA | 2025/2026 UPDATE |
QUESTIONS AND ANSWERS | WITH COMPLETE
SOLUTION
A financial analyst is required to analyze the financial statements of Alliah
Company. While analyzing, the analyst discovered that the company does not
have adequate current assets to meet its total current liabilities. Thus, the
company might face difficulties in meeting its upcoming payments toward its
current liabilities. Which method did the financial analyst use to make this
analysis? Answer - The financial analyst calculated various short-term liquidity
ratios.
A financial analyst who was analyzing Company P's financial statements
concluded that this year, the company's revenue increased by 20%, gross
income by 16%, and net income by 10%. Last year, the same items increased by
12%, 6%, and 4%, respectively. Which financial statement analysis tool did the
financial analyst use to conclude? Answer - Percentage change financial
statements
A company evaluates the industry's economic conditions using Porter's five
forces model. Using the analysis, the company wishes to identify the vertical
competition in the value chain and its impact on its performance. Which one of
Porter's five forces should the company refer to? Answer - Buyer power
A start-up's chief executive officer (CEO) plans to expand the business by
acquisition of a mature company. The CEO is particularly interested in
companies that exhibit superior sales volume and market share and is willing to
,accept low profit margins.Which company meets the CEO's investment criteria
based on the framework for strategic analysis? Answer - A company that sells
nondifferentiated products
Corollary Marketing has prepared the common-size balance sheet for the
current year and has determined the following percentages:
Cash and equivalents: 15%
Receivables: 20%
Property, plant, and equipment: 12%
Accumulated depreciation: (5%)
Accounts payable: 9%
How does Corollary Marketing calculate these percentages? Answer - All items
are a percentage of total assets.
Orange Zest Company specializes in household goods and appliances. In recent
years, the market has become increasingly competitive with the emergence of
new entrants. In light of this, the business decided to continue selling its
nondifferentiated items while taking a smaller profit margin in exchange for
increased market share and sales volume. Which strategy did the company
choose to compete in its industry? Answer - Low-cost leadership strategy
A company's financial analyst identified that the cost of goods sold in a
common-size income statement was 18% in the previous year. However, it
changed to 21% in the current year. What does this analysis indicate? Answer -
The cost of goods sold as a percentage of sales has increased.
A company's financial analyst analyzes the current year's income statement
and balance sheet. The analyst has already calculated some of the profitability
and risk ratios. The company wants the analyst to determine what a reasonable
price for the company's common shares is. Which ratio will help the analyst in
fulfilling the requirement? Answer - Price-earnings ratio
, A firm's management team is examining the income statement and is
concerned that while revenues are growing, gross profit is declining. Which
financial activity caused the decline? Answer - An increase in cost of sales
A hardware manufacturing firm has high expenditures on property, plant, and
equipment (PPE). Where in the statement of cash flows are the net additions
reflected? Answer - Investing
A financial analyst analyzes a company's recently published annual report to
estimate the company's future earnings. While adjusting the company's net
income to estimate the company's future profitability, the company excluded
the income on investment securities deemed available for sale. Why did the
analyst exclude the income on investment securities deemed available for sale?
Answer - Because the income is treated as transitory
A financial analyst is analyzing Sparkit's financial statement. The analyst noticed
that the company uses special purpose entities (SPE) to meet its short-term
needs and treats this transaction as a collateralized loan. What should the
analyst consider while analyzing Sparkit's liabilities? Answer - Sparkit enjoys
the benefits and takes the economic risks of the receivables.
A financial analyst excluded other comprehensive items reported in the income
statement while estimating the company's future earnings.Why did the analyst
exclude this item from the analysis? Answer - As these are considered
transitory income or loss
While analyzing the financial statements of a company, a financial analyst
noticed a contingent liability of $2 million reported on its balance sheet. This
contingent liability is related to a lawsuit filed by one of the customers for the
damage caused by the malfunction of the company's product.Which
interpretation should the financial analyst make for this item? Answer - The
