WGU D775 OA EXAM / INTRODUCTION TO BUSINESS FINANCE D775
PRE ASSESSMENT (PA) WGU ACTUAL EXAM 2026/2027 PREP
QUESTIONS AND CURRENTLY UPDATED STUDY GUIDE COMPLETE
ACCURATE EXAM APPROVED QUESTIONS WITH WELL ELABORATED
ANSWERS (100 % CORRECT VERIFIED SOLUTIONS) NEWEST UPDATED
VERSION 2026 EDITION |GUARANTEED SUCCESS A+ |FULL REVISED
WGU D775 INTRODUCTION TO BUSINESS FINANCE PRE ASSESSMENT
(PA) APPROVED EXAM
1. A company reports current assets of $150,000 and current liabilities of
$100,000. What is the current ratio?
A) 1.0
B) 1.5
C) 2.0
D) 0.67
CORRECT ANSWER: B) 1.5
Rationale: The current ratio is calculated as current assets divided by current
liabilities ($150,000 / $100,000 = 1.5). This measures the company's ability to
cover short-term obligations with short-term assets.
2. Which financial statement provides a snapshot of a company's assets, liabilities,
and equity at a specific point in time?
A) Income Statement
B) Statement of Cash Flows
C) Balance Sheet
D) Statement of Retained Earnings
CORRECT ANSWER: C) Balance Sheet
,Rationale: The balance sheet reports a company's financial position on a specific
date, detailing what the company owns (assets), owes (liabilities), and the
shareholders' claim (equity). The income statement covers a period of time.
3. What is the primary goal of financial management?
A) Maximizing sales revenue
B) Maximizing shareholder wealth
C) Minimizing operational costs
D) Increasing market share
CORRECT ANSWER: B) Maximizing shareholder wealth
Rationale: The primary objective of financial management is to maximize the
value of the firm for its owners, which is reflected in the market price of the
company's stock. This encompasses profitability, growth, and risk management.
4. The matching principle in accounting requires that:
A) Assets equal liabilities plus equity.
B) Expenses are recognized in the same period as the revenues they help generate.
C) Revenue is recognized when cash is received.
D) Inventory is valued at the lower of cost or market.
CORRECT ANSWER: B) Expenses are recognized in the same period as the
revenues they help generate.
Rationale: The matching principle is a fundamental accounting concept that
ensures expenses are recorded in the same accounting period as the revenues they
helped produce, providing an accurate picture of profitability for that period.
5. Which of the following is NOT a component of the DuPont Identity?
A) Profit Margin
B) Asset Turnover
,C) Equity Multiplier
D) Dividend Payout Ratio
CORRECT ANSWER: D) Dividend Payout Ratio
Rationale: The DuPont Identity decomposes Return on Equity (ROE) into three
components: Profit Margin, Asset Turnover, and Equity Multiplier. The dividend
payout ratio is not part of this decomposition.
6. A company has a profit margin of 10%, asset turnover of 0.8, and an equity
multiplier of 1.5. What is the Return on Equity (ROE)?
A) 8%
B) 10%
C) 12%
D) 15%
CORRECT ANSWER: C) 12%
Rationale: ROE using the DuPont Identity is calculated as Profit Margin × Asset
Turnover × Equity Multiplier. (0.10 × 0.8 × 1.5) = 0.12 or 12%.
7. What does the price-earnings (P/E) ratio indicate?
A) The amount of dividends paid per share
B) The market's valuation of a company's earnings
C) The company's leverage
D) The company's liquidity
CORRECT ANSWER: B) The market's valuation of a company's earnings
Rationale: The P/E ratio shows how much investors are willing to pay per dollar of
earnings. A higher P/E often suggests that investors expect higher growth in the
future.
, 8. A company issues bonds to raise capital. This is an example of:
A) Equity financing
B) Debt financing
C) Internal financing
D) Venture capital
CORRECT ANSWER: B) Debt financing
Rationale: Issuing bonds is a form of debt financing where the company borrows
money from investors and promises to pay interest and return the principal. It does
not dilute ownership like equity financing.
9. Which of the following is a cash inflow from operating activities on the
statement of cash flows?
A) Sale of equipment
B) Issuance of common stock
C) Collection of cash from customers
D) Repayment of long-term debt
CORRECT ANSWER: C) Collection of cash from customers
Rationale: Cash collected from customers is a primary source of cash from the core
business operations. Sale of equipment is an investing activity, while issuance of
stock and repayment of debt are financing activities.
10. What is the formula for calculating the Cost of Goods Sold (COGS)?
A) Beginning Inventory + Purchases – Ending Inventory
B) Ending Inventory + Purchases – Beginning Inventory
C) Beginning Inventory – Purchases + Ending Inventory
D) Sales – Gross Profit
CORRECT ANSWER: A) Beginning Inventory + Purchases – Ending Inventory
PRE ASSESSMENT (PA) WGU ACTUAL EXAM 2026/2027 PREP
QUESTIONS AND CURRENTLY UPDATED STUDY GUIDE COMPLETE
ACCURATE EXAM APPROVED QUESTIONS WITH WELL ELABORATED
ANSWERS (100 % CORRECT VERIFIED SOLUTIONS) NEWEST UPDATED
VERSION 2026 EDITION |GUARANTEED SUCCESS A+ |FULL REVISED
WGU D775 INTRODUCTION TO BUSINESS FINANCE PRE ASSESSMENT
(PA) APPROVED EXAM
1. A company reports current assets of $150,000 and current liabilities of
$100,000. What is the current ratio?
A) 1.0
B) 1.5
C) 2.0
D) 0.67
CORRECT ANSWER: B) 1.5
Rationale: The current ratio is calculated as current assets divided by current
liabilities ($150,000 / $100,000 = 1.5). This measures the company's ability to
cover short-term obligations with short-term assets.
2. Which financial statement provides a snapshot of a company's assets, liabilities,
and equity at a specific point in time?
A) Income Statement
B) Statement of Cash Flows
C) Balance Sheet
D) Statement of Retained Earnings
CORRECT ANSWER: C) Balance Sheet
,Rationale: The balance sheet reports a company's financial position on a specific
date, detailing what the company owns (assets), owes (liabilities), and the
shareholders' claim (equity). The income statement covers a period of time.
3. What is the primary goal of financial management?
A) Maximizing sales revenue
B) Maximizing shareholder wealth
C) Minimizing operational costs
D) Increasing market share
CORRECT ANSWER: B) Maximizing shareholder wealth
Rationale: The primary objective of financial management is to maximize the
value of the firm for its owners, which is reflected in the market price of the
company's stock. This encompasses profitability, growth, and risk management.
4. The matching principle in accounting requires that:
A) Assets equal liabilities plus equity.
B) Expenses are recognized in the same period as the revenues they help generate.
C) Revenue is recognized when cash is received.
D) Inventory is valued at the lower of cost or market.
CORRECT ANSWER: B) Expenses are recognized in the same period as the
revenues they help generate.
Rationale: The matching principle is a fundamental accounting concept that
ensures expenses are recorded in the same accounting period as the revenues they
helped produce, providing an accurate picture of profitability for that period.
5. Which of the following is NOT a component of the DuPont Identity?
A) Profit Margin
B) Asset Turnover
,C) Equity Multiplier
D) Dividend Payout Ratio
CORRECT ANSWER: D) Dividend Payout Ratio
Rationale: The DuPont Identity decomposes Return on Equity (ROE) into three
components: Profit Margin, Asset Turnover, and Equity Multiplier. The dividend
payout ratio is not part of this decomposition.
6. A company has a profit margin of 10%, asset turnover of 0.8, and an equity
multiplier of 1.5. What is the Return on Equity (ROE)?
A) 8%
B) 10%
C) 12%
D) 15%
CORRECT ANSWER: C) 12%
Rationale: ROE using the DuPont Identity is calculated as Profit Margin × Asset
Turnover × Equity Multiplier. (0.10 × 0.8 × 1.5) = 0.12 or 12%.
7. What does the price-earnings (P/E) ratio indicate?
A) The amount of dividends paid per share
B) The market's valuation of a company's earnings
C) The company's leverage
D) The company's liquidity
CORRECT ANSWER: B) The market's valuation of a company's earnings
Rationale: The P/E ratio shows how much investors are willing to pay per dollar of
earnings. A higher P/E often suggests that investors expect higher growth in the
future.
, 8. A company issues bonds to raise capital. This is an example of:
A) Equity financing
B) Debt financing
C) Internal financing
D) Venture capital
CORRECT ANSWER: B) Debt financing
Rationale: Issuing bonds is a form of debt financing where the company borrows
money from investors and promises to pay interest and return the principal. It does
not dilute ownership like equity financing.
9. Which of the following is a cash inflow from operating activities on the
statement of cash flows?
A) Sale of equipment
B) Issuance of common stock
C) Collection of cash from customers
D) Repayment of long-term debt
CORRECT ANSWER: C) Collection of cash from customers
Rationale: Cash collected from customers is a primary source of cash from the core
business operations. Sale of equipment is an investing activity, while issuance of
stock and repayment of debt are financing activities.
10. What is the formula for calculating the Cost of Goods Sold (COGS)?
A) Beginning Inventory + Purchases – Ending Inventory
B) Ending Inventory + Purchases – Beginning Inventory
C) Beginning Inventory – Purchases + Ending Inventory
D) Sales – Gross Profit
CORRECT ANSWER: A) Beginning Inventory + Purchases – Ending Inventory
