WGU D076 FINANCE SKILLS FOR
MANAGERS - FINAL EXAM PREP
QUESTIONS AND ANSWERS
1. Which of the following best describes the primary goal of financial management in a
publicly traded corporation?
A. Maximizing the current net income of the firm
B. Maximizing the market share of the company’s products
C. Minimizing the total costs of the production process
D. Maximizing the current value per share of the existing stock
Answer: D
Conceptual Explanation: The primary goal of financial management is to maximize
shareholder wealth, which is reflected in the market price of the existing stock.
2. An analyst is comparing two companies. Company A has a higher current ratio than
Company B, but a lower quick ratio. What is the most likely explanation?
A. Company A has more cash than Company B
B. Company A carries significantly more inventory than Company B
,C. Company A has a higher level of accounts receivable
D. Company B has higher long-term debt obligations
Answer: B
Conceptual Explanation: The quick ratio excludes inventory from current assets. If the
current ratio is high but the quick ratio is low, it indicates that a large portion of current
assets is tied up in inventory.
3. Which financial statement provides a ‘snapshot’ of a firm’s financial position at a specific
point in time?
A. Balance Sheet
B. Statement of Cash Flows
C. Income Statement
D. Statement of Retained Earnings
Answer: A
Conceptual Explanation: The Balance Sheet lists assets, liabilities, and equity at a specific
date, whereas the other statements cover a period of time.
4. In a period of rising prices (inflation), which inventory valuation method typically results in
the highest reported net income?
A. LIFO (Last-In, First-Out)
B. Specific Identification
, C. Weighted Average Cost
D. FIFO (First-In, First-Out)
Answer: D
Conceptual Explanation: FIFO assigns the oldest, lower costs to the Cost of Goods Sold,
resulting in lower expenses and higher net income during inflation.
5. What is the effect on the Present Value (PV) of a future cash flow if the discount rate is
increased?
A. The PV increases
B. The PV remains unchanged
C. The PV decreases
D. The PV becomes zero
Answer: C
Conceptual Explanation: There is an inverse relationship between the discount rate and
present value; higher rates reduce the value of future money today.
6. Which of the following is considered a non-cash expense on the income statement?
A. Interest Expense
B. Depreciation
C. Salaries and Wages
MANAGERS - FINAL EXAM PREP
QUESTIONS AND ANSWERS
1. Which of the following best describes the primary goal of financial management in a
publicly traded corporation?
A. Maximizing the current net income of the firm
B. Maximizing the market share of the company’s products
C. Minimizing the total costs of the production process
D. Maximizing the current value per share of the existing stock
Answer: D
Conceptual Explanation: The primary goal of financial management is to maximize
shareholder wealth, which is reflected in the market price of the existing stock.
2. An analyst is comparing two companies. Company A has a higher current ratio than
Company B, but a lower quick ratio. What is the most likely explanation?
A. Company A has more cash than Company B
B. Company A carries significantly more inventory than Company B
,C. Company A has a higher level of accounts receivable
D. Company B has higher long-term debt obligations
Answer: B
Conceptual Explanation: The quick ratio excludes inventory from current assets. If the
current ratio is high but the quick ratio is low, it indicates that a large portion of current
assets is tied up in inventory.
3. Which financial statement provides a ‘snapshot’ of a firm’s financial position at a specific
point in time?
A. Balance Sheet
B. Statement of Cash Flows
C. Income Statement
D. Statement of Retained Earnings
Answer: A
Conceptual Explanation: The Balance Sheet lists assets, liabilities, and equity at a specific
date, whereas the other statements cover a period of time.
4. In a period of rising prices (inflation), which inventory valuation method typically results in
the highest reported net income?
A. LIFO (Last-In, First-Out)
B. Specific Identification
, C. Weighted Average Cost
D. FIFO (First-In, First-Out)
Answer: D
Conceptual Explanation: FIFO assigns the oldest, lower costs to the Cost of Goods Sold,
resulting in lower expenses and higher net income during inflation.
5. What is the effect on the Present Value (PV) of a future cash flow if the discount rate is
increased?
A. The PV increases
B. The PV remains unchanged
C. The PV decreases
D. The PV becomes zero
Answer: C
Conceptual Explanation: There is an inverse relationship between the discount rate and
present value; higher rates reduce the value of future money today.
6. Which of the following is considered a non-cash expense on the income statement?
A. Interest Expense
B. Depreciation
C. Salaries and Wages
