WGU D775 INTRO TO BUSINESS FINANCE
UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
◉ Balance sheet
Answer: Snapshot of what a company owns (assets) and owes
(liabilities) at one point in time.
◉ Income statement
Answer: Video of performance over a period; shows revenue,
expenses, and profit.
◉ Liquidity ratios
Answer: Measure ability to pay short-term bills; 'Can we
survive/pay payroll soon?'
◉ Activity/Efficiency ratios
Answer: Measure how well assets are used to generate sales; 'Are
we using our stuff well?'
◉ Leverage ratios
, Answer: Measure debt use and financial risk; 'How much risky
rocket fuel (debt) are we using?'
◉ Profitability ratios
Answer: Measure how well the company turns
sales/assets/equity into profit; 'Are we making real money?'
◉ Market ratios
Answer: Link accounting/book values to investor market values;
'What do investors think we're worth?'
◉ Current ratio
Answer: Current Assets / Current Liabilities; broad short-term
liquidity check.
◉ Quick ratio (acid test)
Answer: (Current Assets − Inventory) / Current Liabilities;
stricter liquidity—inventory may be hard to sell quickly.
◉ Cash ratio
Answer: Cash (and sometimes marketable securities) / Current
Liabilities; toughest liquidity stress test.
◉ Liquidity pattern
UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
◉ Balance sheet
Answer: Snapshot of what a company owns (assets) and owes
(liabilities) at one point in time.
◉ Income statement
Answer: Video of performance over a period; shows revenue,
expenses, and profit.
◉ Liquidity ratios
Answer: Measure ability to pay short-term bills; 'Can we
survive/pay payroll soon?'
◉ Activity/Efficiency ratios
Answer: Measure how well assets are used to generate sales; 'Are
we using our stuff well?'
◉ Leverage ratios
, Answer: Measure debt use and financial risk; 'How much risky
rocket fuel (debt) are we using?'
◉ Profitability ratios
Answer: Measure how well the company turns
sales/assets/equity into profit; 'Are we making real money?'
◉ Market ratios
Answer: Link accounting/book values to investor market values;
'What do investors think we're worth?'
◉ Current ratio
Answer: Current Assets / Current Liabilities; broad short-term
liquidity check.
◉ Quick ratio (acid test)
Answer: (Current Assets − Inventory) / Current Liabilities;
stricter liquidity—inventory may be hard to sell quickly.
◉ Cash ratio
Answer: Cash (and sometimes marketable securities) / Current
Liabilities; toughest liquidity stress test.
◉ Liquidity pattern