WGU D076 Pre-Assessment Questions and Answers with complete solution

WGU D076 Pre-Assessment Questions and Answers with complete solution Which principle of ratio analysis means that ratios are open for analyst interpretation, are not governed by rules, and allow creativity to work according to a particular company or asset? - Answer ️️ -Flexibility Comparing a firm's ratios across time. - Answer ️️ -Trend Analysis Comparing a firm's financial ratios to other firms' ratios or industry averages. - Answer ️️ - Cross-sectional Analysis As an active investor, Maria is analyzing her portfolio to decide if there are any stocks she should remove from her pool of financial securities. A company she has invested in, Quiet Flag Industries, just released its annual report. Which kind of method should Maria use to see if the company has improved? - Answer ️️ - Trend analysis An investment analyst is concerned about a construction company's ability to sell its inventory to meet current obligations, because much of the inventory (commercial buildings) it builds and sells takes longer than a year to construct. Which ratio should this analyst use to consider the effect of the firm's inventory on the firm's ability to meet current obligations? - Answer ️️ -Quick ratio Why are ratios considered flexible? - Answer ️️ -Because they are not regulated and can be changed or invented according to a firm's needs Which statement below is an example of how ratios are used in the field of finance? - Answer ️️ -A firm's ratios are compared with those of a benchmark peer group to determine the firm's relative strength and performance. How might calculating financial ratios help shareholders? - Answer ️️ -Ratios can be used to determine whether a firm is maximizing shareholder wealth. The firm Betsy's Books conducts a financial analysis using ratios to know how it is performing in comparison to other similar firms. What is this process called? - Answer ️️ -Benchmarking measure a firm's ability to meet short-term obligations without raising external capital. - Answer ️️ -Liquidity ratios