WGU D076 PA |55 questions with verified answers
A company calculated variances of a budget and actual cash flows that indicate
the firm's strengths and weaknesses in cash flows and its budgeting process.
Which major use of cash budgeting is this an example of?
Assessment of future needs
Performance evaluation
Standardization
Corrective action Ans✓✓✓-Performance evaluation
A company is developing a financial forecast for the next year. The company plans
to implement a new factory that will increase production and resulting sales by
20%.
Since the company's assets are increasing significantly, what else must increase?
Gross margin
Profit turnover
Accounts receivable turnover
Financing Ans✓✓✓-Financing
A financial manager at a company is trying to determine whether to issue new
stocks or new bonds to cover the costs of a project the company is doing the next
year.
Which main task in business finance is this situation an example of?
Making financing decisions
Managing working capital
Making investment decisions
,Managing interdepartmental loans Ans✓✓✓-Making financing decisions
A firm is currently operating at 75% capacity with current sales of $34 million.
Will the firm need to acquire additional fixed assets if its sales are predicted to
increase by $6 million next year?
Yes, because the increase in sales will exceed the firm's sales capacity.
No, because the increase in sales will not exceed the firm's sales capacity.
Yes, because the increase in sales will not exceed the firm's sales capacity.
No, because the increase in sales will exceed the firm's sales capacity. Ans✓✓✓-
No, because the increase in sales will not exceed the firm's sales capacity.
A pharmaceutical company recently spent $2 million developing a new drug. The
company then conducts capital budgeting analysis to determine if it should
produce the newly developed drug. The net present value (NPV) of the project is
$1.5 million.
Why should this company produce the drug?
Because the losses due to cannibalization are less than the value of the project
Because the project will provide a total value of $3.5 million to the company
Because the development costs are greater than the value of the project
Because the NPV is greater than zero Ans✓✓✓-Because the NPV is greater than
zero
A sign company is planning to have an initial public offering (IPO). In which type of
market will its stock first be sold to the public?
Primary market
Efficient market
, Money market
Secondary market Ans✓✓✓-Primary market
An employee was recently hired as a financial analyst and asked to create a cash
budget for the employee's division for the next year.
Which component should the employee exclude from the budget?
Purchase of equipment that will be bought in three years
Payments to suppliers that will be made over the next six months
Purchase of inventory for sales that the employee will make this year
Payment toward the line of credit that is due next month Ans✓✓✓-Purchase of
equipment that will be bought in three years
An energy company discovers that a new bill has been proposed to change the
amount of fuel that can be exported outside the country. If passed, this could
have a serious negative effect on the company's revenues. Some of the
company's competitors are obtaining insurance policies to compensate for this
risk, but since the energy company believes the likelihood of this bill passing is
low, it chooses to do nothing—ultimately taking responsibility for this particular
risk instead of trying to transfer the risk through an insurance policy.
Which risk management technique is this choice an example of?
Risk avoidance
Diversification
Risk retention
Risk separation Ans✓✓✓-Risk retention
A company calculated variances of a budget and actual cash flows that indicate
the firm's strengths and weaknesses in cash flows and its budgeting process.
Which major use of cash budgeting is this an example of?
Assessment of future needs
Performance evaluation
Standardization
Corrective action Ans✓✓✓-Performance evaluation
A company is developing a financial forecast for the next year. The company plans
to implement a new factory that will increase production and resulting sales by
20%.
Since the company's assets are increasing significantly, what else must increase?
Gross margin
Profit turnover
Accounts receivable turnover
Financing Ans✓✓✓-Financing
A financial manager at a company is trying to determine whether to issue new
stocks or new bonds to cover the costs of a project the company is doing the next
year.
Which main task in business finance is this situation an example of?
Making financing decisions
Managing working capital
Making investment decisions
,Managing interdepartmental loans Ans✓✓✓-Making financing decisions
A firm is currently operating at 75% capacity with current sales of $34 million.
Will the firm need to acquire additional fixed assets if its sales are predicted to
increase by $6 million next year?
Yes, because the increase in sales will exceed the firm's sales capacity.
No, because the increase in sales will not exceed the firm's sales capacity.
Yes, because the increase in sales will not exceed the firm's sales capacity.
No, because the increase in sales will exceed the firm's sales capacity. Ans✓✓✓-
No, because the increase in sales will not exceed the firm's sales capacity.
A pharmaceutical company recently spent $2 million developing a new drug. The
company then conducts capital budgeting analysis to determine if it should
produce the newly developed drug. The net present value (NPV) of the project is
$1.5 million.
Why should this company produce the drug?
Because the losses due to cannibalization are less than the value of the project
Because the project will provide a total value of $3.5 million to the company
Because the development costs are greater than the value of the project
Because the NPV is greater than zero Ans✓✓✓-Because the NPV is greater than
zero
A sign company is planning to have an initial public offering (IPO). In which type of
market will its stock first be sold to the public?
Primary market
Efficient market
, Money market
Secondary market Ans✓✓✓-Primary market
An employee was recently hired as a financial analyst and asked to create a cash
budget for the employee's division for the next year.
Which component should the employee exclude from the budget?
Purchase of equipment that will be bought in three years
Payments to suppliers that will be made over the next six months
Purchase of inventory for sales that the employee will make this year
Payment toward the line of credit that is due next month Ans✓✓✓-Purchase of
equipment that will be bought in three years
An energy company discovers that a new bill has been proposed to change the
amount of fuel that can be exported outside the country. If passed, this could
have a serious negative effect on the company's revenues. Some of the
company's competitors are obtaining insurance policies to compensate for this
risk, but since the energy company believes the likelihood of this bill passing is
low, it chooses to do nothing—ultimately taking responsibility for this particular
risk instead of trying to transfer the risk through an insurance policy.
Which risk management technique is this choice an example of?
Risk avoidance
Diversification
Risk retention
Risk separation Ans✓✓✓-Risk retention
