WGU D076 Finance Skills for Managers (PA)
questions with verified answers
FINANCIAL ANALYSIS
Net Profit Total Asset Leverage Return on
Margin Turnover Multiplier Equity
Company 1 20.00% 1.5 2.5 75.0%
Company 2 15.00% 0.83 2.0 25.0%
Company 3 10.00% 0.5 3.0 15.0%
Given the table above, what does the DuPont framework indicate about return on
assets?
1. The firm's market ratio helps determine the price of the stock.
2. All returns are based on the firm's profitability and efficiency.
3. A firm can still have a high return on assets with low net income.
4. Return on assets is based on the amount of the firm's debt and equity.
Ans✓✓✓-2. All returns are based on the firm's profitability and efficiency.
FINANCIAL 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?
1. Inventory ratio
2. Leverage ratio
3. Quick ratio
4. Current ratio Ans✓✓✓-3. Quick ratio
FINANCIAL ANALYSIS
An investor is analyzing a portfolio to decide if there are any stocks that should be
removed from the pool of financial securities. Quiet Flag Industries, a company
the investor has invested in, has just released its annual report.Which method
should the investor use to see if the company has improved?
1. Cross-sectional analysis
2. Progress measurement
3. Focus analysis
4. Trend analysis Ans✓✓✓-4. Trend analysis
,FINANCIAL ANALYSIS
Based on the information in the chart below, what can you conclude about
Company A's ability to collect its accounts receivable (AR)?
Entity Percentage of AR Turnover AR Collection
Sales on Credit Period
Industry 30% 12 30.42
Company A 30% 75 2.14
1. Company A collects its accounts receivable in a highly variable pattern
compared to the industry.
2. Company A is more efficient at collecting its accounts receivable than the
industry.
3. Company A collects its accounts receivable just as quickly as the average of
other firms in the industry.
4. Company A is less efficient at collecting its accounts receivable than the
industry. Ans✓✓✓-4. Company A is less efficient at collecting its accounts
receivable than the industry.
FINANCIAL ANALYSIS
What is the process of analyzing financial data with ratios to compare a firm's
performance to competitors?
, 1. Evaluating
2. Valuing
3. Auditing
4. Benchmarking Ans✓✓✓-4. Benchmarking
FINANCIAL ANALYSIS
Which action will increase the return on equity of a firm?
1. Increasing the asset usage efficiency of the firm
2. Increasing the liquidity of the firm
3. Decreasing the debt financing of the firm
4. Decreasing the profitability of the firm Ans✓✓✓-1. Increasing the asset usage
efficiency of the firm
FINANCIAL ANALYSIS
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?
questions with verified answers
FINANCIAL ANALYSIS
Net Profit Total Asset Leverage Return on
Margin Turnover Multiplier Equity
Company 1 20.00% 1.5 2.5 75.0%
Company 2 15.00% 0.83 2.0 25.0%
Company 3 10.00% 0.5 3.0 15.0%
Given the table above, what does the DuPont framework indicate about return on
assets?
1. The firm's market ratio helps determine the price of the stock.
2. All returns are based on the firm's profitability and efficiency.
3. A firm can still have a high return on assets with low net income.
4. Return on assets is based on the amount of the firm's debt and equity.
Ans✓✓✓-2. All returns are based on the firm's profitability and efficiency.
FINANCIAL 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?
1. Inventory ratio
2. Leverage ratio
3. Quick ratio
4. Current ratio Ans✓✓✓-3. Quick ratio
FINANCIAL ANALYSIS
An investor is analyzing a portfolio to decide if there are any stocks that should be
removed from the pool of financial securities. Quiet Flag Industries, a company
the investor has invested in, has just released its annual report.Which method
should the investor use to see if the company has improved?
1. Cross-sectional analysis
2. Progress measurement
3. Focus analysis
4. Trend analysis Ans✓✓✓-4. Trend analysis
,FINANCIAL ANALYSIS
Based on the information in the chart below, what can you conclude about
Company A's ability to collect its accounts receivable (AR)?
Entity Percentage of AR Turnover AR Collection
Sales on Credit Period
Industry 30% 12 30.42
Company A 30% 75 2.14
1. Company A collects its accounts receivable in a highly variable pattern
compared to the industry.
2. Company A is more efficient at collecting its accounts receivable than the
industry.
3. Company A collects its accounts receivable just as quickly as the average of
other firms in the industry.
4. Company A is less efficient at collecting its accounts receivable than the
industry. Ans✓✓✓-4. Company A is less efficient at collecting its accounts
receivable than the industry.
FINANCIAL ANALYSIS
What is the process of analyzing financial data with ratios to compare a firm's
performance to competitors?
, 1. Evaluating
2. Valuing
3. Auditing
4. Benchmarking Ans✓✓✓-4. Benchmarking
FINANCIAL ANALYSIS
Which action will increase the return on equity of a firm?
1. Increasing the asset usage efficiency of the firm
2. Increasing the liquidity of the firm
3. Decreasing the debt financing of the firm
4. Decreasing the profitability of the firm Ans✓✓✓-1. Increasing the asset usage
efficiency of the firm
FINANCIAL ANALYSIS
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?
