WGU D362 CORPORATE FINANCE PRACTICE TEST 2025/2026
QUESTIONS WITH SOLUTIONS GRADED A+
✔✔What is a key difference between C-corporations and S-corporations?
C-corporations can be owned by other types of companies and are easily acquired,
while S-corporations cannot be acquired.
Owners of S-corporations have limited liability, while owners of C-corporations have
unlimited liability.
An S-corporation is the default corporation when articles of incorporation are filed in a
state, but C-corporations require an additional forms.
S-corporations must pay taxes on the income they earn; all profits earned by C-
corporations pass directly to the stockholders. - ✔✔rrect
Answer
Correct:If an organization has a desire to be bought out by another company, it should
form as a C-corporation to make the future process easier.
✔✔A person wants to start a coffee shop. Initial funding came from the entrepreneur,
but more funds are required to open the coffee shop. The entrepreneur receives the
remaining seed money from friends and family.
Which capitalization strategy did the entrepreneur use?
Yield capitalization
Bootstrapping
Direct capitalization
Venture capital - ✔✔Correct:Bootstrapping happens when an entrepreneur invests
money, but also gets additional funds from friends, family, or credit card loans.
✔✔Which strategy refers to the process of making multiple payments across time to
allow an opportunity to reassess performance at each point?
Staged funding
Syndication
Yield capitalization
Bootstrapping - ✔✔This strategy refers to providing seed funding so a prototype can be
built and tested. Based on the prototype's success, additional funds may be provided.
✔✔Which capitalization strategy would a company use if it needed large sums of
capital, or if an entrepreneur is ready to sell some or all its investment?
Staged funding
Strategic buyer
Initial Public Offering (IPO)
Syndication - ✔✔A company can offer its first sale of common stock in the market to
raise large sums of capital.
, ✔✔The Chief Financial Officer (CFO) of a toy company is considering purchasing a new
piece of machinery to make manufacturing one of its toy lines more efficient and
sustainable.
Which type of decision does this scenario involve?
Working capital management decisions
Capital structure decisions
Capital budgeting decisions
Financing decisions - ✔✔The decision-making process through which the firm
purchases productive assets is called capital budgeting, and it is one of the most
important decision processes in a firm.
✔✔A café decided to purchase a new industrial oven to efficiently and effectively meet
the increasing demand of its baked goods. The Chief Financial Officer (CFO) is in the
process of determining how to pay for the new oven by either applying for a bank loan,
or by asking an individual to invest in the company.
Which type of decision does this scenario involve?
Financing decisions
Capital budgeting decisions
Working capital management decisions
Capital structure decisions - ✔✔Financing decisions determine the ways in which firms
obtain and manage long-term financing to acquire and support their productive assets.
✔✔Last year, a new bookstore. Since then, the store has become increasingly popular,
and the owner has had to hire additional staff to help meet customer demand. The
owner is in the process of determining the best use of the store's increased cash flows,
as well as how much cash needs to be available for the business to pay its employees
every two weeks.
Which type of decision does this scenario involve?
Working capital management decisions
Capital structure decisions
Financing decisions
Capital budgeting decisions - ✔✔Correct:Working capital management refers to the
management of current assets, such as money owed by customers who purchase on
credit, inventory, and current liabilities, such as money owed to suppliers.
✔✔Which two balance sheet account types are affected by working capital
management decisions? Choose two answers.
Current assets
Long-term assets
Current liabilities
QUESTIONS WITH SOLUTIONS GRADED A+
✔✔What is a key difference between C-corporations and S-corporations?
C-corporations can be owned by other types of companies and are easily acquired,
while S-corporations cannot be acquired.
Owners of S-corporations have limited liability, while owners of C-corporations have
unlimited liability.
An S-corporation is the default corporation when articles of incorporation are filed in a
state, but C-corporations require an additional forms.
S-corporations must pay taxes on the income they earn; all profits earned by C-
corporations pass directly to the stockholders. - ✔✔rrect
Answer
Correct:If an organization has a desire to be bought out by another company, it should
form as a C-corporation to make the future process easier.
✔✔A person wants to start a coffee shop. Initial funding came from the entrepreneur,
but more funds are required to open the coffee shop. The entrepreneur receives the
remaining seed money from friends and family.
Which capitalization strategy did the entrepreneur use?
Yield capitalization
Bootstrapping
Direct capitalization
Venture capital - ✔✔Correct:Bootstrapping happens when an entrepreneur invests
money, but also gets additional funds from friends, family, or credit card loans.
✔✔Which strategy refers to the process of making multiple payments across time to
allow an opportunity to reassess performance at each point?
Staged funding
Syndication
Yield capitalization
Bootstrapping - ✔✔This strategy refers to providing seed funding so a prototype can be
built and tested. Based on the prototype's success, additional funds may be provided.
✔✔Which capitalization strategy would a company use if it needed large sums of
capital, or if an entrepreneur is ready to sell some or all its investment?
Staged funding
Strategic buyer
Initial Public Offering (IPO)
Syndication - ✔✔A company can offer its first sale of common stock in the market to
raise large sums of capital.
, ✔✔The Chief Financial Officer (CFO) of a toy company is considering purchasing a new
piece of machinery to make manufacturing one of its toy lines more efficient and
sustainable.
Which type of decision does this scenario involve?
Working capital management decisions
Capital structure decisions
Capital budgeting decisions
Financing decisions - ✔✔The decision-making process through which the firm
purchases productive assets is called capital budgeting, and it is one of the most
important decision processes in a firm.
✔✔A café decided to purchase a new industrial oven to efficiently and effectively meet
the increasing demand of its baked goods. The Chief Financial Officer (CFO) is in the
process of determining how to pay for the new oven by either applying for a bank loan,
or by asking an individual to invest in the company.
Which type of decision does this scenario involve?
Financing decisions
Capital budgeting decisions
Working capital management decisions
Capital structure decisions - ✔✔Financing decisions determine the ways in which firms
obtain and manage long-term financing to acquire and support their productive assets.
✔✔Last year, a new bookstore. Since then, the store has become increasingly popular,
and the owner has had to hire additional staff to help meet customer demand. The
owner is in the process of determining the best use of the store's increased cash flows,
as well as how much cash needs to be available for the business to pay its employees
every two weeks.
Which type of decision does this scenario involve?
Working capital management decisions
Capital structure decisions
Financing decisions
Capital budgeting decisions - ✔✔Correct:Working capital management refers to the
management of current assets, such as money owed by customers who purchase on
credit, inventory, and current liabilities, such as money owed to suppliers.
✔✔Which two balance sheet account types are affected by working capital
management decisions? Choose two answers.
Current assets
Long-term assets
Current liabilities
