WGU C201 Business Acumen
Objective Assessment 2 Test Bank 2025
Actual – Versions A & B | Detailed
Expert Answers
Version A (30 Questions)
Finance (8 Questions)
Question 1
Which financial statement shows a company’s financial position at a specific point in time?
A. Income statement
B. Balance sheet
C. Statement of cash flows
D. Statement of retained earnings
Correct Answer: B
Rationale: The balance sheet provides a snapshot of a company’s assets, liabilities, and equity at
a specific moment, per Business Essentials. The income statement (A) shows profitability, cash
flows (C) track cash movement, and retained earnings (D) detail equity changes.
Question 2
What is the formula for calculating the debt-to-equity ratio?
A. Total liabilities / Total assets
B. Total liabilities / Shareholders’ equity
C. Net income / Total liabilities
D. Total assets / Shareholders’ equity
Correct Answer: B
Rationale: The debt-to-equity ratio (Total liabilities / Shareholders’ equity) measures financial
leverage, indicating how much debt finances the company compared to equity, per WGU C201
curriculum. Other formulas (A, C, D) represent different ratios.
Question 3
What does a high current ratio indicate about a company?
A. High profitability
B. Strong liquidity to cover short-term liabilities
,C. Excessive long-term debt
D. Low operational efficiency
Correct Answer: B
Rationale: The current ratio (Current assets / Current liabilities) measures a company’s ability to
pay short-term obligations. A high ratio indicates strong liquidity, not profitability (A), long-term
debt (C), or efficiency (D).
Question 4
Which type of financing involves selling corporate debt securities privately?
A. Trade credit
B. Commercial paper
C. Private placement
D. Venture capital
Correct Answer: C
Rationale: Private placement involves selling debt securities directly to institutional investors,
per Business Essentials. Trade credit (A) is supplier financing, commercial paper (B) is short-
term unsecured debt, and venture capital (D) funds startups.
Question 5
What is a leveraged buyout (LBO)?
A. Selling assets to another company
B. Buying a company using significant borrowed funds
C. Merging two companies into one
D. Creating a new company from divested assets
Correct Answer: B
Rationale: An LBO involves acquiring a company using substantial debt, often to take it private,
per WGU C201 study guide. Selling assets (A), merging (C), or creating a new company (D)
describe other transactions.
Question 6
What is the purpose of a cost-benefit analysis in financial decision-making?
A. To maximize short-term profits
B. To compare investment costs with expected benefits
C. To reduce employee turnover
D. To standardize operational processes
Correct Answer: B
Rationale: Cost-benefit analysis evaluates whether an investment’s benefits outweigh its costs,
aiding financial decisions, per Business Essentials. It’s not focused on profits (A), turnover (C),
or processes (D).
Question 7
, What is a sovereign wealth fund?
A. A private investment firm
B. A government-owned investment company
C. A nonprofit charitable fund
D. A bank-managed savings account
Correct Answer: B
Rationale: A sovereign wealth fund is a government-owned entity investing in financial and real
assets, per WGU C201 materials. It’s not private (A), nonprofit (C), or bank-managed (D).
Question 8
How is retained earnings calculated?
A. Net income – Dividends
B. Total assets – Total liabilities
C. Revenue – Expenses
D. Equity + Liabilities
Correct Answer: A
Rationale: Retained earnings are calculated as Net income minus Dividends, reflecting profits
reinvested in the company, per Business Essentials. Other options (B, C, D) relate to different
financial metrics.
Strategy (8 Questions)
Question 9
What is the primary goal of a SWOT analysis?
A. To standardize employee training
B. To assess internal and external business factors
C. To calculate financial ratios
D. To automate operational processes
Correct Answer: B
Rationale: A SWOT analysis evaluates Strengths, Weaknesses, Opportunities, and Threats to
guide strategic planning, per WGU C201. It’s not for training (A), ratios (C), or automation (D).
Question 10
In which market structure do many buyers and sellers have some control over price?
A. Perfect competition
B. Monopoly
C. Monopolistic competition
D. Oligopoly
Correct Answer: C
Rationale: Monopolistic competition features many buyers and sellers with differentiated
products, giving some price control, per Business Essentials. Perfect competition (A) has no
control, monopolies (B) have full control, and oligopolies (D) have shared control.
Objective Assessment 2 Test Bank 2025
Actual – Versions A & B | Detailed
Expert Answers
Version A (30 Questions)
Finance (8 Questions)
Question 1
Which financial statement shows a company’s financial position at a specific point in time?
A. Income statement
B. Balance sheet
C. Statement of cash flows
D. Statement of retained earnings
Correct Answer: B
Rationale: The balance sheet provides a snapshot of a company’s assets, liabilities, and equity at
a specific moment, per Business Essentials. The income statement (A) shows profitability, cash
flows (C) track cash movement, and retained earnings (D) detail equity changes.
Question 2
What is the formula for calculating the debt-to-equity ratio?
A. Total liabilities / Total assets
B. Total liabilities / Shareholders’ equity
C. Net income / Total liabilities
D. Total assets / Shareholders’ equity
Correct Answer: B
Rationale: The debt-to-equity ratio (Total liabilities / Shareholders’ equity) measures financial
leverage, indicating how much debt finances the company compared to equity, per WGU C201
curriculum. Other formulas (A, C, D) represent different ratios.
Question 3
What does a high current ratio indicate about a company?
A. High profitability
B. Strong liquidity to cover short-term liabilities
,C. Excessive long-term debt
D. Low operational efficiency
Correct Answer: B
Rationale: The current ratio (Current assets / Current liabilities) measures a company’s ability to
pay short-term obligations. A high ratio indicates strong liquidity, not profitability (A), long-term
debt (C), or efficiency (D).
Question 4
Which type of financing involves selling corporate debt securities privately?
A. Trade credit
B. Commercial paper
C. Private placement
D. Venture capital
Correct Answer: C
Rationale: Private placement involves selling debt securities directly to institutional investors,
per Business Essentials. Trade credit (A) is supplier financing, commercial paper (B) is short-
term unsecured debt, and venture capital (D) funds startups.
Question 5
What is a leveraged buyout (LBO)?
A. Selling assets to another company
B. Buying a company using significant borrowed funds
C. Merging two companies into one
D. Creating a new company from divested assets
Correct Answer: B
Rationale: An LBO involves acquiring a company using substantial debt, often to take it private,
per WGU C201 study guide. Selling assets (A), merging (C), or creating a new company (D)
describe other transactions.
Question 6
What is the purpose of a cost-benefit analysis in financial decision-making?
A. To maximize short-term profits
B. To compare investment costs with expected benefits
C. To reduce employee turnover
D. To standardize operational processes
Correct Answer: B
Rationale: Cost-benefit analysis evaluates whether an investment’s benefits outweigh its costs,
aiding financial decisions, per Business Essentials. It’s not focused on profits (A), turnover (C),
or processes (D).
Question 7
, What is a sovereign wealth fund?
A. A private investment firm
B. A government-owned investment company
C. A nonprofit charitable fund
D. A bank-managed savings account
Correct Answer: B
Rationale: A sovereign wealth fund is a government-owned entity investing in financial and real
assets, per WGU C201 materials. It’s not private (A), nonprofit (C), or bank-managed (D).
Question 8
How is retained earnings calculated?
A. Net income – Dividends
B. Total assets – Total liabilities
C. Revenue – Expenses
D. Equity + Liabilities
Correct Answer: A
Rationale: Retained earnings are calculated as Net income minus Dividends, reflecting profits
reinvested in the company, per Business Essentials. Other options (B, C, D) relate to different
financial metrics.
Strategy (8 Questions)
Question 9
What is the primary goal of a SWOT analysis?
A. To standardize employee training
B. To assess internal and external business factors
C. To calculate financial ratios
D. To automate operational processes
Correct Answer: B
Rationale: A SWOT analysis evaluates Strengths, Weaknesses, Opportunities, and Threats to
guide strategic planning, per WGU C201. It’s not for training (A), ratios (C), or automation (D).
Question 10
In which market structure do many buyers and sellers have some control over price?
A. Perfect competition
B. Monopoly
C. Monopolistic competition
D. Oligopoly
Correct Answer: C
Rationale: Monopolistic competition features many buyers and sellers with differentiated
products, giving some price control, per Business Essentials. Perfect competition (A) has no
control, monopolies (B) have full control, and oligopolies (D) have shared control.
