WGU D076 Pre Assessment - N/A Questions With 100%
Correct Answers | Latest Version (2024/2025) Expert
Verified
1. In which way is accounting different from finance?
A: Accounting is backward looking, while finance is focused on the future.
2. What is the main question that both individuals and companies must consider when making financial decisions to
reach a goal?
A: Will the benefits of the action outweigh the costs?
3. 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?
A: Making financing decisions.
4. How can investing help a person reach personal financial goals?
A: It provides access to potential revenue or increases in value to help meet goals faster.
5. 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?
A: Primary market.
6. Which type of economic indicator changes after the economy changes and helps identify trends in the long term?
A: Lagging indicator.
7. How does an investment institution, such as a mutual fund, facilitate the circulation of money in the economy?
A: By providing individuals and firms access to financial markets to buy or sell financial securities.
8. Which type of economic indicator is used by governments and policymakers to implement or alter policies in an
effort to avoid or minimize the effects of an economic downturn?
A: Leading indicator.
9. Suppose an individual does not eat chocolate because eating chocolate goes against personal beliefs. Which type
of standard is this?
A: Morals.
10. Which action is based upon moral standards?
A: Although there is no company policy regarding it, a financial manager chooses not to accept gifts from the
company’s clients to avoid creating a conflict of interest.
11. What should a potential bondholder (lender) do to prevent a company (borrower) from taking on risky projects?
A: Set strict covenants that the company cannot uphold if it chooses a risky project.
12. What is the term for an individual’s beliefs concerning what is and is not acceptable to personally do?
, A: Morals.
13. Which factor contributes to the inflation of the prices of goods and services over time?
A: Increase in demand for goods and services.
14. Why can compounding interest be a good tool but also a significant detriment?
A: Compounding interest can be a good tool because it allows a lender to gain interest on interest, but it is a
detriment because it causes a borrower to pay interest on interest.
15. Which component of the required rate of return considers the loss of potential gain from other alternatives?
A: Opportunity cost.
16. How is inflation calculated?
A: Inflation is calculated by determining the rate at which the average price level of particular goods and services
increases over a period of time in an economy.
17. Based on the following information about the stocks of several companies, which stock displays the greatest
amount of risk?
Stock A: Return = 22.22%, Standard Deviation = 9.99%
Stock B: Return = 15.05%, Standard Deviation = 7.35%
Stock C: Return = 38.83%, Standard Deviation = 4.54%
Stock D: Return = 5.69%, Standard Deviation = 5.32%
A: Stock A
18. What is the relationship between risk and return?
A: The higher risk an investor takes, the higher return the investor expects to receive.
19. An investor is considering purchasing stock in a certain company, but the investor’s financial advisor suggests
purchasing stocks in multiple companies instead of just one. Which risk management technique is this financial
advisor suggesting?
A: Risk diversification.
20. 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?
A: Risk retention.
21. Which type of ratio should be used to examine the cost efficiency of a firm’s production?
A: Profitability.
22. What is the process of analyzing financial data with ratios to compare a firm’s performance to competitors?
A: Benchmarking.
23. Which action will increase the return on equity of a firm?
A: Increasing the asset usage efficiency of the firm.
24. Based on the information in the chart below, what can you conclude about Company A’s ability to collect its
Correct Answers | Latest Version (2024/2025) Expert
Verified
1. In which way is accounting different from finance?
A: Accounting is backward looking, while finance is focused on the future.
2. What is the main question that both individuals and companies must consider when making financial decisions to
reach a goal?
A: Will the benefits of the action outweigh the costs?
3. 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?
A: Making financing decisions.
4. How can investing help a person reach personal financial goals?
A: It provides access to potential revenue or increases in value to help meet goals faster.
5. 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?
A: Primary market.
6. Which type of economic indicator changes after the economy changes and helps identify trends in the long term?
A: Lagging indicator.
7. How does an investment institution, such as a mutual fund, facilitate the circulation of money in the economy?
A: By providing individuals and firms access to financial markets to buy or sell financial securities.
8. Which type of economic indicator is used by governments and policymakers to implement or alter policies in an
effort to avoid or minimize the effects of an economic downturn?
A: Leading indicator.
9. Suppose an individual does not eat chocolate because eating chocolate goes against personal beliefs. Which type
of standard is this?
A: Morals.
10. Which action is based upon moral standards?
A: Although there is no company policy regarding it, a financial manager chooses not to accept gifts from the
company’s clients to avoid creating a conflict of interest.
11. What should a potential bondholder (lender) do to prevent a company (borrower) from taking on risky projects?
A: Set strict covenants that the company cannot uphold if it chooses a risky project.
12. What is the term for an individual’s beliefs concerning what is and is not acceptable to personally do?
, A: Morals.
13. Which factor contributes to the inflation of the prices of goods and services over time?
A: Increase in demand for goods and services.
14. Why can compounding interest be a good tool but also a significant detriment?
A: Compounding interest can be a good tool because it allows a lender to gain interest on interest, but it is a
detriment because it causes a borrower to pay interest on interest.
15. Which component of the required rate of return considers the loss of potential gain from other alternatives?
A: Opportunity cost.
16. How is inflation calculated?
A: Inflation is calculated by determining the rate at which the average price level of particular goods and services
increases over a period of time in an economy.
17. Based on the following information about the stocks of several companies, which stock displays the greatest
amount of risk?
Stock A: Return = 22.22%, Standard Deviation = 9.99%
Stock B: Return = 15.05%, Standard Deviation = 7.35%
Stock C: Return = 38.83%, Standard Deviation = 4.54%
Stock D: Return = 5.69%, Standard Deviation = 5.32%
A: Stock A
18. What is the relationship between risk and return?
A: The higher risk an investor takes, the higher return the investor expects to receive.
19. An investor is considering purchasing stock in a certain company, but the investor’s financial advisor suggests
purchasing stocks in multiple companies instead of just one. Which risk management technique is this financial
advisor suggesting?
A: Risk diversification.
20. 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?
A: Risk retention.
21. Which type of ratio should be used to examine the cost efficiency of a firm’s production?
A: Profitability.
22. What is the process of analyzing financial data with ratios to compare a firm’s performance to competitors?
A: Benchmarking.
23. Which action will increase the return on equity of a firm?
A: Increasing the asset usage efficiency of the firm.
24. Based on the information in the chart below, what can you conclude about Company A’s ability to collect its
