WGU D076 FINANCIAL SKILLS FOR
MANAGERS ADVANCED ASSESSMENT
2026/2027 QUESTIONS AND ANSWERS
1. Which financial statement reports a company’s financial position at a specific point in
time?
A. Income Statement
B. Statement of Cash Flows
C. Statement of Retained Earnings
D. Balance Sheet
Answer: D
Conceptual Explanation: The Balance Sheet provides a snapshot of assets, liabilities, and
equity at a specific point in time, unlike the income statement or cash flow statement,
which report activity over a period.
2. What is the primary difference between the Current Ratio and the Quick Ratio?
A. The Quick Ratio excludes inventory and prepaid expenses from current assets.
B. The Quick Ratio includes accounts receivable, whereas the Current Ratio does not.
,C. The Current Ratio measures long-term solvency, while the Quick Ratio measures
liquidity.
D. There is no difference between the two ratios.
Answer: A
Conceptual Explanation: The Quick Ratio (Acid-Test) is a more conservative measure of
liquidity because it excludes inventory, which is considered less liquid than cash or
receivables.
3. A company has a Net Income of $500,000 and total equity of $2,000,000. What is the
Return on Equity (ROE)?
A. 25%
B. 20%
C. 10%
D. 40%
Answer: A
Conceptual Explanation: ROE is calculated as Net Income divided by Total Equity
($500,000 / $2,000,000 = 0.25 or 25%).
4. Which of the following would be classified as a cash outflow in the ‘Investing Activities’
section of the Statement of Cash Flows?
A. Purchase of new manufacturing equipment
, B. Payment of dividends to shareholders
C. Repayment of long-term debt
D. Payment of salaries to employees
Answer: A
Conceptual Explanation: Investing activities relate to the purchase or sale of long-term
assets like Property, Plant, and Equipment (PP&E).
5. In capital budgeting, which method is considered superior because it accounts for the time
value of money and provides a dollar-value increase in firm wealth?
A. Payback Period
B. Internal Rate of Return (IRR)
C. Net Present Value (NPV)
D. Accounting Rate of Return
Answer: C
Conceptual Explanation: NPV is preferred because it measures the absolute change in
shareholder wealth and avoids the multiple IRR problem or the disregard for cash flows
after the payback period.
6. What does a high ‘Days Sales Outstanding’ (DSO) suggest about a company?
A. The company is taking a long time to collect payments from customers.
B. The company is very efficient at collecting its receivables.
MANAGERS ADVANCED ASSESSMENT
2026/2027 QUESTIONS AND ANSWERS
1. Which financial statement reports a company’s financial position at a specific point in
time?
A. Income Statement
B. Statement of Cash Flows
C. Statement of Retained Earnings
D. Balance Sheet
Answer: D
Conceptual Explanation: The Balance Sheet provides a snapshot of assets, liabilities, and
equity at a specific point in time, unlike the income statement or cash flow statement,
which report activity over a period.
2. What is the primary difference between the Current Ratio and the Quick Ratio?
A. The Quick Ratio excludes inventory and prepaid expenses from current assets.
B. The Quick Ratio includes accounts receivable, whereas the Current Ratio does not.
,C. The Current Ratio measures long-term solvency, while the Quick Ratio measures
liquidity.
D. There is no difference between the two ratios.
Answer: A
Conceptual Explanation: The Quick Ratio (Acid-Test) is a more conservative measure of
liquidity because it excludes inventory, which is considered less liquid than cash or
receivables.
3. A company has a Net Income of $500,000 and total equity of $2,000,000. What is the
Return on Equity (ROE)?
A. 25%
B. 20%
C. 10%
D. 40%
Answer: A
Conceptual Explanation: ROE is calculated as Net Income divided by Total Equity
($500,000 / $2,000,000 = 0.25 or 25%).
4. Which of the following would be classified as a cash outflow in the ‘Investing Activities’
section of the Statement of Cash Flows?
A. Purchase of new manufacturing equipment
, B. Payment of dividends to shareholders
C. Repayment of long-term debt
D. Payment of salaries to employees
Answer: A
Conceptual Explanation: Investing activities relate to the purchase or sale of long-term
assets like Property, Plant, and Equipment (PP&E).
5. In capital budgeting, which method is considered superior because it accounts for the time
value of money and provides a dollar-value increase in firm wealth?
A. Payback Period
B. Internal Rate of Return (IRR)
C. Net Present Value (NPV)
D. Accounting Rate of Return
Answer: C
Conceptual Explanation: NPV is preferred because it measures the absolute change in
shareholder wealth and avoids the multiple IRR problem or the disregard for cash flows
after the payback period.
6. What does a high ‘Days Sales Outstanding’ (DSO) suggest about a company?
A. The company is taking a long time to collect payments from customers.
B. The company is very efficient at collecting its receivables.
