WGU D076 FINANCIAL SKILLS FOR
MANAGERS EXAM PREP 2026/2027
QUESTIONS AND ANSWERS
1. A firm has a current ratio of 2.5 and a quick ratio of 1.2. If the current liabilities are
$100,000, what is the value of the inventory?
A. $130,000
B. $250,000
C. $120,000
D. $150,000
Answer: A
Conceptual Explanation: Current Assets = Current Ratio * Current Liabilities = 2.5 *
$100,000 = $250,000. Quick Assets = Quick Ratio * Current Liabilities = 1.2 * $100,000 =
$120,000. Inventory = Current Assets - Quick Assets = $250,000 - $120,000 = $130,000.
2. Which financial statement provides a snapshot of a company’s financial position at a
specific point in time?
A. Income Statement
,B. Statement of Cash Flows
C. Retained Earnings Statement
D. Balance Sheet
Answer: D
Conceptual Explanation: The Balance Sheet reports assets, liabilities, and equity at a
specific point in time, unlike the Income Statement or Cash Flow Statement, which cover a
period of time.
3. Using the DuPont Analysis, which three factors directly contribute to Return on Equity
(ROE)?
A. Net Income, Total Assets, and Total Equity
B. Gross Margin, Inventory Turnover, and Debt Ratio
C. Operating Margin, Current Ratio, and Return on Assets
D. Net Profit Margin, Asset Turnover, and Equity Multiplier
Answer: D
Conceptual Explanation: The DuPont formula breaks ROE into three components: Net
Profit Margin (efficiency), Asset Turnover (productivity), and the Equity Multiplier
(leverage).
, 4. A company is considering a project with an initial investment of $50,000 and expected cash
flows of $20,000 per year for 3 years. If the discount rate is 10%, what is the Net Present
Value (NPV)?
A. -$243
B. -$263
C. $2,434
D. $49,737
Answer: B
Conceptual Explanation: NPV = -50,000 + (20,.10^1) + (20,.10^2) +
(20,.10^3) = -50,000 + 18,182 + 16,529 + 15,026 = -$263.
5. Which of the following describes the ‘Agency Problem’ in corporate finance?
A. The conflict of interest between stockholders and corporate managers.
B. The conflict between creditors and the government regarding tax payments.
C. The disagreement between suppliers and customers over credit terms.
D. The competition between two firms in the same industry.
Answer: A
Conceptual Explanation: The agency problem arises when managers (agents) act in their
own best interest rather than in the best interest of the stockholders (principals).
MANAGERS EXAM PREP 2026/2027
QUESTIONS AND ANSWERS
1. A firm has a current ratio of 2.5 and a quick ratio of 1.2. If the current liabilities are
$100,000, what is the value of the inventory?
A. $130,000
B. $250,000
C. $120,000
D. $150,000
Answer: A
Conceptual Explanation: Current Assets = Current Ratio * Current Liabilities = 2.5 *
$100,000 = $250,000. Quick Assets = Quick Ratio * Current Liabilities = 1.2 * $100,000 =
$120,000. Inventory = Current Assets - Quick Assets = $250,000 - $120,000 = $130,000.
2. Which financial statement provides a snapshot of a company’s financial position at a
specific point in time?
A. Income Statement
,B. Statement of Cash Flows
C. Retained Earnings Statement
D. Balance Sheet
Answer: D
Conceptual Explanation: The Balance Sheet reports assets, liabilities, and equity at a
specific point in time, unlike the Income Statement or Cash Flow Statement, which cover a
period of time.
3. Using the DuPont Analysis, which three factors directly contribute to Return on Equity
(ROE)?
A. Net Income, Total Assets, and Total Equity
B. Gross Margin, Inventory Turnover, and Debt Ratio
C. Operating Margin, Current Ratio, and Return on Assets
D. Net Profit Margin, Asset Turnover, and Equity Multiplier
Answer: D
Conceptual Explanation: The DuPont formula breaks ROE into three components: Net
Profit Margin (efficiency), Asset Turnover (productivity), and the Equity Multiplier
(leverage).
, 4. A company is considering a project with an initial investment of $50,000 and expected cash
flows of $20,000 per year for 3 years. If the discount rate is 10%, what is the Net Present
Value (NPV)?
A. -$243
B. -$263
C. $2,434
D. $49,737
Answer: B
Conceptual Explanation: NPV = -50,000 + (20,.10^1) + (20,.10^2) +
(20,.10^3) = -50,000 + 18,182 + 16,529 + 15,026 = -$263.
5. Which of the following describes the ‘Agency Problem’ in corporate finance?
A. The conflict of interest between stockholders and corporate managers.
B. The conflict between creditors and the government regarding tax payments.
C. The disagreement between suppliers and customers over credit terms.
D. The competition between two firms in the same industry.
Answer: A
Conceptual Explanation: The agency problem arises when managers (agents) act in their
own best interest rather than in the best interest of the stockholders (principals).
