WGU D076 FINAL EXAM
COMPREHENSIVE STUDY GUIDE
QUESTIONS AND ANSWERS
1. What is the primary goal of financial management in a publicly traded corporation?
A. To maximize the firm’s total assets.
B. To maximize current net income.
C. To maximize the current value per share of existing stock.
D. To minimize total operating costs.
Answer: C
Conceptual Explanation: The primary goal of financial management is to maximize
shareholder wealth, which is reflected in the market price of the stock.
2. An agency conflict arises when there is a misalignment of interests between which two
parties?
A. Bondholders and the government.
B. Managers and shareholders.
C. Customers and suppliers.
,D. Creditors and employees.
Answer: B
Conceptual Explanation: Agency conflict occurs when management (the agents) acts in
their own best interests rather than in the best interests of the shareholders (the
principals).
3. Which of the following accounts is found on the Balance Sheet rather than the Income
Statement?
A. Cost of Goods Sold.
B. Retained Earnings.
C. Depreciation Expense.
D. Interest Income.
Answer: B
Conceptual Explanation: Retained earnings represents the cumulative profits kept by the
firm and is a component of shareholders’ equity on the balance sheet.
4. How is Net Working Capital calculated?
A. Cash plus Accounts Receivable.
B. Total Assets minus Total Liabilities.
C. Current Assets minus Current Liabilities.
D. Long-term Debt minus Equity.
, Answer: C
Conceptual Explanation: Net Working Capital is the difference between current assets
and current liabilities, representing the firm’s short-term liquidity position.
5. Which financial statement summarizes a firm’s revenues and expenses over a specific
period of time?
A. Balance Sheet.
B. Statement of Cash Flows.
C. Income Statement.
D. Statement of Retained Earnings.
Answer: C
Conceptual Explanation: The Income Statement measures financial performance (profits
and losses) over a specific interval, such as a quarter or a year.
6. What happens to the Present Value (PV) of a future cash flow as the discount rate
increases?
A. The PV decreases.
B. The PV increases.
C. The PV remains unchanged.
D. The PV becomes equal to the Future Value.
Answer: A
COMPREHENSIVE STUDY GUIDE
QUESTIONS AND ANSWERS
1. What is the primary goal of financial management in a publicly traded corporation?
A. To maximize the firm’s total assets.
B. To maximize current net income.
C. To maximize the current value per share of existing stock.
D. To minimize total operating costs.
Answer: C
Conceptual Explanation: The primary goal of financial management is to maximize
shareholder wealth, which is reflected in the market price of the stock.
2. An agency conflict arises when there is a misalignment of interests between which two
parties?
A. Bondholders and the government.
B. Managers and shareholders.
C. Customers and suppliers.
,D. Creditors and employees.
Answer: B
Conceptual Explanation: Agency conflict occurs when management (the agents) acts in
their own best interests rather than in the best interests of the shareholders (the
principals).
3. Which of the following accounts is found on the Balance Sheet rather than the Income
Statement?
A. Cost of Goods Sold.
B. Retained Earnings.
C. Depreciation Expense.
D. Interest Income.
Answer: B
Conceptual Explanation: Retained earnings represents the cumulative profits kept by the
firm and is a component of shareholders’ equity on the balance sheet.
4. How is Net Working Capital calculated?
A. Cash plus Accounts Receivable.
B. Total Assets minus Total Liabilities.
C. Current Assets minus Current Liabilities.
D. Long-term Debt minus Equity.
, Answer: C
Conceptual Explanation: Net Working Capital is the difference between current assets
and current liabilities, representing the firm’s short-term liquidity position.
5. Which financial statement summarizes a firm’s revenues and expenses over a specific
period of time?
A. Balance Sheet.
B. Statement of Cash Flows.
C. Income Statement.
D. Statement of Retained Earnings.
Answer: C
Conceptual Explanation: The Income Statement measures financial performance (profits
and losses) over a specific interval, such as a quarter or a year.
6. What happens to the Present Value (PV) of a future cash flow as the discount rate
increases?
A. The PV decreases.
B. The PV increases.
C. The PV remains unchanged.
D. The PV becomes equal to the Future Value.
Answer: A
