WGU D076 Pre-Assessment Questions and Answers with
complete solution
Which principle of ratio analysis means that ratios are open for analyst
interpretation, are not governed by rules, and allow creativity to work
according to a particular company or asset?
Flexibility
Comparing a firm's ratios across time.
Trend Analysis
Comparing a firm's financial ratios to other firms' ratios or industry averages.
Cross-sectional Analysis
As an active investor, Maria is analyzing her portfolio to decide if there are any
stocks she should remove from her pool of financial securities. A company
she has invested in, Quiet Flag Industries, just released its annual report.
Which kind of method should Maria use to see if the company has improved?
Trend analysis
An investment analyst is concerned about a construction company's ability to
sell its inventory to meet current obligations, because much of the inventory
(commercial buildings) it builds and sells takes longer than a year to
construct.
Which ratio should this analyst use to consider the effect of the firm's
inventory on the firm's ability to meet current obligations?
Quick ratio
Why are ratios considered flexible?
Because they are not regulated and can be changed or invented according to a
firm's needs
Which statement below is an example of how ratios are used in the field of
finance?
A firm's ratios are compared with those of a benchmark peer group to determine the
firm's relative strength and performance.
How might calculating financial ratios help shareholders?
Ratios can be used to determine whether a firm is maximizing shareholder wealth.
The firm Betsy's Books conducts a financial analysis using ratios to know how
it is performing in comparison to other similar firms. What is this process
called?
Benchmarking
measure a firm's ability to meet short-term obligations without raising external
capital.
Liquidity ratios
(also called efficiency ratios) measure how well the company uses its assets to
generate sales or cash—the firm's operational efficiency and profitability.
Activity ratios
consider how the firm is financed.
Leverage ratios
Which action will increase the return on equity of a firm?
Increasing the asset usage efficiency of the firm
Which type of ratio should be used to examine the cost efficiency of a firm's
production?
Profitability
complete solution
Which principle of ratio analysis means that ratios are open for analyst
interpretation, are not governed by rules, and allow creativity to work
according to a particular company or asset?
Flexibility
Comparing a firm's ratios across time.
Trend Analysis
Comparing a firm's financial ratios to other firms' ratios or industry averages.
Cross-sectional Analysis
As an active investor, Maria is analyzing her portfolio to decide if there are any
stocks she should remove from her pool of financial securities. A company
she has invested in, Quiet Flag Industries, just released its annual report.
Which kind of method should Maria use to see if the company has improved?
Trend analysis
An investment analyst is concerned about a construction company's ability to
sell its inventory to meet current obligations, because much of the inventory
(commercial buildings) it builds and sells takes longer than a year to
construct.
Which ratio should this analyst use to consider the effect of the firm's
inventory on the firm's ability to meet current obligations?
Quick ratio
Why are ratios considered flexible?
Because they are not regulated and can be changed or invented according to a
firm's needs
Which statement below is an example of how ratios are used in the field of
finance?
A firm's ratios are compared with those of a benchmark peer group to determine the
firm's relative strength and performance.
How might calculating financial ratios help shareholders?
Ratios can be used to determine whether a firm is maximizing shareholder wealth.
The firm Betsy's Books conducts a financial analysis using ratios to know how
it is performing in comparison to other similar firms. What is this process
called?
Benchmarking
measure a firm's ability to meet short-term obligations without raising external
capital.
Liquidity ratios
(also called efficiency ratios) measure how well the company uses its assets to
generate sales or cash—the firm's operational efficiency and profitability.
Activity ratios
consider how the firm is financed.
Leverage ratios
Which action will increase the return on equity of a firm?
Increasing the asset usage efficiency of the firm
Which type of ratio should be used to examine the cost efficiency of a firm's
production?
Profitability
