D076 WGU FINANCE BY ME (MODULE QUIZZES)
A company currently has a ratio of 1.5 but hopes to improve the ratio to 2 to align more
with the industry benchmark. To achieve this goal, costs were cut in production through
an investment in efficient equipment, and the company achieved a higher profit margin.
If this continues, you are certain that the firm will achieve its goal in two years. What is
this an example of?
a) Flexibility
b) Trend analysis
c) Cross-sectional analysis
d) Progress measurement - Answer -d) Progress measurement
You are comparing the company's ratio to the goal and checking how the company is
progressing toward the goal.
Knowing that you are taking this finance class, a friend asks you about two investment
opportunities he is considering. He wants to know which of the firms is using its assets
more efficiently to generate sales. Which set of information could help you determine
this?
a) Firm A has an asset turnover of 4, and Firm B has an asset turnover of 2.5.
b) Firm A has a leverage ratio of 3, and Firm B has a leverage ratio of 1.5.
c) Firm A has a gross margin of 40%, and Firm B has a gross margin of 35%.
d) Both firms have a return on assets of 5%, but Firm B has a higher profit margin. -
Answer -a) Firm A has an asset turnover of 4, and Firm B has an asset turnover of 2.5.
Asset turnover is an indicator of how well a firm uses its assets to generate sales. Since
Firm A generates $4 of sales for every $1 of assets, it is using its assets more
efficiently.
W&H Company wants to create a cash budget to better manage its cash flows. The
financial manager knows that the firm's labor costs and materials costs are too high for
the level of sales each month. The firm also needs to keep better track of its cash flows
to assess its need for additional financing through short-term loans.
W&H Inc.'s labor costs each month are an example of which item in a cash budget?
a) Minimum cash need
b) Cash disbursement
c) Cash receipt
d) Net cash for the month - Answer -b) Cash disbursement
This is a cash disbursement for the firm because it represents cash going out during the
month to pay employees.
, W&H Company wants to create a cash budget to better manage its cash flows. The
financial manager knows that the firm's labor costs and materials costs are too high for
the level of sales each month. The firm also needs to keep better track of its cash flows
to assess its need for additional financing through short-term loans.
After W&H Inc. has developed a cash budget, what should the company do in the
following months?
a) It should invest any profits in new capital.
b) It should begin tracking its cash inflows and outflows.
c) It should wait until the budgeted months are over and then make a new budget for the
months following.
d) It should monitor its actual cash flows and then revise the cash budget if needed. -
Answer -d) It should monitor its actual cash flows and then revise the cash budget if
needed.
Monitoring and revising the cash budget will allow W&H Inc. to identify and fix any
problems that may arise.
W&H Company wants to create a cash budget to better manage its cash flows. The
financial manager knows that the firm's labor costs and materials costs are too high for
the level of sales each month. The firm also needs to keep better track of its cash flows
to assess its need for additional financing through short-term loans.
Why would creating a cash budget be useful for W&H if the firm needs a loan from the
bank or another short-term lender?
a) Cash budgets allow businesses to seek financing from multiple lenders at a time,
increasing borrowing capabilities.
b) Cash budgets include a detailed credit report of the business's operations, which
proves that the company can use borrowed funds responsibly.
c) Cash budgets help lenders identify a business's investing strategy going forward,
establishing confidence in future operations.
d) Cash budgets increase the lender's trust in a firm by demonstrating the firm's abi -
Answer -d) Cash budgets increase the lender's trust in a firm by demonstrating the
firm's ability to make profits and repay loans.
Cash budgets are detailed plans that show creditors that a firm will have enough cash
from month to month to support its operations while staying within acceptable borrowing
limits. A good cash budget allows creditors to feel secure in lending money to the firm.
How do the benefits of knowing the cash position for each period differ between
businesses and individuals?
A company currently has a ratio of 1.5 but hopes to improve the ratio to 2 to align more
with the industry benchmark. To achieve this goal, costs were cut in production through
an investment in efficient equipment, and the company achieved a higher profit margin.
If this continues, you are certain that the firm will achieve its goal in two years. What is
this an example of?
a) Flexibility
b) Trend analysis
c) Cross-sectional analysis
d) Progress measurement - Answer -d) Progress measurement
You are comparing the company's ratio to the goal and checking how the company is
progressing toward the goal.
Knowing that you are taking this finance class, a friend asks you about two investment
opportunities he is considering. He wants to know which of the firms is using its assets
more efficiently to generate sales. Which set of information could help you determine
this?
a) Firm A has an asset turnover of 4, and Firm B has an asset turnover of 2.5.
b) Firm A has a leverage ratio of 3, and Firm B has a leverage ratio of 1.5.
c) Firm A has a gross margin of 40%, and Firm B has a gross margin of 35%.
d) Both firms have a return on assets of 5%, but Firm B has a higher profit margin. -
Answer -a) Firm A has an asset turnover of 4, and Firm B has an asset turnover of 2.5.
Asset turnover is an indicator of how well a firm uses its assets to generate sales. Since
Firm A generates $4 of sales for every $1 of assets, it is using its assets more
efficiently.
W&H Company wants to create a cash budget to better manage its cash flows. The
financial manager knows that the firm's labor costs and materials costs are too high for
the level of sales each month. The firm also needs to keep better track of its cash flows
to assess its need for additional financing through short-term loans.
W&H Inc.'s labor costs each month are an example of which item in a cash budget?
a) Minimum cash need
b) Cash disbursement
c) Cash receipt
d) Net cash for the month - Answer -b) Cash disbursement
This is a cash disbursement for the firm because it represents cash going out during the
month to pay employees.
, W&H Company wants to create a cash budget to better manage its cash flows. The
financial manager knows that the firm's labor costs and materials costs are too high for
the level of sales each month. The firm also needs to keep better track of its cash flows
to assess its need for additional financing through short-term loans.
After W&H Inc. has developed a cash budget, what should the company do in the
following months?
a) It should invest any profits in new capital.
b) It should begin tracking its cash inflows and outflows.
c) It should wait until the budgeted months are over and then make a new budget for the
months following.
d) It should monitor its actual cash flows and then revise the cash budget if needed. -
Answer -d) It should monitor its actual cash flows and then revise the cash budget if
needed.
Monitoring and revising the cash budget will allow W&H Inc. to identify and fix any
problems that may arise.
W&H Company wants to create a cash budget to better manage its cash flows. The
financial manager knows that the firm's labor costs and materials costs are too high for
the level of sales each month. The firm also needs to keep better track of its cash flows
to assess its need for additional financing through short-term loans.
Why would creating a cash budget be useful for W&H if the firm needs a loan from the
bank or another short-term lender?
a) Cash budgets allow businesses to seek financing from multiple lenders at a time,
increasing borrowing capabilities.
b) Cash budgets include a detailed credit report of the business's operations, which
proves that the company can use borrowed funds responsibly.
c) Cash budgets help lenders identify a business's investing strategy going forward,
establishing confidence in future operations.
d) Cash budgets increase the lender's trust in a firm by demonstrating the firm's abi -
Answer -d) Cash budgets increase the lender's trust in a firm by demonstrating the
firm's ability to make profits and repay loans.
Cash budgets are detailed plans that show creditors that a firm will have enough cash
from month to month to support its operations while staying within acceptable borrowing
limits. A good cash budget allows creditors to feel secure in lending money to the firm.
How do the benefits of knowing the cash position for each period differ between
businesses and individuals?
