D076 WGU PRE-ASSESSMENT QUESTIONS &
ANSWERS
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? - Answer -Flexibility
Comparing a firm's ratios across time. - Answer -Trend Analysis
Comparing a firm's financial ratios to other firms' ratios or industry averages. - Answer -
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? - Answer
-Trend analysis
Which statement below is an example of how ratios are used in the field of finance? -
Answer -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? - Answer -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? - Answer -
Benchmarking
measure a firm's ability to meet short-term obligations without raising external capital. -
Answer -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. - Answer -
Activity ratios
consider how the firm is financed. - Answer -Leverage ratios
Which action will increase the return on equity of a firm? - Answer -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?
- Answer -Profitability
ANSWERS
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? - Answer -Flexibility
Comparing a firm's ratios across time. - Answer -Trend Analysis
Comparing a firm's financial ratios to other firms' ratios or industry averages. - Answer -
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? - Answer
-Trend analysis
Which statement below is an example of how ratios are used in the field of finance? -
Answer -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? - Answer -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? - Answer -
Benchmarking
measure a firm's ability to meet short-term obligations without raising external capital. -
Answer -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. - Answer -
Activity ratios
consider how the firm is financed. - Answer -Leverage ratios
Which action will increase the return on equity of a firm? - Answer -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?
- Answer -Profitability
