WGU D076 Pre- Assessment (New 2024/ 2025 Update) Finance Skills for Managers| Questions and Verified Answers| 100% Correct| A Grade
QUESTION
Which
... [Show More] action will increase the return on equity of a firm?
-Decreasing the profitability of the firm
-Increasing the asset usage efficiency of the firm
-Decreasing the debt financing of the firm
-Increasing the liquidity of the firm
Answer:
Increasing the asset usage efficiency of the firm
QUESTION
Based on the information in the chart below, what can you conclude about Company A's ability to collect its accounts receivable (AR)?
Entity: Percentage of Sales on Credit: AR Turnover: AR Collection Period
Industry: 30%: 12: 30.42
Company A: 30%: 7: 52.14
-Company A is more efficient at collecting its accounts receivable than the industry.
-Company A is less efficient at collecting its accounts receivable than the industry.
-Company A collects its accounts receivable just as quickly as the average of other firms in the industry.
-Company A collects its accounts receivable in a highly variable pattern compared to the industry.
Answer:
Company A is less efficient at collecting its accounts receivable than the industry.
QUESTION
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?
-Focus
-Evaluation
-Standardization
-Flexibility
Answer:
Flexibility
QUESTION
Why might an investor be concerned by how Company A is achieving its higher-than-industry return on equity?
Entity: Net Profit Margin: Total Asset Turnover: Leverage Multiplier: Return on Equity
Company A: 7%: 1.25: 2.5: 21.88%
Company B: 15%: 1.30: 1.3: 25.35%
Industry: 8%: 1.30: 1.5: 15.6%
-The company has a higher amount of profit generated per sales earned when compared to the industry.
-The company's return on assets is significantly higher than the industry's.
-The company's significantly higher use of debt could present a financial risk.
-The company is more efficient than the industry at using its assets to generate sales, and this may be unsustainable.
Answer:
The company's significantly higher use of debt could present a financial risk.
QUESTION
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?
-Focus analysis
-Cross-sectional analysis
-Progress measurement
-Trend analysis
Answer:
Trend analysis
QUESTION
Which type of ratios are banks and lenders most concerned about?
-Activity
-Profitability
-Efficiency
-Liquidity
Answer:
Liquidity
QUESTION
Which ratio helps an analyst evaluate whether a company can cover its short-term obligations?
-Current ratio
-Net margin
-Market-to-book ratio
-Return on equity
Answer:
Current ratio
QUESTION
Company: Net Profit Margin: Total Asset Turnover: Leverage Multiplier: Return on Equity
Company 1: 20.00%: 1.5: 2.5: 75.0%
Company 2: 15.00%: 0.83: 2.0: 25.0%
Company 3: 10.00%: 0.5: 3.0: 15.0%
Given the table above, what does the DuPont framework indicate about return on assets?
-Return on assets is based on the amount of the firm's debt and equity.
-A firm can still have a high return on assets with low net income.
-All returns are based on the firm's profitability and efficiency.
-The firm's market ratio helps determine the price of the stock.
Answer:
All returns are based on the firm's profitability and efficiency.
QUESTION
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
-Leverage ratio
-Current ratio
-Inventory ratio
Answer:
Quick ratio
QUESTION
An employee was recently hired as a financial analyst and asked to create a cash budget for the employee's division for the next year.
Which component should the employee exclude from the budget?
-Payments to suppliers that will be made over the next six months
-Purchase of inventory for sales that the employee will make this year
-Purchase of equipment that will be bought in three years
-Payment toward the line of credit that is due next month
Answer:
Purchase of equipment that will be bought in three years
QUESTION
What are the benefits of using the traditional envelope method to track cash flows?
-It is simple and helps ensure that users do not spend more than the cash that they have available.
-It requires users to carefully track specific expenses and write down their income and spending for the month.
-It automatically separates expenses into categories so users can quickly assess their purchases during the month. [Show Less]