WGU D775 BUSINESS FINANCE OA
PRACTICE EXAMINATION 2026
QUESTIONS WITH ANSWERS GRADED A+
◍ higher activity ratios.
Answer: efficient management of assets generally Leads to higher
profitability and better cash flow.
◍ lower activity ratios.
Answer: these companies might have "stale" assets, or assets that do not
generate sources of revenue.
◍ Debt Financing.
Answer: Take out a loan or sell bonds to finance a project (interest is paid
before taxes). Raises funds without ownership dilution but adds repayment
obligation
◍ Future Value Interest Factor (FVIF).
Answer: a factor multiplied by today's savings to determine how the savings
will accumulate over time
◍ Producer Price Index (PPI).
Answer: Measures wholesale price changes from producers' prospective
◍ Liabilities.
Answer: company's obligations to third parties
◍ Business Uses of PV Calculations.
Answer: 1. Capital budgeting2. Discounted cash flow analysis3. Business
Valuation4. Pension fund liabilities5. Cost-benefit analysis
◍ Income Statement.
Answer: Measures performance over a period
,◍ Leverage Ratios.
Answer: Measure a company's use of debt financing and its ability to
manage and service debt(Higher ratio = more debt = more risk)
◍ higher total asset turnover ratio.
Answer: implies that the company is effectively using its assets to produce
revenue,
◍ Cash Ratio.
Answer: A liquidity ratio that indicates the cash on hand to cover short-term
liabilities = Cash & Cash Equivalents ÷ Current Liabilites- Higher ratio
means immediate debt paying ability
◍ Earnings before taxes (EBT).
Answer: EBIT minus paid interest
◍ Most common Market Ratio.
Answer: Price-Earnings (EPS)
◍ Low D/E Ratio.
Answer: suggests a reliance on equity financing, which might signify lower
risk but also reflects on the company's conservative growth strategies.
◍ Payback Period.
Answer: The amount of time it takes for an investment's cumulative cash
inflows to equal the initial costDecision Rule: accept projects with a
payback period less than or equal to a predetermined cutoff period; reject
those with a longer payback period (the cutoff period is arbitrary and
depends on the company/project)
◍ Gross Domestic Product (GDP).
Answer: Total valu eof goods and services produced in a country over a
period
◍ Debt-to-Equity Ratio (D/E).
Answer: A type of leverage ratio that compares the company's total debt to
its equity
, ◍ High liquidity ratios.
Answer: indicate a strong capacity to cover short-term debts, enhancing the
firm's creditworthiness and financial stability.
◍ Primary Markets.
Answer: where new stocks or bonds are traded for the first time
◍ current ratio.
Answer: measures a company's ability to satisfy its short-term liabilities
with its short-term assets one or higher generally indicates that a company
has sufficient assets to meet its short-term obligations, with higher values
suggesting greater liquidity. A value less than one indicates that the
company may struggle to meet its short-term liabilities
◍ time-series analysis.
Answer: examine the financial ratios of one firm across time.
◍ Liabilities.
Answer: What a company owes- Current liabilites = due within 1 year
(electric bill)- long-term liabilities = due after one year (mortgage)
◍ Debt-to-Equity (D/E) Ratio.
Answer: A leverage ratio that compares the company's total debt to its
equity= Total Liabilities ÷ Total Equity.- Higher ratio = more agressive debt
use (more potential for growth but also more risk)
◍ Common Stock.
Answer: Most popular. shareholders have voting rights and may receive
dividends, capital appreciation (increase in value over time --> sell it for
more than you bought it)
◍ Debt-to-Assets Ratio (D/A).
Answer: A type of leverage ratio that measures the percentage of a
company's assets that are financed by debt
◍ 2 Key Activity Ratios.
Answer: 1. Total Asset Turnover Ratio (measures how efficiently all assets
PRACTICE EXAMINATION 2026
QUESTIONS WITH ANSWERS GRADED A+
◍ higher activity ratios.
Answer: efficient management of assets generally Leads to higher
profitability and better cash flow.
◍ lower activity ratios.
Answer: these companies might have "stale" assets, or assets that do not
generate sources of revenue.
◍ Debt Financing.
Answer: Take out a loan or sell bonds to finance a project (interest is paid
before taxes). Raises funds without ownership dilution but adds repayment
obligation
◍ Future Value Interest Factor (FVIF).
Answer: a factor multiplied by today's savings to determine how the savings
will accumulate over time
◍ Producer Price Index (PPI).
Answer: Measures wholesale price changes from producers' prospective
◍ Liabilities.
Answer: company's obligations to third parties
◍ Business Uses of PV Calculations.
Answer: 1. Capital budgeting2. Discounted cash flow analysis3. Business
Valuation4. Pension fund liabilities5. Cost-benefit analysis
◍ Income Statement.
Answer: Measures performance over a period
,◍ Leverage Ratios.
Answer: Measure a company's use of debt financing and its ability to
manage and service debt(Higher ratio = more debt = more risk)
◍ higher total asset turnover ratio.
Answer: implies that the company is effectively using its assets to produce
revenue,
◍ Cash Ratio.
Answer: A liquidity ratio that indicates the cash on hand to cover short-term
liabilities = Cash & Cash Equivalents ÷ Current Liabilites- Higher ratio
means immediate debt paying ability
◍ Earnings before taxes (EBT).
Answer: EBIT minus paid interest
◍ Most common Market Ratio.
Answer: Price-Earnings (EPS)
◍ Low D/E Ratio.
Answer: suggests a reliance on equity financing, which might signify lower
risk but also reflects on the company's conservative growth strategies.
◍ Payback Period.
Answer: The amount of time it takes for an investment's cumulative cash
inflows to equal the initial costDecision Rule: accept projects with a
payback period less than or equal to a predetermined cutoff period; reject
those with a longer payback period (the cutoff period is arbitrary and
depends on the company/project)
◍ Gross Domestic Product (GDP).
Answer: Total valu eof goods and services produced in a country over a
period
◍ Debt-to-Equity Ratio (D/E).
Answer: A type of leverage ratio that compares the company's total debt to
its equity
, ◍ High liquidity ratios.
Answer: indicate a strong capacity to cover short-term debts, enhancing the
firm's creditworthiness and financial stability.
◍ Primary Markets.
Answer: where new stocks or bonds are traded for the first time
◍ current ratio.
Answer: measures a company's ability to satisfy its short-term liabilities
with its short-term assets one or higher generally indicates that a company
has sufficient assets to meet its short-term obligations, with higher values
suggesting greater liquidity. A value less than one indicates that the
company may struggle to meet its short-term liabilities
◍ time-series analysis.
Answer: examine the financial ratios of one firm across time.
◍ Liabilities.
Answer: What a company owes- Current liabilites = due within 1 year
(electric bill)- long-term liabilities = due after one year (mortgage)
◍ Debt-to-Equity (D/E) Ratio.
Answer: A leverage ratio that compares the company's total debt to its
equity= Total Liabilities ÷ Total Equity.- Higher ratio = more agressive debt
use (more potential for growth but also more risk)
◍ Common Stock.
Answer: Most popular. shareholders have voting rights and may receive
dividends, capital appreciation (increase in value over time --> sell it for
more than you bought it)
◍ Debt-to-Assets Ratio (D/A).
Answer: A type of leverage ratio that measures the percentage of a
company's assets that are financed by debt
◍ 2 Key Activity Ratios.
Answer: 1. Total Asset Turnover Ratio (measures how efficiently all assets
