WGU D076 OBJECTIVE ASSESSMENT FINAL EXAM 2 S
(VERSION A AND B) EXAM 2026-2027 LATEST VERSION
QUESTIONS AND VERIFIED CORRECT ANSWERS
What allows an investor to determine which financial activities are
contributing to changes in the return on equity? - answer>>>DuPont
framework - Decomposing the DuPont framework enables analysis of
fundamental performance to determine which financial activities are
contributing to changes in the return on equity.
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? - answer>>>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.
Why are ratios useful for analyzing and comparing company performance
between firms of different sizes? - answer>>>They provide standardization. -
Ratios standardize financial data to make them comparable across firms, even
those of distinctly different sizes.
You are the financial manager of a firm. The firm is small and is struggling
to collect cash from accounts receivable. Also, due to the nature of industry,
inventories are illiquid. To make sure that the firm has enough cash holdings
for short-term obligations, you decide to create a new ratio of cash to short-
term obligations. What is this scenario an example of? -
answer>>>Flexibility -
Why are activity ratios also called efficiency ratios or asset use efficiency
ratios? - answer>>>Because they measure how well a company uses its assets
to generate sales or cash.
, WGU D076 OBJECTIVE ASSESSMENT FINAL EXAM 2 S
(VERSION A AND B) EXAM 2026-2027 LATEST VERSION
QUESTIONS AND VERIFIED CORRECT ANSWERS
-
What type of ratio is used to consider how a firm is financed and to assess a
firm's ability to pay interest and pay back long-term obligations? -
answer>>>Financing ratios - Financing ratios consider how a firm is
financed.
What does a net margin of 7% indicate? - answer>>>For every dollar of
revenue, 7 cents remain for the equity holders after all other costs are covered
-
Firm A has an average collection period of 67 days, and the industry norm is
40 days. What can the firm do in order to be competitive with accounts
receivable management in the industry? - answer>>>Tighten the credit
standards for its customers. - The credit standards are too loose, so the
customers are not paying Firm A as quickly as they are paying other
competitors in the industry. Tightening the credit standards would shorten the
average collection period.
What is the difference between the current ratio and the quick ratio? -
answer>>>Inventory is excluded in the calculation of the quick ratio. - Since
inventory is the least liquid current asset, inventory is not included in the
calculation.
Which term is used to describe the stock of a firm with market-to-book ratio
of less than 1? - answer>>>Value stock - An M/B ratio of less than 1 is
considered a value stock.
What does inventory turnover assess? - answer>>>The inventory management of
a firm -
You are comparing the return on equity of Firm 1 and Firm 2. Both firms
have an identical profit margin and asset turnover, but Firm 1 has an overall
, WGU D076 OBJECTIVE ASSESSMENT FINAL EXAM 2 S
(VERSION A AND B) EXAM 2026-2027 LATEST VERSION
QUESTIONS AND VERIFIED CORRECT ANSWERS
higher return on equity. What must be true? - answer>>>Firm 1 is using a
higher proportion of debt to finance its operations. - The third component of
return on equity is the leverage multiplier. Since the firms' profit margins and
asset turnovers are the same, it must be the leverage multiplier
(VERSION A AND B) EXAM 2026-2027 LATEST VERSION
QUESTIONS AND VERIFIED CORRECT ANSWERS
What allows an investor to determine which financial activities are
contributing to changes in the return on equity? - answer>>>DuPont
framework - Decomposing the DuPont framework enables analysis of
fundamental performance to determine which financial activities are
contributing to changes in the return on equity.
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? - answer>>>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.
Why are ratios useful for analyzing and comparing company performance
between firms of different sizes? - answer>>>They provide standardization. -
Ratios standardize financial data to make them comparable across firms, even
those of distinctly different sizes.
You are the financial manager of a firm. The firm is small and is struggling
to collect cash from accounts receivable. Also, due to the nature of industry,
inventories are illiquid. To make sure that the firm has enough cash holdings
for short-term obligations, you decide to create a new ratio of cash to short-
term obligations. What is this scenario an example of? -
answer>>>Flexibility -
Why are activity ratios also called efficiency ratios or asset use efficiency
ratios? - answer>>>Because they measure how well a company uses its assets
to generate sales or cash.
, WGU D076 OBJECTIVE ASSESSMENT FINAL EXAM 2 S
(VERSION A AND B) EXAM 2026-2027 LATEST VERSION
QUESTIONS AND VERIFIED CORRECT ANSWERS
-
What type of ratio is used to consider how a firm is financed and to assess a
firm's ability to pay interest and pay back long-term obligations? -
answer>>>Financing ratios - Financing ratios consider how a firm is
financed.
What does a net margin of 7% indicate? - answer>>>For every dollar of
revenue, 7 cents remain for the equity holders after all other costs are covered
-
Firm A has an average collection period of 67 days, and the industry norm is
40 days. What can the firm do in order to be competitive with accounts
receivable management in the industry? - answer>>>Tighten the credit
standards for its customers. - The credit standards are too loose, so the
customers are not paying Firm A as quickly as they are paying other
competitors in the industry. Tightening the credit standards would shorten the
average collection period.
What is the difference between the current ratio and the quick ratio? -
answer>>>Inventory is excluded in the calculation of the quick ratio. - Since
inventory is the least liquid current asset, inventory is not included in the
calculation.
Which term is used to describe the stock of a firm with market-to-book ratio
of less than 1? - answer>>>Value stock - An M/B ratio of less than 1 is
considered a value stock.
What does inventory turnover assess? - answer>>>The inventory management of
a firm -
You are comparing the return on equity of Firm 1 and Firm 2. Both firms
have an identical profit margin and asset turnover, but Firm 1 has an overall
, WGU D076 OBJECTIVE ASSESSMENT FINAL EXAM 2 S
(VERSION A AND B) EXAM 2026-2027 LATEST VERSION
QUESTIONS AND VERIFIED CORRECT ANSWERS
higher return on equity. What must be true? - answer>>>Firm 1 is using a
higher proportion of debt to finance its operations. - The third component of
return on equity is the leverage multiplier. Since the firms' profit margins and
asset turnovers are the same, it must be the leverage multiplier
