WGU D076 Objective Assessment Final
Exam 2026-2027 Version A & B – 170
Questions with Verified Correct Answers
1. What allows an investor to determine which financial activities are
contributing to changes in the return on equity?
• answer->>> DuPont framework
2. 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
3. Why are ratios useful for analyzing and comparing company performance
between firms of different sizes?
• answer->>> They provide standardization
4. 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
,5. 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
6. A company has current assets of 500,000𝑎𝑛𝑑𝑐𝑢𝑟𝑟𝑒𝑛𝑡𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠𝑜𝑓250,000.
What is its current ratio?
• answer->>> 2.0
7. Which ratio measures a company's ability to meet its short-term obligations
without selling inventory?
• answer->>> Quick ratio (acid-test ratio)
8. A firm has net income of 100,000, 𝑡𝑜𝑡𝑎𝑙𝑎𝑠𝑠𝑒𝑡𝑠𝑜𝑓1,000,000, and equity of
$500,000. What is its return on equity (ROE)?
• answer->>> 20%
9. The DuPont identity breaks ROE into three components. Which of the
following is NOT one of them?
• answer->>> Debt-to-equity ratio
10. What does the DuPont framework decompose return on equity (ROE)
into?
• answer->>> Profit margin, asset turnover, and equity multiplier
11. A company has a profit margin of 5%, asset turnover of 2, and an equity
multiplier of 1.5. What is its ROE?
• answer->>> 15%
, 12. Which ratio indicates how much profit a company generates for each
dollar of sales?
• answer->>> Profit margin
13. A firm has total debt of 400,000𝑎𝑛𝑑𝑡𝑜𝑡𝑎𝑙𝑒𝑞𝑢𝑖𝑡𝑦𝑜𝑓600,000. What is its
debt-to-equity ratio?
• answer->>> 0.67
14. The times interest earned ratio measures:
• answer->>> The ability to cover interest payments with operating
income
15. Which of the following is an example of a liquidity ratio?
• answer->>> Current ratio
16. A company's inventory turnover is 8. This means:
• answer->>> The company sells and replaces its inventory 8 times per
year
17. Days sales outstanding (DSO) measures:
• answer->>> The average number of days to collect payment from
customers
18. A firm has cost of goods sold of 500,000𝑎𝑛𝑑𝑎𝑣𝑒𝑟𝑎𝑔𝑒𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦𝑜𝑓100,000.
What is its inventory turnover?
• answer->>> 5
19. Which ratio is used to evaluate a company's leverage?
• answer->>> Debt-to-assets ratio
Exam 2026-2027 Version A & B – 170
Questions with Verified Correct Answers
1. What allows an investor to determine which financial activities are
contributing to changes in the return on equity?
• answer->>> DuPont framework
2. 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
3. Why are ratios useful for analyzing and comparing company performance
between firms of different sizes?
• answer->>> They provide standardization
4. 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
,5. 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
6. A company has current assets of 500,000𝑎𝑛𝑑𝑐𝑢𝑟𝑟𝑒𝑛𝑡𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠𝑜𝑓250,000.
What is its current ratio?
• answer->>> 2.0
7. Which ratio measures a company's ability to meet its short-term obligations
without selling inventory?
• answer->>> Quick ratio (acid-test ratio)
8. A firm has net income of 100,000, 𝑡𝑜𝑡𝑎𝑙𝑎𝑠𝑠𝑒𝑡𝑠𝑜𝑓1,000,000, and equity of
$500,000. What is its return on equity (ROE)?
• answer->>> 20%
9. The DuPont identity breaks ROE into three components. Which of the
following is NOT one of them?
• answer->>> Debt-to-equity ratio
10. What does the DuPont framework decompose return on equity (ROE)
into?
• answer->>> Profit margin, asset turnover, and equity multiplier
11. A company has a profit margin of 5%, asset turnover of 2, and an equity
multiplier of 1.5. What is its ROE?
• answer->>> 15%
, 12. Which ratio indicates how much profit a company generates for each
dollar of sales?
• answer->>> Profit margin
13. A firm has total debt of 400,000𝑎𝑛𝑑𝑡𝑜𝑡𝑎𝑙𝑒𝑞𝑢𝑖𝑡𝑦𝑜𝑓600,000. What is its
debt-to-equity ratio?
• answer->>> 0.67
14. The times interest earned ratio measures:
• answer->>> The ability to cover interest payments with operating
income
15. Which of the following is an example of a liquidity ratio?
• answer->>> Current ratio
16. A company's inventory turnover is 8. This means:
• answer->>> The company sells and replaces its inventory 8 times per
year
17. Days sales outstanding (DSO) measures:
• answer->>> The average number of days to collect payment from
customers
18. A firm has cost of goods sold of 500,000𝑎𝑛𝑑𝑎𝑣𝑒𝑟𝑎𝑔𝑒𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦𝑜𝑓100,000.
What is its inventory turnover?
• answer->>> 5
19. Which ratio is used to evaluate a company's leverage?
• answer->>> Debt-to-assets ratio
