D775/ WGU D775 - INTRODUCTION TO
BUSINESS FINANCE | OBJECTIVE
ASSESSMENT EXAM
QUESTIONS AND CORRECT ANSWERS
Purpose of financial ratios - ✔✔✔ Correct Answer > assess financial health of
firm
Forecast financial health of firm
Identify changes to improve financial health of firm
Liquidity ratios - ✔✔✔ Correct Answer > company's ability to meet its short
term financial obligations using liquid assets
High liquidity ratio indicates... - ✔✔✔ Correct Answer > ___ liquidity ratios
indicate a strong ability to meet short term obligations using liquid assets
Activity ratios (efficiency ratios) - ✔✔✔ Correct Answer > how efficiently a
firm utilizes its assets to generate sales or revenue
Page 1 of 34
,Low activity ratios (efficiency ratios) indicate... - ✔✔✔ Correct Answer > __
activity ratios (efficiency ratios) indicate ineffective at generating sales or
revenue
Leverage ratio - ✔✔✔ Correct Answer > extent to which a firm uses debt to
finance its operations
High leverage ratios indicate... - ✔✔✔ Correct Answer > __ leverage ratios
indicate greater financial risk and struggle to meet debt obligations
Capital structure - ✔✔✔ Correct Answer > mix of debt and equity
Profitability ratios - ✔✔✔ Correct Answer > ability to generate earnings
relative to revenue, assets, or equity; indicative of ability to produce profits.
High profitability ratios indicate... - ✔✔✔ Correct Answer > __ profitability
ratios indicate strong revenue-generating capabilities
Market ratios - ✔✔✔ Correct Answer > financial performance in relation to a
company's stock price
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,Cross-sectional analysis - ✔✔✔ Correct Answer > comparing financial ratios of
one company to the same financial ratios of another company
Time-series analysis - ✔✔✔ Correct Answer > comparing financial ratios of a
company over time
Time value of money - ✔✔✔ Correct Answer > money available today is worth
more than the same amount in the future due to its earning potential
Market capitalization calculation - ✔✔✔ Correct Answer > __ __ is calculated
as stock price multiplied by the number of shares
Market capitalization - ✔✔✔ Correct Answer > total value of a company's
outstanding shares of stock
Present value interest factor (PVIF) - ✔✔✔ Correct Answer > multiplier used to
calculate the present value of a future lump sum based on interest rate and
number of time periods
Ethical behavior towards shareholders includes - ✔✔✔ Correct Answer >
honest financial reporting, avoiding conflicts of interest, and preventing insider
trading
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, Agency problem (principal-agent problem) - ✔✔✔ Correct Answer > conflict
of interest between management and shareholders
Agents in principal-agent problem - ✔✔✔ Correct Answer > management are
the __ in principal-agent problem
Principals in the principal-agent problem - ✔✔✔ Correct Answer >
shareholders are the ___ in the principal-agent problem
Board of directors purpose - ✔✔✔ Correct Answer > oversee CEO and
company management
ESG acronym - ✔✔✔ Correct Answer > Environmental, Social,
Governance
CSR acronym - ✔✔✔ Correct Answer > corporate social responsibility
CSR definition - ✔✔✔ Correct Answer > company's commitment to manage
the social, environmental, and economic effects of its operations responsibly
Financial statements - ✔✔✔ Correct Answer > files or documents that provide
a snapshot of a company's performance and operational efficiency
Page 4 of 34
BUSINESS FINANCE | OBJECTIVE
ASSESSMENT EXAM
QUESTIONS AND CORRECT ANSWERS
Purpose of financial ratios - ✔✔✔ Correct Answer > assess financial health of
firm
Forecast financial health of firm
Identify changes to improve financial health of firm
Liquidity ratios - ✔✔✔ Correct Answer > company's ability to meet its short
term financial obligations using liquid assets
High liquidity ratio indicates... - ✔✔✔ Correct Answer > ___ liquidity ratios
indicate a strong ability to meet short term obligations using liquid assets
Activity ratios (efficiency ratios) - ✔✔✔ Correct Answer > how efficiently a
firm utilizes its assets to generate sales or revenue
Page 1 of 34
,Low activity ratios (efficiency ratios) indicate... - ✔✔✔ Correct Answer > __
activity ratios (efficiency ratios) indicate ineffective at generating sales or
revenue
Leverage ratio - ✔✔✔ Correct Answer > extent to which a firm uses debt to
finance its operations
High leverage ratios indicate... - ✔✔✔ Correct Answer > __ leverage ratios
indicate greater financial risk and struggle to meet debt obligations
Capital structure - ✔✔✔ Correct Answer > mix of debt and equity
Profitability ratios - ✔✔✔ Correct Answer > ability to generate earnings
relative to revenue, assets, or equity; indicative of ability to produce profits.
High profitability ratios indicate... - ✔✔✔ Correct Answer > __ profitability
ratios indicate strong revenue-generating capabilities
Market ratios - ✔✔✔ Correct Answer > financial performance in relation to a
company's stock price
Page 2 of 34
,Cross-sectional analysis - ✔✔✔ Correct Answer > comparing financial ratios of
one company to the same financial ratios of another company
Time-series analysis - ✔✔✔ Correct Answer > comparing financial ratios of a
company over time
Time value of money - ✔✔✔ Correct Answer > money available today is worth
more than the same amount in the future due to its earning potential
Market capitalization calculation - ✔✔✔ Correct Answer > __ __ is calculated
as stock price multiplied by the number of shares
Market capitalization - ✔✔✔ Correct Answer > total value of a company's
outstanding shares of stock
Present value interest factor (PVIF) - ✔✔✔ Correct Answer > multiplier used to
calculate the present value of a future lump sum based on interest rate and
number of time periods
Ethical behavior towards shareholders includes - ✔✔✔ Correct Answer >
honest financial reporting, avoiding conflicts of interest, and preventing insider
trading
Page 3 of 34
, Agency problem (principal-agent problem) - ✔✔✔ Correct Answer > conflict
of interest between management and shareholders
Agents in principal-agent problem - ✔✔✔ Correct Answer > management are
the __ in principal-agent problem
Principals in the principal-agent problem - ✔✔✔ Correct Answer >
shareholders are the ___ in the principal-agent problem
Board of directors purpose - ✔✔✔ Correct Answer > oversee CEO and
company management
ESG acronym - ✔✔✔ Correct Answer > Environmental, Social,
Governance
CSR acronym - ✔✔✔ Correct Answer > corporate social responsibility
CSR definition - ✔✔✔ Correct Answer > company's commitment to manage
the social, environmental, and economic effects of its operations responsibly
Financial statements - ✔✔✔ Correct Answer > files or documents that provide
a snapshot of a company's performance and operational efficiency
Page 4 of 34
