WGU D775 INTRODUCTION TO BUSINESS
FINANCE EXAM PREP 2026 | VERIFIED
QUESTIONS WITH ANSWERS & DETAILED
RATIONALES | COMPREHENSIVE WESTERN
GOVERNORS UNIVERSITY STUDY GUIDE
• This study guide contains 200 verified exam-style questions with detailed EXPERT
RATIONALE designed to fully prepare you for the WGU D775 Introduction to
Business Finance assessment.
• Use this material by reading each question carefully, selecting your answer before
checking the highlighted correct option, and studying the EXPERT RATIONALE to
reinforce conceptual understanding.
QUESTION 1 A company has current assets of $500,000 and current liabilities
of $250,000. What is the current ratio?
A) 0.5
B) 1.5
C) 3.0
D) 2.5
E) 2.0
Correct Answer: E) 2.0
EXPERT RATIONALE: The current ratio is calculated as Current Assets ÷ Current
Liabilities = $500,000 ÷ $250,000 = 2.0. This means the company has $2 in current
assets for every $1 of current liabilities, indicating good short-term liquidity.
QUESTION 2 Which financial statement shows a company's revenues and
expenses over a specific period?
A) Balance Sheet
B) Statement of Cash Flows
,C) Statement of Retained Earnings
D) Statement of Stockholders' Equity
E) Income Statement
Correct Answer: E) Income Statement
EXPERT RATIONALE: The Income Statement (also called the Profit & Loss
Statement) reports revenues, expenses, and net income or loss over a specific
accounting period. The Balance Sheet shows financial position at a point in time,
while the Cash Flow Statement tracks cash movements.
QUESTION 3 What does the term "working capital" refer to?
A) Total assets minus total liabilities
B) Long-term assets minus long-term liabilities
C) Cash and cash equivalents only
D) Total revenue minus total expenses
E) Current assets minus current liabilities
Correct Answer: E) Current assets minus current liabilities
EXPERT RATIONALE: Working capital = Current Assets − Current Liabilities. It
measures a company's short-term operational liquidity and its ability to meet short-
term obligations. Positive working capital indicates the firm can cover its near-term
debts.
QUESTION 4 Which of the following best describes the time value of money?
A) Money loses value due to inflation only
B) Future money is worth more than present money
C) Money has the same value regardless of time
D) Only invested money changes in value over time
,E) A dollar today is worth more than a dollar in the future
Correct Answer: E) A dollar today is worth more than a dollar in the future
EXPERT RATIONALE: The time value of money principle states that a dollar
available today is worth more than a dollar in the future because today's dollar can
be invested to earn returns. This is the foundational concept behind discounting
and compounding in finance.
QUESTION 5 What is the formula for calculating Net Present Value (NPV)?
A) Future Cash Flows + Initial Investment
B) Total Revenue − Total Costs
C) Present Value of Inflows × Discount Rate
D) Cash Inflows ÷ Cash Outflows
E) Present Value of future cash flows minus the initial investment
Correct Answer: E) Present Value of future cash flows minus the initial
investment
EXPERT RATIONALE: NPV = PV of future cash flows − Initial Investment. A positive
NPV means the project adds value to the firm; a negative NPV means the project
destroys value. NPV is the gold standard for capital budgeting decisions.
QUESTION 6 A bond with a face value of $1,000 pays an annual coupon of $80.
What is the coupon rate?
A) 10%
B) 6%
C) 12%
D) 4%
E) 8%
, Correct Answer: E) 8%
EXPERT RATIONALE: Coupon Rate = Annual Coupon Payment ÷ Face Value = $80 ÷
$1,000 = 0.08 = 8%. The coupon rate is fixed at issuance and determines the annual
interest payment the bondholder receives.
QUESTION 7 Which of the following is considered a long-term source of
financing?
A) Accounts payable
B) Notes payable due within one year
C) Commercial paper
D) Accrued liabilities
E) Corporate bonds
Correct Answer: E) Corporate bonds
EXPERT RATIONALE: Corporate bonds are long-term debt instruments, typically
maturing in 10–30 years. Accounts payable, commercial paper, and notes payable
due within one year are all short-term financing sources. Long-term financing
supports capital investment decisions.
QUESTION 8 What does the Debt-to-Equity ratio measure?
A) Profitability relative to equity
B) Efficiency of asset utilization
C) Company's ability to pay dividends
D) Return generated on total assets
E) The proportion of financing from debt versus equity
Correct Answer: E) The proportion of financing from debt versus equity
FINANCE EXAM PREP 2026 | VERIFIED
QUESTIONS WITH ANSWERS & DETAILED
RATIONALES | COMPREHENSIVE WESTERN
GOVERNORS UNIVERSITY STUDY GUIDE
• This study guide contains 200 verified exam-style questions with detailed EXPERT
RATIONALE designed to fully prepare you for the WGU D775 Introduction to
Business Finance assessment.
• Use this material by reading each question carefully, selecting your answer before
checking the highlighted correct option, and studying the EXPERT RATIONALE to
reinforce conceptual understanding.
QUESTION 1 A company has current assets of $500,000 and current liabilities
of $250,000. What is the current ratio?
A) 0.5
B) 1.5
C) 3.0
D) 2.5
E) 2.0
Correct Answer: E) 2.0
EXPERT RATIONALE: The current ratio is calculated as Current Assets ÷ Current
Liabilities = $500,000 ÷ $250,000 = 2.0. This means the company has $2 in current
assets for every $1 of current liabilities, indicating good short-term liquidity.
QUESTION 2 Which financial statement shows a company's revenues and
expenses over a specific period?
A) Balance Sheet
B) Statement of Cash Flows
,C) Statement of Retained Earnings
D) Statement of Stockholders' Equity
E) Income Statement
Correct Answer: E) Income Statement
EXPERT RATIONALE: The Income Statement (also called the Profit & Loss
Statement) reports revenues, expenses, and net income or loss over a specific
accounting period. The Balance Sheet shows financial position at a point in time,
while the Cash Flow Statement tracks cash movements.
QUESTION 3 What does the term "working capital" refer to?
A) Total assets minus total liabilities
B) Long-term assets minus long-term liabilities
C) Cash and cash equivalents only
D) Total revenue minus total expenses
E) Current assets minus current liabilities
Correct Answer: E) Current assets minus current liabilities
EXPERT RATIONALE: Working capital = Current Assets − Current Liabilities. It
measures a company's short-term operational liquidity and its ability to meet short-
term obligations. Positive working capital indicates the firm can cover its near-term
debts.
QUESTION 4 Which of the following best describes the time value of money?
A) Money loses value due to inflation only
B) Future money is worth more than present money
C) Money has the same value regardless of time
D) Only invested money changes in value over time
,E) A dollar today is worth more than a dollar in the future
Correct Answer: E) A dollar today is worth more than a dollar in the future
EXPERT RATIONALE: The time value of money principle states that a dollar
available today is worth more than a dollar in the future because today's dollar can
be invested to earn returns. This is the foundational concept behind discounting
and compounding in finance.
QUESTION 5 What is the formula for calculating Net Present Value (NPV)?
A) Future Cash Flows + Initial Investment
B) Total Revenue − Total Costs
C) Present Value of Inflows × Discount Rate
D) Cash Inflows ÷ Cash Outflows
E) Present Value of future cash flows minus the initial investment
Correct Answer: E) Present Value of future cash flows minus the initial
investment
EXPERT RATIONALE: NPV = PV of future cash flows − Initial Investment. A positive
NPV means the project adds value to the firm; a negative NPV means the project
destroys value. NPV is the gold standard for capital budgeting decisions.
QUESTION 6 A bond with a face value of $1,000 pays an annual coupon of $80.
What is the coupon rate?
A) 10%
B) 6%
C) 12%
D) 4%
E) 8%
, Correct Answer: E) 8%
EXPERT RATIONALE: Coupon Rate = Annual Coupon Payment ÷ Face Value = $80 ÷
$1,000 = 0.08 = 8%. The coupon rate is fixed at issuance and determines the annual
interest payment the bondholder receives.
QUESTION 7 Which of the following is considered a long-term source of
financing?
A) Accounts payable
B) Notes payable due within one year
C) Commercial paper
D) Accrued liabilities
E) Corporate bonds
Correct Answer: E) Corporate bonds
EXPERT RATIONALE: Corporate bonds are long-term debt instruments, typically
maturing in 10–30 years. Accounts payable, commercial paper, and notes payable
due within one year are all short-term financing sources. Long-term financing
supports capital investment decisions.
QUESTION 8 What does the Debt-to-Equity ratio measure?
A) Profitability relative to equity
B) Efficiency of asset utilization
C) Company's ability to pay dividends
D) Return generated on total assets
E) The proportion of financing from debt versus equity
Correct Answer: E) The proportion of financing from debt versus equity
