WGU D076 – Finance Skills for Managers Objective Assessment (OA) | Questions and
Answers | 2026/27 Updates | 100% Correct
1. What is the primary difference between finance and accounting?
A. Finance is backward-looking; accounting is forward-looking
B. Finance focuses on the future; accounting is generally backward-looking
C. Both are identical in their time orientation
D. Finance records past transactions; accounting predicts future performance
Correct Answer: B
Rationale: Finance is forward-looking, focusing on future decision-making, while
accounting is backward-looking, recording and summarizing past financial information
and transactions. Option A reverses the correct relationship. Option C is false. Option D
incorrectly swaps the definitions of the two disciplines.
2. Which subspecialty of finance involves deciding which assets to invest in to create
wealth in the future?
A. Business finance
B. Financial institutions
C. Investments
D. Asset pricing only
Correct Answer: C
Rationale: Investments is the area of finance that involves deciding which assets to
invest in to create wealth in the future through positive returns . Business finance
focuses on funding and capital structure. Financial institutions are organizations that
facilitate financial transactions .
3. What is the primary goal of a financial manager in a publicly traded firm?
A. Maximize short-term profits at any cost
,B. Maximize the wealth of the owners (stockholders)
C. Minimize the firm's tax liability
D. Maximize the number of employees
Correct Answer: B
Rationale: The primary goal of a firm and its financial manager is to maximize
shareholder wealth (the value of the firm's stock) . This long-term focus on owner wealth
differs from profit maximization alone .
4. What is the agency problem (principal-agent problem)?
A. Conflict of interest between two competing firms
B. When the agent (management) does not act in the best interest of the principal
(owners)
C. Disagreement between a company and its external auditors
D. Tension between short-term and long-term investors
Correct Answer: B
Rationale: The agency problem occurs when management (the agent) pursues personal
interests rather than acting in the best interest of shareholders (the principal) . Agency
costs are incurred when management does not act in shareholders' best interests .
5. How can agency problems be reduced through corporate control mechanisms?
A. Setting strict production goals
B. Accounting manipulations
C. Executive compensation (stocks and stock options)
D. Acquiring a foreign subsidiary
Correct Answer: C
Rationale: Compensating management with stocks and stock options aligns their
interests with shareholders, making them more willing to take on riskier projects that
increase firm value . This reduces agency costs by creating shared incentives between
managers and owners.
, 6. Which area of finance includes firms that accept deposits, offer investment products,
provide loans, or broker financial transactions?
A. Business finance
B. Investments
C. Financial institutions
D. Asset pricing
Correct Answer: C
Rationale: Financial institutions include organizations such as banks, insurance
companies, and mutual funds that accept deposits, offer investment products, provide
loans, and broker financial transactions . Business finance focuses on corporate funding,
investments focuses on asset allocation.
7. What is the main objective of personal financial goals?
A. To maximize charity donations
B. To maximize owner wealth (like corporations)
C. To maximize individual utility (satisfaction and happiness)
D. To maximize stock investments
Correct Answer: C
Rationale: Personal finance goals aim to maximize individual utility—the satisfaction or
happiness derived from taking care of necessities and achieving personal priorities .
Unlike corporations, individuals maximize utility, not just financial wealth .
8. Which type of financial market is used for short-term assets held for one year or less?
A. Capital market
B. Primary market
C. Money market
D. Secondary market
Correct Answer: C
Answers | 2026/27 Updates | 100% Correct
1. What is the primary difference between finance and accounting?
A. Finance is backward-looking; accounting is forward-looking
B. Finance focuses on the future; accounting is generally backward-looking
C. Both are identical in their time orientation
D. Finance records past transactions; accounting predicts future performance
Correct Answer: B
Rationale: Finance is forward-looking, focusing on future decision-making, while
accounting is backward-looking, recording and summarizing past financial information
and transactions. Option A reverses the correct relationship. Option C is false. Option D
incorrectly swaps the definitions of the two disciplines.
2. Which subspecialty of finance involves deciding which assets to invest in to create
wealth in the future?
A. Business finance
B. Financial institutions
C. Investments
D. Asset pricing only
Correct Answer: C
Rationale: Investments is the area of finance that involves deciding which assets to
invest in to create wealth in the future through positive returns . Business finance
focuses on funding and capital structure. Financial institutions are organizations that
facilitate financial transactions .
3. What is the primary goal of a financial manager in a publicly traded firm?
A. Maximize short-term profits at any cost
,B. Maximize the wealth of the owners (stockholders)
C. Minimize the firm's tax liability
D. Maximize the number of employees
Correct Answer: B
Rationale: The primary goal of a firm and its financial manager is to maximize
shareholder wealth (the value of the firm's stock) . This long-term focus on owner wealth
differs from profit maximization alone .
4. What is the agency problem (principal-agent problem)?
A. Conflict of interest between two competing firms
B. When the agent (management) does not act in the best interest of the principal
(owners)
C. Disagreement between a company and its external auditors
D. Tension between short-term and long-term investors
Correct Answer: B
Rationale: The agency problem occurs when management (the agent) pursues personal
interests rather than acting in the best interest of shareholders (the principal) . Agency
costs are incurred when management does not act in shareholders' best interests .
5. How can agency problems be reduced through corporate control mechanisms?
A. Setting strict production goals
B. Accounting manipulations
C. Executive compensation (stocks and stock options)
D. Acquiring a foreign subsidiary
Correct Answer: C
Rationale: Compensating management with stocks and stock options aligns their
interests with shareholders, making them more willing to take on riskier projects that
increase firm value . This reduces agency costs by creating shared incentives between
managers and owners.
, 6. Which area of finance includes firms that accept deposits, offer investment products,
provide loans, or broker financial transactions?
A. Business finance
B. Investments
C. Financial institutions
D. Asset pricing
Correct Answer: C
Rationale: Financial institutions include organizations such as banks, insurance
companies, and mutual funds that accept deposits, offer investment products, provide
loans, and broker financial transactions . Business finance focuses on corporate funding,
investments focuses on asset allocation.
7. What is the main objective of personal financial goals?
A. To maximize charity donations
B. To maximize owner wealth (like corporations)
C. To maximize individual utility (satisfaction and happiness)
D. To maximize stock investments
Correct Answer: C
Rationale: Personal finance goals aim to maximize individual utility—the satisfaction or
happiness derived from taking care of necessities and achieving personal priorities .
Unlike corporations, individuals maximize utility, not just financial wealth .
8. Which type of financial market is used for short-term assets held for one year or less?
A. Capital market
B. Primary market
C. Money market
D. Secondary market
Correct Answer: C
