WGU D775 Intro to Business Finance OA EXAM Questions and
Answers | 2025 Update | 100% Correct.
Accounts Receivable (A/R) Turnover - CORRECT ANSWER-A type of liquidity
ratio that describes the number of times a firm's accounts receivable
account is paid off. Accounts Receivable Turnover = Credit Sales ÷ Accounts
Receivable.
Activity Ratios - CORRECT ANSWER-A type of financial ratio that evaluates
how efficiently a firm utilizes its assets to generate sales or revenue; also
known as efficiency ratios.
After-tax Cost of Debt - CORRECT ANSWER-An adjustment of the before-tax
cost of debt that considers the tax deductions on interest expenses. It
reflects the actual cost to a firm for debt financing after benefiting from tax
breaks.
Agency Costs - CORRECT ANSWER-Costs that are incurred by the firm when
management and employees of a company do not act in the best interests of
shareholders.
Agency Problem - CORRECT ANSWER-A conflict of interest inherent in
relationships where one party is expected to act in another's best interests,
such as between shareholders and company management.
,Annual Interest Rate - CORRECT ANSWER-The annualized cost of borrowing or
the yearly interest rate charged on a loan or credit balance. Also known as
annual percentage rate (APR).
Annuity - CORRECT ANSWER-A financial arrangement in which a series of
equal payments is made or received at regular intervals over a specified
period of time.
Assets - CORRECT ANSWER-Resources owned by the company that have
economic value.
Auction Markets - CORRECT ANSWER-Financial markets in which buyers and
sellers submit competitive bids and offers, with transactions occurring at
prices that match the highest bid with the lowest offer.
Average Collection Period - CORRECT ANSWER-A type of liquidity ratio that
calculates the average number of days it takes for a company to collect its
receivables. Average Collection Period = Accounts Receivable ÷ Daily Credit
Sales.
Before-tax Cost of Debt - CORRECT ANSWER-The interest rate on loans or
bonds. If a bank provides an interest rate on a small business loan of 9.5%,
then 9.5% is the before-tax cost of debt.
Balance Sheet - CORRECT ANSWER-A financial statement that presents a
company's financial position at a specific point in time.
, Bonds - CORRECT ANSWER-Debt securities issued by corporations or
governments to raise capital, where the issuer agrees to pay back the
principal along with interest on specified dates.
Book Value - CORRECT ANSWER-Literal value or face value.
Business Finance - CORRECT ANSWER-The area of the business in which 1)
financial measures are used to help management make decisions (ratio
analysis), 2) financial analysts use mathematical models to select what
projects to invest in (capital budgeting), and 3) financial analysts use the
cost of capital to determine whether these projects should be financed with
either debt or equity, and which type of each.
Capital Appreciation - CORRECT ANSWER-When a stock is bought at a lower
price than what it is sold. Subtracting the lower purchase price from the
higher sales price is the appreciation.
Capital Budgeting - CORRECT ANSWER-The process by which businesses
evaluate potential investments to determine if they are worth pursuing. It
assesses projected cash flows, costs, and returns of projects like new
machinery or acquisitions to ensure efficient resource allocation and
profitability.
Capital Structure - CORRECT ANSWER-The mixture of debt and equity that a
firm uses to finance the company.
Cash Ratio - CORRECT ANSWER-A type of liquidity ratio that provides insight
into a company's ability to pay off short-term liabilities with its cash on hand.
Cash Ratio = Cash ÷ Current Liabilities.
Answers | 2025 Update | 100% Correct.
Accounts Receivable (A/R) Turnover - CORRECT ANSWER-A type of liquidity
ratio that describes the number of times a firm's accounts receivable
account is paid off. Accounts Receivable Turnover = Credit Sales ÷ Accounts
Receivable.
Activity Ratios - CORRECT ANSWER-A type of financial ratio that evaluates
how efficiently a firm utilizes its assets to generate sales or revenue; also
known as efficiency ratios.
After-tax Cost of Debt - CORRECT ANSWER-An adjustment of the before-tax
cost of debt that considers the tax deductions on interest expenses. It
reflects the actual cost to a firm for debt financing after benefiting from tax
breaks.
Agency Costs - CORRECT ANSWER-Costs that are incurred by the firm when
management and employees of a company do not act in the best interests of
shareholders.
Agency Problem - CORRECT ANSWER-A conflict of interest inherent in
relationships where one party is expected to act in another's best interests,
such as between shareholders and company management.
,Annual Interest Rate - CORRECT ANSWER-The annualized cost of borrowing or
the yearly interest rate charged on a loan or credit balance. Also known as
annual percentage rate (APR).
Annuity - CORRECT ANSWER-A financial arrangement in which a series of
equal payments is made or received at regular intervals over a specified
period of time.
Assets - CORRECT ANSWER-Resources owned by the company that have
economic value.
Auction Markets - CORRECT ANSWER-Financial markets in which buyers and
sellers submit competitive bids and offers, with transactions occurring at
prices that match the highest bid with the lowest offer.
Average Collection Period - CORRECT ANSWER-A type of liquidity ratio that
calculates the average number of days it takes for a company to collect its
receivables. Average Collection Period = Accounts Receivable ÷ Daily Credit
Sales.
Before-tax Cost of Debt - CORRECT ANSWER-The interest rate on loans or
bonds. If a bank provides an interest rate on a small business loan of 9.5%,
then 9.5% is the before-tax cost of debt.
Balance Sheet - CORRECT ANSWER-A financial statement that presents a
company's financial position at a specific point in time.
, Bonds - CORRECT ANSWER-Debt securities issued by corporations or
governments to raise capital, where the issuer agrees to pay back the
principal along with interest on specified dates.
Book Value - CORRECT ANSWER-Literal value or face value.
Business Finance - CORRECT ANSWER-The area of the business in which 1)
financial measures are used to help management make decisions (ratio
analysis), 2) financial analysts use mathematical models to select what
projects to invest in (capital budgeting), and 3) financial analysts use the
cost of capital to determine whether these projects should be financed with
either debt or equity, and which type of each.
Capital Appreciation - CORRECT ANSWER-When a stock is bought at a lower
price than what it is sold. Subtracting the lower purchase price from the
higher sales price is the appreciation.
Capital Budgeting - CORRECT ANSWER-The process by which businesses
evaluate potential investments to determine if they are worth pursuing. It
assesses projected cash flows, costs, and returns of projects like new
machinery or acquisitions to ensure efficient resource allocation and
profitability.
Capital Structure - CORRECT ANSWER-The mixture of debt and equity that a
firm uses to finance the company.
Cash Ratio - CORRECT ANSWER-A type of liquidity ratio that provides insight
into a company's ability to pay off short-term liabilities with its cash on hand.
Cash Ratio = Cash ÷ Current Liabilities.
