WGU D076 - FINANCE SKILLS FOR MANAGERS EXAM
WGU D076 - FINANCE SKILLS FOR MANAGERS EXAM NEWEST
2025/2026 COMPLETE QUESTIONS AND CORRECT DETAILED
ANSWERS (VERIFIED ANSWERS) |BRAND NEW VERSION!!
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?
a. trend analysis
b. flexibility
c. standardization
d. cross-sectional analysis
flexibility; ratio analysis is flexible, so you can create a new ratio given the need of
the firm
why are activity ratios also called efficiency ratios or asset use efficiency ratios?
a. because thy are used to directly judge how well management is doing at
maximizing owner wealth
b. because they measure how well a company uses its assets to generate sales or
cash
c. because they are used to evaluate the current value of a company
d. because they consider how a firm's assets are financed
because they measure how well a company uses its assets to generate sales or
cash
what type of ratio is used to consider how a firm is financed and to assess a firm's
ability to pay interest and pay back long-term obligations?
a. profitability ratios
b. financing ratios
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, WGU D076 - FINANCE SKILLS FOR MANAGERS EXAM
c. activity ratios
d. market ratios
financing ratios consider how a firm is financed
what does a net margin of 7% indicate?
a. for every dollar of revenue, 7 cents remain for the debt holders and equity
holders after all other costs are covered
b. for every dollar of revenue, 7 cents remain for the equity holders after all other
costs are covered
c. for every dollar of fixed assets, 7 cents are generated in sales
d. for every dollar of total assets, 7 cents are generated as sales
for every dollar of revenue, 7 cents remain for the equity holders after all other
costs are covered; net margin tells us the percentage of sales that will become net
income, which is the amount remaining for the equity holders
Firm A has an average collection period of 67 days, and the industry norm is 40
days. What can the firm do in order to be competitive with accounts receivable
management in the industry?
a. pay suppliers more quickly
b. pay suppliers more slowly
c. loosen the credit standards for its customers
d. tighten the credit standards for its customers
tighten the credit standards for its customers; the credit standards are too loose,
so the customers are not paying Firm A as quickly as they are paying other
competitors in the industry. Tightening the credit standards would shorten the
average collection period
what is the difference between the current ratio and the quick ratio?
a. accounts payable are excluded in the calculation of a quick ratio
b. cash is excluded in the calculation of a quick ratio
c. notes payable are excluded in the calculation of a quick ratio
d. inventory is excluded in the calculation of the quick ratio
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, WGU D076 - FINANCE SKILLS FOR MANAGERS EXAM
inventory is excluded in the calculation of the quick ratio; since inventory is the
least liquid current asset, inventory is not included in the calculation
which term is used to describe the stock of a firm with market-to-book ratio of
less than 1?
a. overvalued
b. undervalued
c. value stock
growth stock
value stock; an m/b ratio of less than 1 is considered a value stock
what does inventory turnover assess?
a. how well a firm can meet short-term obligations through sales
b. the proportion of inventory by equity
c. the inventory management of a firm
d. how well a company is doing overall
the inventory management of a firm; inventory turnover tells us how well a firm is
managing its inventory
You are comparing the return on equity of Firm 1 and Firm 2. Both firms have an
identical profit margin and asset turnover, but Firm 1 has an overall higher return
on equity. What must be true?
a. Firm 2 is not using its assets as efficiently as Firm 1 to generate sales
b. Firm 2 has a higher cost of sales relative to Firm 1
c. Firm 1 is using a higher proportion of debt to finance its operations
d. Firm 1 has a lower times interest earned because its return on equity is higher
Firm 1 is using a higher proportion of debt to finance its operations; the third
component of return on equity is the leverage multiplier. Since the firms' profit
margins and asset turnovers are the same, it must be the leverage multiplier that
is different. Using a higher amount of debt would result in a larger leverage
multiplier and an overall higher return on equity
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, WGU D076 - FINANCE SKILLS FOR MANAGERS EXAM
What is the name for a forecast of short-term events that helps a company
understand if it has sufficient cash?
a. sustainable growth rate
b. percent of sales forecast
c. time value of money
d. cash budget
cash budget; is a short-term forecast of future events that helps a company
understand whether it has sufficient cash for regular operations
what is the purpose of a monthly cash budget?
a. to ensure that you have enough cash each month to pay your fixed expenses
b. to control cash inflows and outflows so you can balance income with
expenditures and savings
c. to have documentation for tax and lending
d. to know how much cash you spend on both a monthly and yearly basis so you
can determine how much you have left over to invest
to control cash inflows and outflows so you can balance income with expenditures
and savings; controlling cash inflows and outflows allows you to use your money
in the most effective way possible
in which situation would a firm need to borrow cash?
a. when the net cash balance is less than or equal to zero
b. when the beginning cash balance plus the net cash is less than the minimum
cash balance required for the month
c. when the firm's cash receipts are negative
d. when the minimum cash balance for the period has been met, but the firm
wants to make sure it has enough cash to cover the beginning cash required for
next month
when the beginning cash balance plus the net cash is less than the minimum cash
balance required for the month; this indicates to a firm that additional financing
will be needed during the period to operate effectively
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WGU D076 - FINANCE SKILLS FOR MANAGERS EXAM NEWEST
2025/2026 COMPLETE QUESTIONS AND CORRECT DETAILED
ANSWERS (VERIFIED ANSWERS) |BRAND NEW VERSION!!
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?
a. trend analysis
b. flexibility
c. standardization
d. cross-sectional analysis
flexibility; ratio analysis is flexible, so you can create a new ratio given the need of
the firm
why are activity ratios also called efficiency ratios or asset use efficiency ratios?
a. because thy are used to directly judge how well management is doing at
maximizing owner wealth
b. because they measure how well a company uses its assets to generate sales or
cash
c. because they are used to evaluate the current value of a company
d. because they consider how a firm's assets are financed
because they measure how well a company uses its assets to generate sales or
cash
what type of ratio is used to consider how a firm is financed and to assess a firm's
ability to pay interest and pay back long-term obligations?
a. profitability ratios
b. financing ratios
1|Page
, WGU D076 - FINANCE SKILLS FOR MANAGERS EXAM
c. activity ratios
d. market ratios
financing ratios consider how a firm is financed
what does a net margin of 7% indicate?
a. for every dollar of revenue, 7 cents remain for the debt holders and equity
holders after all other costs are covered
b. for every dollar of revenue, 7 cents remain for the equity holders after all other
costs are covered
c. for every dollar of fixed assets, 7 cents are generated in sales
d. for every dollar of total assets, 7 cents are generated as sales
for every dollar of revenue, 7 cents remain for the equity holders after all other
costs are covered; net margin tells us the percentage of sales that will become net
income, which is the amount remaining for the equity holders
Firm A has an average collection period of 67 days, and the industry norm is 40
days. What can the firm do in order to be competitive with accounts receivable
management in the industry?
a. pay suppliers more quickly
b. pay suppliers more slowly
c. loosen the credit standards for its customers
d. tighten the credit standards for its customers
tighten the credit standards for its customers; the credit standards are too loose,
so the customers are not paying Firm A as quickly as they are paying other
competitors in the industry. Tightening the credit standards would shorten the
average collection period
what is the difference between the current ratio and the quick ratio?
a. accounts payable are excluded in the calculation of a quick ratio
b. cash is excluded in the calculation of a quick ratio
c. notes payable are excluded in the calculation of a quick ratio
d. inventory is excluded in the calculation of the quick ratio
2|Page
, WGU D076 - FINANCE SKILLS FOR MANAGERS EXAM
inventory is excluded in the calculation of the quick ratio; since inventory is the
least liquid current asset, inventory is not included in the calculation
which term is used to describe the stock of a firm with market-to-book ratio of
less than 1?
a. overvalued
b. undervalued
c. value stock
growth stock
value stock; an m/b ratio of less than 1 is considered a value stock
what does inventory turnover assess?
a. how well a firm can meet short-term obligations through sales
b. the proportion of inventory by equity
c. the inventory management of a firm
d. how well a company is doing overall
the inventory management of a firm; inventory turnover tells us how well a firm is
managing its inventory
You are comparing the return on equity of Firm 1 and Firm 2. Both firms have an
identical profit margin and asset turnover, but Firm 1 has an overall higher return
on equity. What must be true?
a. Firm 2 is not using its assets as efficiently as Firm 1 to generate sales
b. Firm 2 has a higher cost of sales relative to Firm 1
c. Firm 1 is using a higher proportion of debt to finance its operations
d. Firm 1 has a lower times interest earned because its return on equity is higher
Firm 1 is using a higher proportion of debt to finance its operations; the third
component of return on equity is the leverage multiplier. Since the firms' profit
margins and asset turnovers are the same, it must be the leverage multiplier that
is different. Using a higher amount of debt would result in a larger leverage
multiplier and an overall higher return on equity
3|Page
, WGU D076 - FINANCE SKILLS FOR MANAGERS EXAM
What is the name for a forecast of short-term events that helps a company
understand if it has sufficient cash?
a. sustainable growth rate
b. percent of sales forecast
c. time value of money
d. cash budget
cash budget; is a short-term forecast of future events that helps a company
understand whether it has sufficient cash for regular operations
what is the purpose of a monthly cash budget?
a. to ensure that you have enough cash each month to pay your fixed expenses
b. to control cash inflows and outflows so you can balance income with
expenditures and savings
c. to have documentation for tax and lending
d. to know how much cash you spend on both a monthly and yearly basis so you
can determine how much you have left over to invest
to control cash inflows and outflows so you can balance income with expenditures
and savings; controlling cash inflows and outflows allows you to use your money
in the most effective way possible
in which situation would a firm need to borrow cash?
a. when the net cash balance is less than or equal to zero
b. when the beginning cash balance plus the net cash is less than the minimum
cash balance required for the month
c. when the firm's cash receipts are negative
d. when the minimum cash balance for the period has been met, but the firm
wants to make sure it has enough cash to cover the beginning cash required for
next month
when the beginning cash balance plus the net cash is less than the minimum cash
balance required for the month; this indicates to a firm that additional financing
will be needed during the period to operate effectively
4|Page
