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D076 WGU Principles of Finance EXAM
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1 What is the primary goal of the financial manager of a firm? - To maximize owner wealth 3 What is the primary aim of personal finance goals? - To maximize satisfaction from products purchased and services obtained 3 Which subspecialty of finance primarily involves deciding which assets will...

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  • February 3, 2024
  • 15
  • 2023/2024
  • Exam (elaborations)
  • Questions & answers

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  • d076 wgu principles of finance exam

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  • A/AS Level
  • AQA
  • WGU
  • WGU D076
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D076 WGU Principles of Finance EXAM
1

What is the primary goal of the financial manager of a firm? - ✔✔To maximize owner wealth

3

What is the primary aim of personal finance goals? - ✔✔To maximize satisfaction from products
purchased and services obtained

3

Which subspecialty of finance primarily involves deciding which assets will create more wealth and earn
positive returns? - ✔✔Investments

A company calculated variances of a budget and actual cash flows that indicate the firm's strengths and
weaknesses in cash flows and its budgeting process.

Which major use of cash budgeting is this an example of? - ✔✔Performance evaluation

A company is developing a financial forecast for the next year. The company plans to implement a new
factory that will increase production and resulting sales by 20%.

Since the company's assets are increasing significantly, what else must increase? - ✔✔Financing

A company is trying to decide which of four projects to invest in. - ✔✔The one with highest NPV
amount

A financial manager at a company is trying to determine whether to issue new stocks or new bonds to
cover the costs of a project the company is doing the next year.

Which main task in business finance is this situation an example of? - ✔✔Making financing decisions

A firm has paid off its short-term loans more quickly in the past couple of years. What might this trend
indicate about the firm's financial ratios? - ✔✔Its liquidity ratio is increasing. Liquidity is a measure of
the ability of a firm to convert short-term assets into cash. Paying off short-term loans quickly is an
indication that a firm is quite liquid, so the firm's liquidity ratio would be increasing.

A firm is currently operating at 75% capacity with current sales of $34 million.

Will the firm need to acquire additional fixed assets if its sales are predicted to increase by $6 million
next year? - ✔✔No, because the increase in sales will not exceed the firm's sales capacity.

A hypothesized estimate of future returns under different scenarios based on expectational data - ✔✔
An expected return

, A large corporation is looking to merge with another large corporation. Which financial institution can
help them do this? - ✔✔Investment bank

A local start-up company just hit its five-year anniversary and is planning an initial public offering
sometime this year. In order to issue public stock, which market will the company use? - ✔✔When a
company issues stock for the first time to raise capital, shares must initially be sold through a primary
market.

A pharmaceutical company recently spent $2 million developing a new drug. The company then
conducts capital budgeting analysis to determine if it should produce the newly developed drug. The net
present value (NPV) of the project is $1.5 million.

Why should this company produce the drug? - ✔✔Because the NPV is greater than zero

A sign company is planning to have an initial public offering (IPO). In which type of market will its stock
first be sold to the public? - ✔✔Primary market

About a year ago, the short-term Treasury bill had 1.54% interest and the long-term Treasury note had
2.54% interest. This week, the 1-year Treasury bill has an interest rate of 3.13%, while the 10-year
Treasury note has an interest rate of 2.28%. What does this information indicate about the future
economy? - ✔✔It may indicate an economic downturn. Since the long-term Treasury interest rate is
lower than the short-term rate, it has an inverted yield curve, which may indicate an economic
downturn.

Activity ratios - ✔✔measure how well the company uses its assets to generate sales or cash—the firm's
operational efficiency and profitability.

An employee was recently hired as a financial analyst and asked to create a cash budget for the
employee's division for the next year.

Which component should the employee exclude from the budget? - ✔✔Purchase of equipment that
will be bought in three years

An energy company discovers that a new bill has been proposed to change the amount of fuel that can
be exported outside the country. If passed, this could have a serious negative effect on the company's
revenues. Some of the company's competitors are obtaining insurance policies to compensate for this
risk, but since the energy company believes the likelihood of this bill passing is low, it chooses to do
nothing—ultimately taking responsibility for this particular risk instead of trying to transfer the risk
through an insurance policy.

Which risk management technique is this choice an example of? - ✔✔Risk Retention

An investment analyst is concerned about a construction company's ability to sell its inventory to meet
current obligations, because much of the inventory (commercial buildings) it builds and sells takes
longer than a year to construct.

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