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WGU D076 Exam Questions and Complete Solutions Graded A+
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WGU D076 Exam Questions and Complete Solutions Graded A+
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WGU D076 ExamQuestions and Complete
Solutions Graded A+
Interest rate - Answer: percentage of the principal that a lender charges a borrower for the use of
assets.
Cost of capital - Answer: Also known as Discount rate, the cost to a firm to use an investor's capital
Simple interest - Answer: Annual Interest = Principal x Interest Rate
Total interest - Answer: Total Interest = Annual interest x t
Compounding Interest - Answer: otal Interest = Principal x (1+Interest Rate/over/
¿ ¿Numbers of periods - Principal
Required rate of return - Answer: the rate of return or compensation that an investor or a lender will
accept for investments such as stocks, bonds, or loans.
hurdle rate - Answer: The word compensation is used because this is the rate that investors or lenders
will be compensated for a given level of risk associated with investments or loans.
Opportunity cost - Answer: the loss of potential gain from other alternatives when one alternative is
chosen.
Risk - Answer: possibility that the realized or actual return will differ from the expected return.
, Inflation - Answer: the rate at which the average price level of goods and services in an economy
increases over a period of time.
Sources of inflation - Answer: 1:Increased demand for goods and services
2:Rising costs
3:Adaptive expectations- when prices of goods and services go up, employees expect and even demand
higher wages to maintain their standard of living.
Decomposing Interest Rate - Answer: Rate = Risk-Free Rate + Risk Premium
Real rate - Answer: same as the growth rate in purchasing power, even though the formula seems
different. This is call the Fisher Effect, an economic theory created by the economist Irving Fisher.
Why Are Ratios Useful - Answer: 1. Standardization- Ratios standardize financial data to make them
comparable across firms, even those of distinctly different sizes.
2. Flexibility
3. Focus
4. Evaluation
Benchmarking - Answer: the process of completing a financial analysis and comparing a firm's
performance to that of other similar firms is known as benchmarking.
Liquidity - Answer: measure a firm's ability to meet short-term obligations without raising external
capital. While everybody is concerned about liquidity, short-term creditors such as banks and suppliers
are particularly interested. Liquidity is a measure of not only how much cash you have but also how
easily you can convert short-term assets into cash.
Liquidity - Answer: 1. Current Ratio=Current Assets/Current Liabilities
2. Quick Ratio=Current Assets - Inventory/Current Liabilities
Activity - Answer: (also called efficiency ratios) measure how well the company uses its assets to
generate sales or cash—the firm's operational efficiency and profitability.
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