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WGU Financial Management VBC1 Sample Questions:
1. How is the cash ratio calculated?
A) Cash and Cash Equivalents ÷ Current Liabilities
B) Cash + Accounts Payable
C) Cash and Cash Equivalents ÷ Total Liabilities
D) Current Assets ÷ Current Liabilities
2. Ratios for Freedom Rock Bicycles are shown below, along with industry average ratios.
What are appropriate recommendations for Freedom Rock Bicycles based on this analysis?
A) To reduce non-production expenses and evaluate the company's fixed costs
B) To maintain current operating expenses and reduce asset levels to be in line with the industry
C) To increase production expenses and invest in more assets
D) To focus solely on increasing gross margins to match industry levels
3. Why should a firm not carry too much cash?
A) To prevent the need to pay higher taxes on cash holdings
B) To guard against the higher interest payments associated with large cash balances
C) To keep the cash ratio at a low level for financial reporting purposes
D) To avoid incurring large opportunity costs
4. What distinguishes free cash flow to equity (FCFE) from free cash flow to the firm (FCFF)?
A) FCFE represents the total cash flow from operations that is available at the end of the period.
B) FCFE is distributable only to debt holders, whereas FCFF is distributable only to equity holders.
C) FCFE includes depreciation, amortization, and other non-cash expenses, while FCFF does not.
D) FCFE measures cash distributable to equity holders after all obligations are met, including debt payments.
5. What costs are considered part of an asset's initial investment?
A) Market research
B) Depreciation
C) Discounted salvage value
D) Delivery and installation
Solutions:
| Question # 1 Answer: A | Question # 2 Answer: A | Question # 3 Answer: D | Question # 4 Answer: D | Question # 5 Answer: D |
By Prescott
