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WGU Financial Management VBC1 Sample Questions:
1. What is a drawback of using the Gordon growth model for estimating the cost of common equity?
A) It requires extensive market data analysis.
B) It is too complex for general use.
C) It applies only to companies with stable dividend policies.
D) It emphasizes short-term financial performance.
2. What is the goal of just-in-time (JIT) inventory management?
A) To maximize the storage space utilized
B) To extend the cash conversion cycle
C) To minimize holding costs by reducing inventory levels
D) To increase the quantity of on-hand inventory
3. What distinguishes a subordinated debenture from a senior debenture?
A) A subordinated debenture has a lower claim on assets in the event of liquidation.
B) A subordinated debenture is issued in a foreign currency.
C) A subordinated debenture is secured with collateral.
D) A subordinated debenture has a higher claim on assets in the event of liquidation.
4. What is a potential drawback of lowering the annual dividend payment?
A) It could possibly increase the company's net margin.
B) It might lead to higher sales growth for the company.
C) It can lead to an immediate increase in the company's stock price.
D) It may cause the company's stockholders to react negatively.
5. How does a competitive sale of bonds work?
A) The underwriter purchases bonds at a fixed rate determined by the government.
B) Underwriters submit bids, and the firm selects one based on price and interest rate.
C) Underwriters negotiate directly with the issuing firm on price and interest rate.
D) The underwriter is selected by the issuing firm based on a thorough interview process.
Solutions:
| Question # 1 Answer: C | Question # 2 Answer: C | Question # 3 Answer: A | Question # 4 Answer: D | Question # 5 Answer: B |
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