All Weeks Financial Acumen for Non-Financial Managers Coursera Quiz Answers
In this course, you’ll explore how financial statement data and non-financial metrics can be linked to financial performance. Professors Rick Lambert and Chris Ittner of the Wharton School have designed this course to help you gain a practical understanding of how data is used to assess what drives financial performance and forecast future financial scenarios.
You’ll learn more about the frameworks of financial reporting, income statements, and cash reporting, and apply different approaches to analyzing financial performance using real-life examples to see the concepts in action. By the end of this course, you’ll have honed your skills in understanding how financial data and non-financial data interact to forecast events and be able to determine the best financial strategy for your organization.
Financial Acumen for Non-Financial Managers Week 1 Quiz Answers
Quiz 1: Module 1 Quiz 1 – Balance Sheet and Income Statement
Q1. Which of the following does a balance sheet do? (Check all that apply)
- Shows the revenues of a firm
- Shows how much debt a firm has
- Measures the financial position of the firm at a point in time
- Shows the assets of a firm
- Measures the activities of the firm over a period of time (e.g. a year)
Q2. Which of the following are on a Balance Sheet? (Check all that apply)
- Accounts Payable
- Sales Revenue
- Retained Earnings
- Depreciation Expense
- Property, Plant, and Equipment
Q3. Suppose Current Assets for a firm are $50, Long-Term Assets are $100, and Total Liabilities are $30. How much is the firm’s total Owners’ Equity?
Q4. Suppose Net Income for a firm is $200 for the year and Dividends paid are $60. How much does Retained Earnings on the Balance Sheet change during the year?
- Does not change
- Goes up by $200
- Goes up by $260
- Goes up by $140
Q5. Which of the following are on an Income Statement? (Check all that apply)
- Interest Expense
- Accounts Receivable
- Cost of Goods Sold
- Long-Term Debt
- Selling, General, and Administrative Expense
Q6. Given the following information (not all of which is relevant), what is Net Income?
· Sales Revenue = $5000
· Dividends Paid = $200
· Cash = $100
· SG&A Expense = $400
· Cost of Goods Sold = $1600
Q7. Which of the following will impact income THIS year?
- Spend $100 to pay off short-term debt
- Spend $100 on purchases of equipment
- Spend $100 on research and development
- Spend $100 on purchases of inventory that is still not sold at the end of the year
Q8. Which of the following will result in the firm recognizing revenue this year? (Check all that apply)
- A customer places an order for a new product
- Receiving an advance deposit in cash from a customer
- Selling a product on credit
- Receiving cash for a product delivered in a prior year
- Delivering a service for which you had been paid in a prior year
Q9. Suppose the following transaction(s) happen: A firm issues long-term debt and receives $50,000 in cash.
What happens to the various sections of the balance sheet?
- Short-Term Assets go up by $50,000 and Long-Term Liabilities go up by $50,000
- Short-Term Assets go up by $50,000 and Long-Term Assets go down by $50,000
- Short-Term Assets go up by $50,000 and Owners’ Equity goes up by $50,000
- Short-Term Assets go up by $50,000 and Owners’ Equity goes down by $50,000
- Short-Term Assets go up by $50,000 and Long-Term Liabilities go down by $50,000
Q10. Suppose the following transaction(s) happen: A firm sells inventory that had cost $100 for $150. Of the $150 of sales, $120 is cash and $30 is credit.
Which of the following effects on the balance sheet are correct? (Check all that apply) Note that none of the answers give ALL the effects.
- Accounts Receivable goes up by $30
- Accounts Payable goes up by $120
- Inventory goes up by $100
- Cash goes up by $150
- Retained Earnings goes up by $50
Q11. Suppose you buy a machine for $300,000 that is expected to last for 10 years, with no salvage value at that time. If the firm uses straight-line depreciation, how much depreciation expense is recognized per year?
Q12. We generate sales of $100,000 for the year. Of this amount, $80,000 are cash sales and $20,000 are credit sales. Based on past experience, we expect that 10% of the credit sales won’t be collected. How much income should the firm recognize for the year? (Ignore anything else that is not referenced in the problem, such as cost of goods sold, interest expense, etc.)
Quiz 2: Module 1 Quiz 2 – Balance Sheet and Income Statement
Q1. How much are HCD’s total assets at the end of year 20×2? (in millions)
Q2. HCD’s largest asset is Property and Equipment, which represents their buildings, etc. What is their second largest asset at the end of year 20×2?
- Accounts Receivable
- Long-term Debt
- Other Intangible Assets
Q3. What business activity causes Goodwill to be recognized on a balance sheet?
- Profitable Operations
- Charitable Contributions
- Treating Customers Well
- Acquisitions of other Businesses
Q4. What is HCD’s largest liability on their balance sheet at the end of year 20×2?
- Accounts Payable
- Additional Paid in Capital
- Property and Equipment
- Long-Term Debt
Q5. Note that LCD’s Shareholders’ Equity is far smaller than their Liabilities. In looking through their account titles in the Shareholders’ Equity section, note that there is not one called Retained Earnings. Instead, we see a line item called “Accumulated Deficit.” What is the interpretation of this line item?
- HCD is bankrupt
- HCD has been incurring more losses than profits over its lifetime
- HCD owes a lot of back taxes
- HCD has overdrawn its bank account
Q6. How much was HCD’s Net Income for year 20×2? (in millions)
Q7. What is HCD’s largest Operating Expense during year 20×2?
- Salaries, wages, and benefits
- Depreciation and amortization
- Interest Expense
Q8. Which of the following is true about HCD’s line item “Net Operating Revenues before provision for doubtful accounts?” This is the top line on the income statement (Check all that apply)
- Revenue in 20×2 was 19,611
- Revenue in 20×2 was 21,070
- Revenues have been growing over time
- Some of these revenues probably won’t be collected
Q9. In HCD’s footnotes, they give more details regarding the customer “types” that comprise their revenue. Which customer group generated the highest revenue in 20×2? (Hint: Look in the footnotes)
- Managed Care
- Indemnity, self-pay, and other
Q10. The provision for doubtful accounts in the second line of the income statement represents revenues that HCD has billed to customers and patients, but does not expect to collect. What percent of the top line on the income statement is HCD’s provision for doubtful accounts in 20×2?
Q11. HCD’s provision for doubtful accounts is extremely large relative to other industries. Much of this is because, unlike in other industries, HCD cannot screen its customers on the basis of credit quality. Which customer group has given HCD the biggest collection difficulties? (Hint: Look at the footnotes)
- Self-pay uninsured
- Managed Care
Financial Acumen for Non-Financial Managers Week 2 Quiz Answers
Quiz 1: Module 2 Quiz 1 – Cash Flow Statement
Q1. Which of the following activities would affect the OPERATING section of the cash flow statement this year? (Check all that apply)
- Selling some products for cash
- Paying back debt
- Buying inventory for cash
- Buying a machine on credit
- Issuing shares of stock
Q2. Which of the following activities would affect the INVESTING section of the cash flow statement this year? (Check all that apply)
- Paying a dividend
- Depreciating a long-term asset
- Buying a machine for cash
- Spending cash on R&D
- Buying back some of your own shares
Q3. Which of the following activities would affect the FINANCING section of the cash flow statement? (Check all that apply)
- Receive cash from selling a product
- Paying a dividend
- Paying your income taxes
- Issuing long-term debt
- Buying another company for cash
Q4. Which of the following would likely be true about the cash flow statement of a startup company? (Check all that apply)
- It pays a lot of dividends
- Its operating cash flow is insufficient to cover its investing cash flows
- Its operating cash flow is highly positive
- Its financing cash flows are positive
Q5. Suppose a firm recognizes sales revenue of $100 on its income statement for a period. Of this amount, $80 was for cash and $20 was on credit. What is the overall impact on the operating section of this information? (Ignore the cost side of the sale)
- Cash from Operations goes up by 80
- Cash from Operations goes up by 100
- Cash from Operations goes up by 20
- Cash from Operations goes down by 20
Q6. Suppose a firm recognizes sales revenue of $200 on its income statement for a period. Of this amount, $150 was for cash and $50 was on credit. How would this be shown on a cash flow statement that uses the INDIRECT method? (Ignore the cost side of things)
- Net Income is $150 and there are no adjustments necessary on the cash flow statement
- Net Income is $200 and there is an adjustment downward of $150 related to receivables
- Net Income is $150 and there is an adjustment downward of $50 related to receivables
- Net Income is $200 and there is an adjustment downward of $50 related to receivables
Q7. Suppose we are looking at a cash flow statement constructed using the INDIRECT method. We see a positive adjustment in the operating section of $1000 for Depreciation. Which of the following are correct interpretations of this? (Check all that apply)
- The firm sold long-term assets for $1000
- The firm invested $1000 of cash in long-term assets
- Depreciation provided cash of $1000
- Income was lower by $1000 because of Depreciation expense
Q8. Suppose we are looking at a cash flow statement constructed using the INDIRECT method. We see a NEGATIVE adjustment of $5000 related to Accounts Payable. Which of the following are correct interpretations of this? (Check all that apply)
- The firm paid $5000 less to suppliers than they had recorded as expense on the income statement this year
- The firm paid $5000 to suppliers this year
- The firm paid $5000 more to suppliers than they had recorded as expense on the income statement this year
- The firm received $5000 from customers this year
Quiz 2: Module 2 Quiz 2 – Cash Flow Statement
Q1. According to the Cash Flow Statement, what was the change in HCD’s cash balance during the year 20×2? (in millions)
- Cash went up by 356
- Cash went up by 176
- Cash went up by 716
- Cash went up by 360
Q2. What was the HCD’s Financing Cash Flow in 20×2?
- A net inflow of 232
- A net outflow of 430
- A net outflow of 232
- A net inflow of 430
Q3. What was HCD’s primary SOURCE of financing activities over the period 20×0 to 20×2?
- Sales of facilities and other assets
- Depreciation and Amortization
- Repayments of Borrowings Under Credit Facilities
- Proceeds from Other Borrowings
Q4. What caused HCD’s investment outflows of cash to be highest in 20×1 relative to the other years?
- They spent more on acquisitions of other businesses than in the other years
- They spent more on property and equipment than in the other years
- They bought more inventory than they sold relative to other years
- The repaid the most borrowings under credit facilities than in the other years
Q5. In which year was the operating cash flows the highest for HCD?
- All the years were the same
Q6. Refer to the adjusting entry for “Depreciation and Amortization” of +850 in the Operating Section of the Cash Flow Statement. What is the interpretation of this? (Check all that apply)
- Depreciation provided 850 of cash because it lowers your tax bill by that amount
- Depreciation expense lowered net income during the year by 850 so the +850 on the cash flow statement offsets that to show there is no net change in cash attributable to depreciation
- Depreciation provided 850 of cash
- The firm sold equipment for 850 in cash
Q7. Refer to the adjusting entry for “Accounts Receivable” of -1,604 in the Operating Section of the cash flow statement. What is the interpretation of this? (Check all that apply)
- HCD’s sales revenue was higher than their cash collections from customers
- HCD paid suppliers more than they recorded as expenses during the year
- Accounts Receivable went up during the year
- HCD paid dividends of 1604 during the year.
Financial Acumen for Non-Financial Managers Week 3 Quiz Answers
Quiz 1: Module 3 Quiz
Q1. Which of the following would affect the Current Ratio (defined as Current Assets divided by Current Liabilities)? (Check all that apply)
- Issue shares to pay down long-term debt
- Collect on a receivable
- Buy a machine with cash
- Buy inventory with cash
Q2. Which of the following are true about interpreting the Current Ratio? (Check all that apply)
- A high current ratio means you can’t go bankrupt
- Too high a current ratio means you may have too much invested in short-term assets, which may hurt your long-term profitability
- A higher current ratio is better
- A higher current ratio means more safety in the short term
Q3. Which of the following is a reason why Diluted Earnings Per Share is less than Basic Earnings Per Share for a firm? (Check all that apply)
- Because the firm has employee stock options that can turn into shares
- Because the firm bought back shares during the year
- Because the firm has debt and can take advantage of leverage
- Because the firm pays dividends
Q4. Which of the following will affect a firm’s Leverage Ratio (defined as Total Liabilities divided by Total Stockholders’ Equity)? (Check all that apply)
- Generating Positive Net Income
- Issuing Long-Term Debt for cash
- Buying back shares with cash
- Paying a dividend to Shareholders
Q5. Why don’t firms increase their leverage as much as possible? (Check all that apply)
- Having too much debt increases the interest rate firms have to pay on their loans
- It will increase their risk of bankruptcy
- It will slow down the collection of receivables
- It will increase their tax bill
Q6. Which of the following will increase a firm’s Return on Equity (ROE)? (Check all that apply)
- Increasing leverage (assuming the firm is earning a higher return than what it pays out on debt)
- Increasing Return on Assets
- Aggressive accounting methods
- Decreasing Profit Margins
Q7. Suppose a firm’s Net Income = $500, total assets = $2000, total liabilities = $500, and total stockholders’ equity = $1500. What is Return on Equity (ROE)?
Q8. Suppose a firm’s sales for the year = $1200 and its average receivables balance is $200. What is the firm’s Accounts Receivable Turnover Ratio, expressed in days (not times per year)?
- 30 days
- 61 days
- 0 days
- 90 days
- 6 days
Q9. In the final video, we calculated a more sophisticated version of Return on Assets (ROA), which we defined as
ROA = [ Net Income + (1 – tax rate) x Interest Expense ] / Total Assets
Suppose Net Income = $1000, Total Assets = $5000, Interest Expense = $200, and the tax rate = 30%. What is ROA?
Q10. The primary thing that this more sophisticated measure of ROA better captures that the simpler version, defined as ROA* = Net Income / Total Assets, is:
- It adjusts for non-recurring items in net income
- It takes out non-cash charges that are in net income
- It gives a higher number, so it makes the firm look better
- It better measures how we did with our assets, irrespective of the mix of debt and equity used to finance those assets
Financial Acumen for Non-Financial Managers Week 4 Quiz Answers
Quiz 1: Module 4 Quiz – Linking Non-financial Metrics to Financial Performance
Q1. How can predictive analytics improve performance measurement?
- By assisting in weighing different performance measures based on their relative importance
- All answers are correct
- By enhancing the setting of performance targets
- By increasing the organization’s understanding of the key performance drivers that should be measured
Q2. Which of the following is a key attribute of a causal business model?
- Both A and C
- A) It includes employee, customer, operational, and innovation measures
- Both B and C
- B) It is linked to the organization’s strategy
- A, B, and C are all correct
- C) It articulates the hypothesized drivers of financial performance
Q3. Which of the following choices are important when designing statistical tests of a hypothesized causal business model? (Check all that apply)
- The desired economic outcomes (e.g., profits, revenue growth, contract renewal, retention, etc.)
- The unit of analysis (e.g., customers, employees, projects, product lines, locations, divisions, etc.)
- The department responsible for conducting the analyses (e.g., finance, marketing, etc.)
- The expected time lag between changes in nonfinancial performance and resulting changes in financial performance (e.g., daily, monthly, yearly, etc.)
Q4. Assume that measure A is expected to lead to improvements in measure B. If no statistically significant relationship is found between the two performance measures, what could explain the insignificant relationship?
- Either A, B, or C could explain the insignificant relationship
- A) Organizational barriers are preventing improvements in measure A from translating into improvements in measure B
- Either B or C could explain the insignificant relationship
- C) Even though the performance dimension captured by measure A is actually a driver of measure B, the method used to calculate measure A is bad (e.g., it uses too few scale points, the s are misleading, or it asks about performance dimensions that do not drive customers’ purchase behavior)
- B) Contrary to the company’s hypothesis, improvements in the performance dimension captured by measure A do not lead to improvements in measure B
Q5. Why is the identification of non-linearities important for setting performance targets?
- Non-linear relationships between measures cannot be accommodated in statistical models
- If improvements in a nonfinancial performance metric are characterized by diminishing returns to scale (i.e., greater improvements yield increasing smaller or nonexistent financial returns), setting nonfinancial performance targets that are too high can actually lead to lower profitability
- Managers do not understand the concepts of increasing or diminishing returns to improvements in nonfinancial performance
- It is never appropriate to maximize scores on nonfinancial metrics such as employee or customer satisfaction
Q6. How can statistical analysis of the linkages between non-financial metrics and financial performance be used to make better investment decisions?
- The statistical analyses can ensure that the chosen investments in nonfinancial performance will improve financial results
- The statistical analyses can replace the use of financial justification methods such as net present value and payback period
- The information can be used to forecast future cash flows from investments in nonfinancial performance dimensions
- Managers can selectively use the information to financially justify any investment they want
Q7. Assume that three non-financial performance measures (denoted X, Y, and Z and all measured on ten-point scales) are hypothesized to be drivers of future revenues. Statistical analysis reveals that a one-unit increase in X has the largest impact on future revenues. If the company’s objective is increasing overall profits, should it focus more effort on improving measure X than on improving measures Y and Z?
- A) Yes
- C) Maybe, but only after considering the cost to improve performance on X relative to the cost to improve Y or Z
- Both B and C
- B) Maybe, but only after considering the difficulty of improving performance on X relative to the difficulty of improving proving performance on Y or Z
Q8. Which of the following is a common technical issue that makes it difficult to use analytics to link non-financial metrics to financial performance?
- Financial and nonfinancial data that reside in different databases that are incompatible (e.g., have different coding structures, capture data in different levels of granularity, measure the same dimension differently, etc.)
- The difficulty in using statistical software packages
- The limited number of performance metrics that are tracked by most organizations
- The high cost of data storage
Q9. Which of the following is NOT a common organizational issue that makes it difficult to use analytics to link non-financial metrics to financial performance?
- Organizational participants do not want to know the answers, which may contradict their intuition or beliefs
- Lack of resources and appropriate skill sets
- Different parts of the organization do not want to share the data
- Most organizations do not care about nonfinancial performance
Q10. Why should organizational mechanisms be established to ensure that ongoing analyses of the linkages between non-financial metrics and financial performance are conducted?
- Changes in competitive environments can make earlier analyses obsolete
- Performance metrics that previously were key drivers of financial performance may become less important after the company has achieved its performance targets for those dimensions
- Ongoing analysis and ing of results can help refine strategies, actions, and measures by revealing the lower-level root causes or drivers of performance
- All answers are correct
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