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100+ Free DSST Principles of Finance Practice Questions

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48% (FY24 DANTES-funded military test takers) Pass Rate
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Key Facts: DSST Principles of Finance Exam

100

Exam Questions

DSST Principles of Finance fact sheet

2 hours

Time Limit

DSST Principles of Finance fact sheet

400

Minimum Recommended Score

DSST exam page and fact sheet

3

ACE-Recommended Semester Hours

DSST Principles of Finance fact sheet

20%

Weight of Financial Statements and Planning

DSST Principles of Finance fact sheet

20%

Weight of Time Value of Money

DSST Principles of Finance fact sheet

$100

DSST Test Fee

GetCollegeCredit DSST FAQ

48%

FY24 DANTES Military Pass Rate

DANTES FY24 DSST military pass-rate PDF

The current DSST Principles of Finance fact sheet is Rev 11/2021 and lists 100 questions in a 2-hour testing window, a minimum recommended score of 400, and 3 lower-level baccalaureate semester hours. The largest domains are Financial Statements and Planning at 20% and Time Value of Money at 20%, followed by Capital Budgeting and Risk and Return at 12% each.

Sample DSST Principles of Finance Practice Questions

Try these sample questions to test your DSST Principles of Finance exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1Which financial statement reports a company's assets, liabilities, and owners' equity at a specific point in time?
A.Income statement
B.Balance sheet
C.Statement of cash flows
D.Statement of retained earnings
Explanation: The balance sheet reports what the company owns, what it owes, and the residual claim of owners at a specific date. It follows the accounting equation: assets equal liabilities plus equity.
2A firm has sales of $500,000, cost of goods sold of $320,000, and operating expenses of $90,000. What is operating income before interest and taxes?
A.$90,000
B.$180,000
C.$230,000
D.$410,000
Explanation: Operating income before interest and taxes is sales minus cost of goods sold minus operating expenses. Here, $500,000 - $320,000 - $90,000 = $90,000.
3On a statement of cash flows, cash paid to suppliers for inventory is usually classified as which type of activity?
A.Operating activity
B.Investing activity
C.Financing activity
D.Noncash activity
Explanation: Cash paid to suppliers is part of the firm's normal operating cycle. Operating activities include cash receipts from customers and cash payments related to producing and selling goods or services.
4A company has current assets of $240,000 and current liabilities of $120,000. What is its current ratio?
A.0.5
B.1.0
C.2.0
D.3.0
Explanation: The current ratio equals current assets divided by current liabilities. The calculation is $240,000 / $120,000 = 2.0, meaning current assets are twice current liabilities.
5Which ratio is most directly used to evaluate how much debt a firm uses relative to owners' capital?
A.Inventory turnover
B.Debt-to-equity ratio
C.Gross profit margin
D.Price-earnings ratio
Explanation: The debt-to-equity ratio compares debt financing with equity financing. It is a solvency or leverage measure because it helps evaluate long-term financial risk.
6For a new project, which tax rate is usually most relevant when estimating the tax effect of additional taxable income?
A.Average tax rate
B.Marginal tax rate
C.Dividend yield
D.Inflation rate
Explanation: The marginal tax rate applies to the next dollar of taxable income. Project analysis focuses on incremental cash flows, so the marginal tax rate is normally the relevant rate.
7In a common-size income statement, each line item is usually expressed as a percentage of which base?
A.Total assets
B.Net sales
C.Total liabilities
D.Common stock par value
Explanation: A common-size income statement expresses each income statement item as a percentage of sales. This makes it easier to compare cost and profit relationships across firms or time periods.
8A firm has current assets of $500,000, inventory of $220,000, prepaid expenses of $30,000, and current liabilities of $250,000. What is its quick ratio?
A.0.88
B.1.00
C.1.12
D.2.00
Explanation: The quick ratio excludes less-liquid current assets such as inventory and prepaid expenses. Quick assets are $500,000 - $220,000 - $30,000 = $250,000; dividing by $250,000 of current liabilities gives 1.00.
9The DuPont identity breaks return on equity into profit margin, total asset turnover, and which third component?
A.Dividend payout ratio
B.Equity multiplier
C.Current ratio
D.Coupon rate
Explanation: The expanded DuPont model expresses ROE as profit margin times total asset turnover times the equity multiplier. The equity multiplier captures the effect of financial leverage.
10A firm's EBIT is $360,000 and annual interest expense is $90,000. What is the times interest earned ratio?
A.0.25 times
B.3.0 times
C.4.0 times
D.5.0 times
Explanation: Times interest earned equals EBIT divided by interest expense. The firm earns $360,000 / $90,000 = 4.0 times its annual interest cost before taxes.

About the DSST Principles of Finance Exam

The DSST Principles of Finance exam covers financial statements and planning, time value of money, working capital management, stock and bond characteristics, capital budgeting, cost of capital, risk and return, and international financial management. The official fact sheet lists 100 multiple-choice questions in 2 hours, a minimum recommended score of 400, ACE-recommended lower-level baccalaureate credit, and permitted use of a nonprogrammable calculator.

Assessment

100 multiple-choice questions

Time Limit

2 hours

Passing Score

400

Exam Fee

$100 DSST test fee; test-center administrative fees may apply (Prometric / DSST; DANTES funds eligible military first attempts)

DSST Principles of Finance Exam Content Outline

20%

Financial Statements and Planning

Fundamentals of financial statements, including balance sheet, income statement, statement of cash flows, statement of owner equity, ratio analysis, taxes, marginal tax rates, corporate tax rates, and DuPont analysis.

20%

Time Value of Money

Present value and future value for lump sums and annuities, annuity due versus ordinary annuity, interest rate calculations, equivalent annual rate, and annual percentage rate.

10%

Working Capital Management

Short-term sources of funds, management of inventory, accounts receivable, accounts payable, short-term investments, and cash budgets.

8%

Valuation and Characteristics of Stocks and Bonds

Bond characteristics such as debentures, sinking funds, and coupons, plus common stock, preferred stock, and dividends.

12%

Capital Budgeting

Capital assets, project cash flow forecasting, incremental cash flows, pro forma analysis, net present value, payback, accounting rate of return, internal rate of return, break-even analysis, and sensitivity analysis.

11%

Cost of Capital

Cost of debt, cost of equity from common and preferred stock, and weighted average cost of capital.

12%

Risk and Return

Expected return on assets and portfolios, risk measures such as standard deviation and beta, real and nominal interest rates, CAPM, security market line, market risk, company-specific risk, and diversification.

7%

International Financial Management

Exchange rate effects, currency risk, political risk, spot rates, forward rates, and hedging tools.

How to Pass the DSST Principles of Finance Exam

What You Need to Know

  • Passing score: 400
  • Assessment: 100 multiple-choice questions
  • Time limit: 2 hours
  • Exam fee: $100 DSST test fee; test-center administrative fees may apply

Keys to Passing

  • Complete 500+ practice questions
  • Score 80%+ consistently before scheduling
  • Focus on highest-weighted sections
  • Use our AI tutor for tough concepts

DSST Principles of Finance Study Tips from Top Performers

1Allocate study time to match the official eight-domain outline; Financial Statements and Planning plus Time Value of Money together make up 40% of the exam.
2Memorize and practice core formulas: current ratio, quick ratio, DuPont ROE, present value, future value, annuity values, EAR, NPV, IRR decision rule, WACC, CAPM, expected return, and break-even quantity.
3Practice calculator workflows with a nonprogrammable calculator because DSST permits a nonprogrammable calculator for this exam.
4For capital budgeting, focus on incremental cash flows, sunk costs, working-capital changes, taxes, NPV, IRR, payback, ARR, break-even, and sensitivity analysis.
5For risk and return, keep the distinction clear between systematic risk, company-specific risk, beta, standard deviation, CAPM, and diversification.

Frequently Asked Questions

How many questions are on the DSST Principles of Finance exam?

The official DSST Principles of Finance fact sheet states that the exam contains 100 questions to be answered in 2 hours.

What score is recommended for DSST Principles of Finance credit?

The official DSST exam page and fact sheet list a minimum score of 400 for the ACE credit recommendation. Individual colleges decide whether and how to award DSST credit.

What does DSST Principles of Finance cover?

The official outline has eight domains: Financial Statements and Planning at 20%, Time Value of Money at 20%, Working Capital Management at 10%, Valuation and Characteristics of Stocks and Bonds at 8%, Capital Budgeting at 12%, Cost of Capital at 11%, Risk and Return at 12%, and International Financial Management at 7%.

How much credit is DSST Principles of Finance worth?

The official DSST fact sheet lists an ACE recommendation of 3 lower-level baccalaureate semester hours for Principles of Finance. Credit acceptance and course equivalency vary by institution.

How much does the DSST Principles of Finance exam cost?

The DSST FAQ lists a $100 test fee per exam and notes that testing-center administrative fees are not included. DANTES funds eligible military first attempts under DANTES rules.

Can I use a calculator on DSST Principles of Finance?

The official DSST Principles of Finance page states that a nonprogrammable calculator is permitted during the exam. Test takers should confirm calculator rules before test day.

Is there an official pass rate for DSST Principles of Finance?

DANTES publishes a 48% FY24 pass rate for DANTES-funded military test takers. A public pass rate for all DSST Principles of Finance test takers was not found on the official DSST, Prometric, or DANTES pages reviewed.