WGU C214 Financial Management 2023\/
2024 Exam| Questions and Verified Answers|
Grade A+
Q: What do you do if the question says that the dividend was paid RECENTLY or the dividend
was JUST paid?
Answer:
First you must calculate the expected dividend.
Q: How do you know when to use the Gordon Growth model to answer a question?
Answer:
If you see the word GROW or GROWTH in the question, then it’s a GGM question.
Q: What is the CAPM model?
Answer:
Capital Asset Pricing Model. Considered superior to GGM because it incorporates RISK.
Uses concept of “Efficient Frontier”.
Q: What is the concept of Efficient Frontier?
Answer:
Efficient Frontier maximizes expected return for a given level of risk.
Q: In a probability question, what should the chance of recession and the chance of expansion
equal in percentage?<\/p>\n\n\n\n
Answer:
They should total 100%
Q: What are some implications of Efficient Market Hypothesis (EMH)
Answer:
One important implication of EMH is that no one can time the market.
In any market to survive in an efficient financial market, they have to consistently make
profitable decisions.
Q: Under the efficient market hypothesis (EMH) how is the intrinsic value of stock determined?
Answer:
Under EMH, the intrinsic value of a stock is the Present Value of the stock’s after tax net cash
flows.
Q: What is Capital budgeting?
Answer:
The process that companies employ to make decisions on long term investments (projects that
generate cash flows over a multi-year time horizon).
A company wants to buy a factory? That’s a capital budgeting decisions.
A company wants to buy $10million dollars in equipment? That’s a capital budgeting decision.
Q: What are the 3 sets of information you need in Capital budgeting decision making?
Answer:<\/p>\n\n\n\n
Q: Companies use two methods for capital budgeting. What are they?
Answer:
Net Present Value (NPV) and Internal Rate of Return (IRR)
Q: What is Net Present Value (NPV)?
Answer:
Is defined as the present value of after tax net cash flows and is the most commonly used method
in Capital budgeting.
Q: What is the Internal Rate of Return (IRR) Method?
Answer:
It is defined as the discount rate that results in a zero net present value.
Q: How do you calculate NPV?
Answer:
Use your financial calculator!
Q: What does it mean if you see a negative number?
Answer:
It means cash is going out.<\/p>\n\n\n\n
Q: What is the comprehensive formula for Net Income?
Answer:
Increase in revenue – Increase in fixed costs and variable costs – depreciation * (1- tax rate)
Q: On the financial calculator, a dividend is always entered as\u2026
Answer:
A payment: the “PMT” key.
Q: How do you enter I\/Y percentages in the financial calculator?
Answer:
You enter them as a whole number. So 15% would be 15
Q: Whenever somebody gets something every year, it’s called what?
Answer:
An annuity
Q: How is an annuity entered into the financial calculator
Answer:
An annuity is always entered as a payment (PMT) in the financial calculator.
Q: If a question has two time periods in the question, what clue is that giving you as to what
kind of question it is.<\/p>\n\n\n\n
WGU C214 Financial Management Quiz
Bank | 200+ Questions and Verified Answers|
100% Correct | 2023\/ 2024 Newly Updated
Q: What is the relationship between WACC and IRR?
a. Just 2 different numbers
b. IRR must exceed WACC to accept investment
c. WACC must exceed IRR to accept investment
d. WACC and IRR are the same thing
Answer:
b
Q: What is the relationship between NPV and IRR?
a. Both must exceed WACC to accept investment
b. If discount rate equals IRR, NPV is equal to zero.
c. NPV must exceed WACC to accept investment
d. If discount rate equals IRR, should accept investment
Answer:
b
Q: If a firm’s financial and operating leverage is high, what is the implication?
a. The firm is more profitable
b. Profits are more volatile as sales fluctuate
c. The firm is less profitable
d. The two leverages offset each other – – neutral impact
Answer:
b<\/p>\n\n\n\n
Q: If an industry, such as autos, has very high fixed costs and very cyclical sales, what is the
implication for financial leverage?
a. Use high financial leverage to offset high fixed costs
b. Use low financial leverage to offset high operating leverage
c. It has no implication at all
d. None of the above
Answer:
b
Q: The SGR measures:
a. Historical dividend growth rate
b. Sales growth rate
c. Potential sales growth with internal funding
d. None of the above
Answer:
c
Q: The SEC Securities & Exchange Commission requires public companies to do the
following:
a. File audited financial statements with SEC
b. Change CEOs on a regular basis
e. Regulates the Money Supply
d. Prohibits foreign bribery
Answer:
a
Q: What does the Sarbanes-Oxley Act require companies to do?
a. Have a board of directors
b. Register all foreign sales
c. Make estimated tax payments
d. Have internal control audits<\/p>\n\n\n\n
Answer:
d
Q: If a company produces and sells a product only in the U.S., what international developments
may affect its sales?
a. Fluctuating exchange rates
b. Imports of competing products
c. Immigration policy
d. Inflation in Europe
Answer:
b
Q: The SEC requires the following to file audited financial statements:
a. All companies
b. All for-profit companies
c. All publicly-traded corporations
d. There is no such requirement
Answer:
c
Q: Which best describes conceptually the valuation of all financial assets in financial markets?
a. Based on opinions of Wall Street analysts
b. The NPV of anticipated cash flows
c. Based on the book value of assets and liabilities
d. None of the above
Answer:
b
Q: Which accurately describes an “efficient” market?
a. Prices are low
b. Prices do not fluctuate<\/p>\n\n\n\n
c. Deviations from “fair value” are quickly eliminated
d. “Hot stocks” are the best investment
Answer:
c
Q: If a firm’s goal is to maximize stockholder wealth, which would the firm avoid?
a. Stock buybacks
b. Risky long-term investments
c. Investments with negative NPV
d. Transparency in financial statements
Answer:
c
Q: If you wanted to evaluate a non-public company, what sources would you use?
a. The financial statements filed with the SEC
b. The latest stock price quoted in the Wall Street Journal
c. The PE of a comparable public company
d. The book value of equity in its balance sheet
Answer:
c
Q: Which section of the Statement of Cash Flows describes the production and sales of the
firm’s product?
a. Cash Flow Operations
b. Cash Flow Investing
c. Cash Flow Financing.
d. Cash Flow Securities
Answer:
a<\/p>\n\n\n\n
WGU C214 Pre-Assessment Financial
Management 2023\/ 2024 Exam| Questions
and Verified Answers| Grade A+
Q: A firm has a ROE (return on equity) of 0.27 and the industry average ROE is 0.24. Which
conclusion would an analyst draw when comparing the firm to the industry?
Answer:
The firm is generating higher returns to owners than the industry.
Q: What must have taken place for a firm to recognize revenue, in order for the firm to comply
with the accrual accounting rules?
Answer:
The product must have been delivered.
Q: A teacher won $100,000 and invests this money for 5 years at an interest rate of 4%
(compounded
annually).
How much will the teacher have in principal and interest at the end of the 5 years?
Answer:
$121,665
Q: An accountantis 40 years old with an anticipated retirement age of 70 years old. The
accountant plans to
save $6,000 per year at the end of the next 30 years to fund retirement.
Answer:<\/p>\n\n\n\n
$336,510
Q: An investor deposits $2,000 per year (beginning today) for 10 years in a 4% interest bearing
account. The
last cash flow is received 1 year prior to the end ofthe tenth year.
What is the investor’s future balance after 10 years?
Answer:
$24,973
Q: What is the par value (face value) of a bond?
Answer:
The sum of money that the corporation promises to pay upon expiration of the bond.
Q: A broker is considering purchasing common stock in a company that has average but
consistent operating
performance.
Which factor should lead the broker to purchase shares in this company?
Answer:
The current price of the stock is 25% below its intrinsic value.
Q: A broker is considering buying a dividend-paying stock. The dividend will be paid atthe end
of the year.
The analyst consensus is the stock will be worth $36 in one year. The company pays a $2.25
annual
dividend (ex dividend date is not a consideration,the broker will receive the full $2.25), and the
broker
expects a 12% rate of return
What is the highest price the broker should be willing to pay for the stock?<\/p>\n\n\n\n
Answer:
$34.15
Q: A person buys shares of a company at $45. They recently paid a $2 annual dividend which is
expected to
grow by 10% per year.
What is the expected return per year?
Answer:
14.9%
Q: Which investment option is less desirable for a prudent investor?
Answer:
Quadrant 4, bottom left, 3\/4 to right side. Also E. for answer.
Q: The market rate of return is 9%. The face value ofthe bond is $1000,the coupon rate is 9%
with annual
compounding, and the bond matures in 10 years.
What is the value of the bond?
Answer:
$1,000
Q: Which statement is true about fluctuations in bond prices?
Answer:
When the market interest rates fluctuate, the required rate of return equals the bond coupon rate.<\/p>\n\n\n\n
WGU C214 Object Assessment Financial
Management 2023\/ 2024 Exam| Questions
and Verified Answers| Grade A+
Q: Why would we reject a project based on IRR?
Answer:
The discount rate is higher than the IRR
Q: What are two key elements of differential cash flow?
Answer:
Depreciation expense and net income
Q: Why is the NPV preferred over the IRR?
Answer:
It measures the dollar value and is more reliable.
Q: When a company uses more leverage as evidenced by a higher degree of either financial or
operating leverage, what effect does it have on changes in profitability?
Answer:
Higher leverage leads to higher profitability for a given sale level.
Q: What does the degree of financial leverage indicate?<\/p>\n\n\n\n
Answer:
The reliance on debt
Q: If a company has a high degree of financial leverage, what does that tell us about the firms
risk profile?
Answer:
Financial leverage also means that more financing is done through debt, not equity. Higher
profits to shareholders.
Q: What is the cash cycle?
Answer:
The amount of time to regenerate cash.
Q: Why is float important to understand?
Answer:
To time cash expenditures
Q: What should a company do to manage its working capital?
Answer:
Collect quickly and pay slowly
Q: Name what characterizes increased collection float?
Answer:
Increased float indicates slower processing time.<\/p>\n\n\n\n
Q: In regards to Accounts Payable Balances, what is a good policy?
Answer:
Paying off A\/P on the last day due is a good policy.
Q: What would be a good source of information to determine replacement cost?
Answer:
Building Appraisal
Q: Dodd-Frank Act regulates which segment of the U.S economy?
Answer:
Banking industry
Q: What is the regulatory body that overseas the systematic risk in banking?
Answer:
Financial stability oversight council
Q: The SEC securities and Exchange Commission requires companies to do the following three
things:
Answer:
Register all public offerings, regulate stock sales and ensure transparency through uniform
reporting.<\/p>\n\n\n\n
WGU C214 Financial Management 2023\/
2024 Exam| Web Questions and Verified
Answers| Grade A+
Q: TVM:
M wants to have $20k in 4 years. How much should M invest now in order to have $20k in 4
years if she can invest money at 16%?
Answer:
TVM:
$11,040
N=4
I\/Y=16
FV=$20,000
CPT then PV = $11,045.82
Q: Impact of Inflation on Cash Flows:
If the cash flow today is $100,000 and the annual inflation rate is 5%, what is the value of the
cash flow at end of one year?
Answer:
Impact of Inflation on Cash Flows:
Value of cash flow=
(1-.05)*$100,000=$95,000
Q: The Statement of Cash Flows is?
Answer:
\u2026explains the change in the cash balance for one period of time.
Q: Cash Flow from Operating Activities consists of?<\/p>\n\n\n\n
Answer:
Net Income +
Depreciation +\/-
Decreases\/Increases in Current Assets +\/-
Decreases\/Increases in Current Liabilities
Q: Cash Flow from Operating Activities:
Which of the following would be added to Net Income in the operating activities section of a
Statement of Cash Flows prepared using the indirect method?
Answer:
Cash Flow from Operating Activities:
\u2026an Increase (+) in Accounts Payable
Q: Cash Flow from Operating Activities:
Examples of Current Liabilities?
Answer:
Cash Flow from Operating Activities:
Accounts Payable
-\/+ decrease\/increase in Current Liabilities
Q: Cash Flow from Operating Activities:
If a company reports net income of $100k, depreciation of $20k, and an increase in Accounts
Receivable of $5k, what is the cash flow from operating activities?
Answer:
Cash Flow from Operating Activities:
CFFOA=$100k-$20k-$5k =
$115,000 Inflow
Accounts Receivable
+\/- decrease\/increase in Current Assets<\/p>\n\n\n\n
Q: Cash Flow from Operating Activities:
Examples of Current Asset?
Answer:
Cash Flow from Operating Activities:
Accounts Receivable
+\/- decrease\/increase in Current Assets
Q: Cash Flow from Operating Activities:
If a company reports net income of $100k, depreciation of $20k, and an increase in Accounts
Payable of $5k, what is the cash flow from operating activities?
Answer:
Cash Flow from Operating Activities:
CFFOA=$100k+$20k+$5k =
$125k Inflow
Accounts Payable
-\/+ decrease\/increase in Current Liabilities
Q: Cash Flow from Operating Activities:
A company reports an increase in $5k in Accounts Receivable for the year and half will be
collected next year. What is the impact on the cash flow from operations?
Answer:
Cash Flow from Operating Activities:
$5,000 decrease in cash flow for the year
Accounts Receivable
+\/- decrease\/increase in Current Assets
Q: Cash Flow from Investing Activities:
Which of the following would be considered a cash outflow in the Investing Activities section of
the Statement of Cash Flows?
Answer:<\/p>\n","protected":false},"excerpt":{"rendered":"
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