Objective Assessment Exam

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WGU C214 Financial Management Objective Assessment Exam Questions and Answers (Verified Answers) 1.Trading on the NYSE is executed without a specialist (i.e. a market maker). (T/F) ANS False 2.Stocks and bonds are two types of financial instruments (T/F) ANS True 3.The matching principle in accrual accounting requires that ANS Revenues be recognized when the earnings process is complete and matches expenses to revenues recognized.

4.A basic equation for the balance sheet is ANS Equity = Assets – Liabilities 1 / 4

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5.Why is the Balance Sheet known as a permanent statement ANS Because the other statements are reset at the end of the fiscal year 6.How do you calculate the change in Retained Earnings ANS Net Income - Divi- dends 7.Which of the following is generally true ANS Operating Income and EBIT are the same 8.Which components are part of total assets ANS Cash Accounts Receivable, Inventory, Long Term Assets 9.Which components are part of current assets ANS Inventory, Cash, Accounts Receivable, Short Term Investments 10.Which components are part of Total Liabilities ANS Bonds, Accounts Payable, Mortgage 11.When Fixed Assets increase what happens to Cash ANS Cash decreases 2 / 4

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12.Which is the purpose of the statement of cash flows ANS explains the change in cash balance for one period of time 13.The OIROI (Operating Income Return on Investment) uses what elements on the income statement ANS EBIT, Total Assets 14.Why would a company be interested in the TAT-Total Asset Turnover- ratio? a ANS How efficient assets are at producing sales 15.Which of the following gives the largest effective rate (APY) ANS 18.6% com- pounded daily 16.What does the beta coefficient represent ANS It is a statistically-derived mea- sure of volatility 17.Why is depreciation expense taken out of the net income calculation, yet added back at the end ANS Because depreciation expense is tax deductible 18.Why is the NPV preferred over the IRR? Pick Two ANS 1-It measures the dollar value 2- It is harder to calculate 3 / 4

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19.What does the Degree of Financial Leverage indicate ANS The reliance on debt 20.If a company has a high degree of financial leverage, what does that tell us about the firm's risk profile ANS Higher profits to shareholders 21.What is the cash cycle ANS The amount of time to regenerate cash 22.Why is float important to understand ANS To time cash expenditures

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