Objective Assessment Retake Exam

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WGU C214 Financial Management Objective Assessment Retake Exam Questions and Answers (Verified Answers)

• What does the Foreign Corrupt Practice Act forbid companies to do

ANS The Foreign Corrupt Practices Act 1977, as amended, 15 U.S.C. was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business.

• What are two basic types of financial instruments

ANS Stocks and bonds

• What are secondary markets

ANS A secondary market is when you buy and sell stock in the stock exchange.

• What do cash flows from operating activities report

ANS Cash flow from oper- ating activities, cash generated from day to day business operations. CFO= Net Income = Depreciation Expense- (Change in 1 / 3

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Current Assets- Change in Current Liabilities)

• What does the statement of cash flows report

ANS The statement of cash flows shows the change in cash balance over a period of time. The statement of cash flows describes how a balance increases or decreases. The 3 components CFO, CFF, CFI help describe changes in cash.

• Write the equation that links the income to the balance sheet

ANS Retained Earnings Equation. Ending Retained Earnings= Beginning Retained Earnings+ Net Income-Dividends Paid.

• What is the firm's cash flow from financing activities

ANS Cash flow from financ- ing activities shows you the cash that is generated from financing a business. CFF= Increase in LT Debt (bonds) + Increase in Stock - Dividends Paid.

• Describe an income statement

ANS Revenues expenses and income (R.E.I)

• What item is included in the income statement and not included in the

statement of cash flows ANS Depreciation Expense

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• A company sold goods in 2016 for $30,000 and collected the cash in 2017.

In 2016, the company incurred and paid $20,000 in expenses related to the goods sold. How much income should the company report in 2016 under the accrual basis of accounting

ANS $30,000-$20,000= $10,000

11. EBIT: $1,000,000

Depreciation: $30,000

Change in working capital: ($5,000)

Net capital expenditures: $10,000

Tax rate: 40%

What is the company's free cash flow ANS FCFF=EBIT * (1-Tax Rate)+ Deprecia- tion- Cap Exp- Increase in NWC

1,000,000* (1-.40)+ 30,000-10,000- (5,000)

= 600,000+ 30,000-10,000+ 5,000

= $625,000

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