WGU C214 Financial Mgt Practice Questions Answer Key

WGU C214 Financial Mgt Practice Questions Answer Key
1. Trading on the NYSE is executed without a specialist (i.e. a market maker).
(T/F): False
2. Stocks and bonds are two types of financial instruments (T/F): True
3. The matching principle in accrual accounting requires that:: Revenues be
recognized when the earnings process is complete and matches expenses to
revenues recognized.
4. A basic equation for the balance sheet is:: Equity = Assets - Liabilities
5. Why is the Balance Sheet known as a permanent statement?: Because the
other statements are reset at the end of the fiscal year
6. How do you calculate the change in Retained Earnings?: Net Income - Dividends
7. Which of the following is generally true?: Operating Income and EBIT are the
same
8. Which components are part of total assets?: Cash Accounts Receivable,
Inventory, Long Term Assets
9. Which components are part of current assets?: Inventory, Cash, Accounts
Receivable, Short Term Investments
10. Which components are part of Total Liabilities?: Bonds, Accounts Payable,
Mortgage
11. When Fixed Assets increase what happens to Cash?: Cash decreases
12. Which is the purpose of the statement of cash flows?: 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?: EBIT, Total Assets
14. Why would a company be interested in theTAT-Total AssetTurnover-ratio?
a: How efficient assets are at producing sales
15. Which of the following gives the largest effective rate (APY): 18.6% compounded daily
16. What does the beta coefficient represent?: It is a statistically-derived measure of volatility
17. Why is depreciation expense taken out of the net income calculation, yet
added back at the end?: Because depreciation expense is tax deductible
18. Why is the NPV preferred over the IRR? Pick Two: 1-It measures the dollar
value 2- It is harder to calculate
19. What does the Degree of Financial Leverage indicate?: 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?: Higher profits to shareholders
21. What is the cash cycle?: The amount of time to regenerate cash
22. Why is float important to understand?: To time cash expenditures
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WGU C214 Financial Mgt Practice Questions Answer Key 2026/25
23. What should a company do to manage its working capital?: Collect quickly
and pay slowly
24. What would be a source of information to determine Replacement Cost?-
: Building Appraisal
25. What does the Sarbanes-Oxley Act require companies to do?: Have internal
control audits
26. FINRA (Financial Industry Regulatory Authority) does the following: (pick
one): Prosecutes naughty stock brokers
27. If a product is made 100% domestically, what can affect its domestic
market?: International competition
28. If a company makes its product in a foreign country where labor costs are
much lower, what happens?: Profits go up and domestic employment decreases.
29. If the value of a dollar increases, the price of imports:: Decreases
30. Why would a farmer buy a hedge when he signs a contract to sell produce
overseas?: To reduce currency risk
31. Which components are part of current assets?
a. Cash, Accounts Receivable, Property Plant & Equipment
b. Accounts Receivable, Accounts Payable, Inventory
c. Long Term Debt, Property Plant & Equipment, Common Stock
d. Inventory, Cash, Accounts Receivable, Short Term Investments: Inventory,
Cash, Accounts Receivable, Short Term Investments
32. Suppose the inventory turnover of a company is higher than the industry.
Based on this observation, which of the following is most likely?: The firm has
too little inventory resulting in lost sales or stock-outs.
33. If a company wishes to obtain a bank loan, will it want to have a higher
current ratio or a lower current ratio?: higher
34. If an investor knows the idiosyncratic risk, the investor knows the:: Beta
Coefficient
35. Why would we reject a project based on the NPV?: the NPV is a negative
number
36. Why would we reject a project based on the IRR?: the discount rate is higher
than the IRR
37. Company A wishes to keep 20% of its assets as cash. Company B keeps
its cash balance at 5% of assets. Which of the following statements apply?: -
company B invest in more working current assets
38. Company A offers trade credit of 2% 10 / net 30 and Company B offers
trade credit at net 30. What can be said about the credit policies of each
company?: company A can attract more customers

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