WGU C214 Financial Management
Objective Assessment Retake Exam
Questions and Answers (Verified Answers)
1.Which will be larger: accrual taxes payable or accounting income tax ex-
pense:
ANS Accounting tax expense will be higher; actual taxes based on IRS
rules will be lower
2.Which financial ratios measure "efficiency"
ANS Asset turnover and Fixed Asset turnover
3.Which ratio is the best measure of a firm's ability to pay bills
ANS Quick Ratio
4.Which decision requires using subjective estimates
ANS Economic life of a new asset
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,5.What is the yield to maturity on a bond
ANS The return earned from the purchase date to maturity
6.If a firm buys a 30-day CD, where is it carried on the balance sheet
ANS Cash and ST in current assets
7.How does a "prudent investor" select investments
ANS Seeks the highest return for "reasonable" amount of risk
8.What is the difference between WACC and CAPM's required return
ANS CAPM includes only equity required return; WACC includes debt
and equity
9.What do points on the Efficient Frontier measure
ANS The maximum return for a given level of risk; maximum Return-to-
risk ratio
10.What is Beta
ANS Measure of volatility of a stock's risk relative to the market
11.Why are accurate forecasts important
ANS Plan for resources to support sales
12.Which leverage measure shows the impact of EBIT changes on pre-
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, tax profit (EBT)
ANS Financial leverage
13.Which ratios are used in working capital management
ANS Cash ratio, Current ratio - ratios containing current assets and/or
current liabilities
14.Which ratio is used for valuing a private company
ANS Price-to-earnings (PE) ratio
15.What are the 4 costs associated with holding inventory
ANS Product, storage, holding, and opportunity
16.What risk is eliminated by a diversified portfolio
ANS Idiosyncratic risk - risk affecting a single firm
17.What is the "secondary" market
ANS Investors trading securities among them- selves after initial
issuance of securities
18.What are impacts of outsourcing
ANS Fewer jobs and lower priced products
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16
Objective Assessment Retake Exam
Questions and Answers (Verified Answers)
1.Which will be larger: accrual taxes payable or accounting income tax ex-
pense:
ANS Accounting tax expense will be higher; actual taxes based on IRS
rules will be lower
2.Which financial ratios measure "efficiency"
ANS Asset turnover and Fixed Asset turnover
3.Which ratio is the best measure of a firm's ability to pay bills
ANS Quick Ratio
4.Which decision requires using subjective estimates
ANS Economic life of a new asset
1/
16
,5.What is the yield to maturity on a bond
ANS The return earned from the purchase date to maturity
6.If a firm buys a 30-day CD, where is it carried on the balance sheet
ANS Cash and ST in current assets
7.How does a "prudent investor" select investments
ANS Seeks the highest return for "reasonable" amount of risk
8.What is the difference between WACC and CAPM's required return
ANS CAPM includes only equity required return; WACC includes debt
and equity
9.What do points on the Efficient Frontier measure
ANS The maximum return for a given level of risk; maximum Return-to-
risk ratio
10.What is Beta
ANS Measure of volatility of a stock's risk relative to the market
11.Why are accurate forecasts important
ANS Plan for resources to support sales
12.Which leverage measure shows the impact of EBIT changes on pre-
2/
16
, tax profit (EBT)
ANS Financial leverage
13.Which ratios are used in working capital management
ANS Cash ratio, Current ratio - ratios containing current assets and/or
current liabilities
14.Which ratio is used for valuing a private company
ANS Price-to-earnings (PE) ratio
15.What are the 4 costs associated with holding inventory
ANS Product, storage, holding, and opportunity
16.What risk is eliminated by a diversified portfolio
ANS Idiosyncratic risk - risk affecting a single firm
17.What is the "secondary" market
ANS Investors trading securities among them- selves after initial
issuance of securities
18.What are impacts of outsourcing
ANS Fewer jobs and lower priced products
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16
