WGU C214 UNDERSTANDING FINANCIAL STATEMENTS AND RATIOS: A COMPREHENSIVE TEST QUESTIONS AND ANSWERS UPDATE
5 views 0 purchase
Course
WGU C214
Institution
WGU C214
WGU C214 UNDERSTANDING FINANCIAL STATEMENTS AND RATIOS: A COMPREHENSIVE TEST QUESTIONS AND ANSWERS UPDATE
How do you calculate the change in retained earnings?
Correct Answer: - Net Income-Dividends
Which of the following is generally true?
Correct Answer: - Operating income and EBIT are t...
WGU C214 UNDERSTANDING FINANCIAL STATEMENTS
AND RATIOS: A COMPREHENSIVE TEST 2024-2025
QUESTIONS AND ANSWERS UPDATE
How do you calculate the change in retained earnings?
Correct Answer: - Net Income-Dividends
Which of the following is generally true?
Correct Answer: - Operating income and EBIT are the same
*EBIT=Earnings before interest and taxes. Used to measure a firms operating income.
Which components are part of total assets?
Correct Answer: - Cash accounts receivable, inventory, long-term assets
Which components are part of current assets?
Correct Answer: - Inventory, cash, accounts receivable, short-term investments
Which components are part of total liabilities?
Correct Answer: - Bonds, accounts payable, mortgage
Why is the balance sheet known as a permanent statement?
Correct Answer: - Because the other statements reset at the end of the fiscal year
A basic equation for the balance sheet is?
Correct Answer: - Equity = Assets – liabilities
When fixed assets increase, what happens to cash?
Correct Answer: - Cash decreases
Which is the purpose of the statement of cash flows?
Correct Answer: - Explains the change in cash balance for a period of time.
The OIROI (Operating Income Return on Investment) uses what elements on the income statement?
Correct Answer: - EBIT, Total Assets
Why would a company be interested in the TAT (Total Asset Turnover) ratio?
Correct Answer: - How efficient assets are at producing sales
Which of the following gives the largest effective rate (APY-annual percentage yield)?
Correct Answer: - 18.6% compounded daily
What does the beta coefficient represent?
Correct Answer: - It is a statistically-derived measure of volatility
Why is depreciation expense taken out of the net income calculation, yet added back at the end?
Correct Answer: - Because depreciation expense is tax deductible
Why is the NPV preferred over the IRR?
Correct Answer: - It measures the dollar value. It is more reliable.
, What does the degree of Financial leverage indicate?
Correct Answer: - The reliance on debt
If a company has a high degree of financial leverage, what does that tell us about the firm’s risk profile?
Correct Answer: - Higher profits to shareholders
What is the cash cycle?
Correct Answer: - The amount of time to regenerate cash
Why is float important to understand?
Correct Answer: - The time cash expenditures
What should a company do to manage its working capital?
Correct Answer: - Collect quickly and pay slowly
What would be a source of information to determine replacement cost?
Correct Answer: - Building Appraisal
What does Sarbanes-Oxley Act require companies to do?
Have internal control audits
FINRA (Financial Industry Regulatory Authority) does the following: Correct Answer: - Prosecutes naughty
stockbrokers
If a product is made 100% domestically, what can affect its domestic market?
Correct Answer: - International competition
If a company makes its product in a foreign country where labor costs are much lower, what happens?
Correct Answer: - Profits go up and domestic employment decreases
If the value of a dollar increases, the price of imports: Correct Answer: - Decreases
Why would a farmer buy a hedge when he signs a contract to sell produce overseas?
To reduce currency risk
Suppose the inventory turnover of a company is higher than the industry. Based on this observation, which
of the following is most likely?
Correct Answer: - The firm has too little inventory resulting in lost sales or stock-outs
If the company wishes to obtain a bank loan, will it want to have higher current ratio or a lower current
ratio?
Correct Answer: - Higher
If an investor knows the idiosyncratic risk, the investor knows the: Correct Answer: - Beta coefficient
Why would we reject a project based on the NPV (Net present value)?
Correct Answer: - The NPV is a negative number
Why would we reject a project based on the IRR (internal rate of return)?
Correct Answer: - The discount rate is higher than the IRR
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?
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Nurslink. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $12.99. You're not tied to anything after your purchase.
