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WGU C214 FINANCIAL MANAGEMENT EXAM WITH ALL ANSWERS
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WGU C214 FINANCIAL MANAGEMENT EXAM WITH ALL ANSWERS
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WGU C214 FINANCIAL MANAGEMENTEXAM WITH ALL ANSWERS
T1vPrimaryvfinancialvmarketsv-vcorrectvanswer-
thevmarketsvinvwhichvsecuritiesv(stocksvandvbonds)varevfirstvissued.vThisvisvwherevth
evissuersv(thevfirms)vandvthevbuyersv(thevinvestors)vwillvengagevinvanvexchange.
T1vSyndicatev-vcorrectvanswer-
Whenvavcompanyvwantsvtovissuevstock,vbonds,vorvothervpubliclyvtradedvsecurities,vit
vhiresvanv*vunderwriterv*vtovmanagevwhatvisvoftenvavlongvandvcomplexvprocess.
Aftervdeterminingvthevofferingvstructure,vthevunderwritervusuallyvassemblesvwhatvisvc
alledvavsyndicatevtovgetvhelpvmanagevthevminutiaev(andvrisk)vofvlargevofferings.vAvsy
ndicatevisvavgroupvofvinvestmentvbanksvandvbrokeragevfirmsvthatvcommitvtovsellvavce
rtainvpercentagevofvthevoffering.v
Avgroupvofvintermediariesvthatvisvusedvtovoverseevthevissuancevofvstocksvandvbonds
.vSyndicatesvarevgenerallyvmadevupvofvlargevinvestmentvbanksvorvothervtypesvofvinst
itutionalvinvestors.
Competitivevsalev-vcorrectvanswer-
thosevwishingvtovunderwritevthevbondvissuevwillvsubmitvbidsv(onvthevbond'svpricesvan
dvinterestvrate)vtovthevissuingvfirm.vThevfirmvwillvthenvselectvthevunderwritervthatvoffer
edvthevhighestvpricevandvlowestvinterestvrate.vThevunderwritervwillvthenvsellvthevbond
svtovvariousvinvestorsvatv(hopefully)vavslightlyvhighervpricevthanvthatvatvwhichvthevbo
ndsvwerevpurchased
Negotiatedvsalev-vcorrectvanswer-
isvthevprocessvofvunderwritersvsubmittingvproposalsvincludingvbids.v*involvesvavmore
vthoroughvinterviewvprocessvwithvthevunderwriters.*vThevissuingvfirmvwillvcarefullyvse
lectvthevmanagementvteamvthatvwillvplacevthesevbonds.
SecondaryvFinancialvMarketsv-vcorrectvanswer-
Wherevsecuritiesvaftervtheyvarevsoldvforvthevfirstvtimevarevtraded.
,AuctionvMarketv-vcorrectvanswer-
Avmarketvwithvavphysicalvlocationvandvpricesvarevsetvbyvthevinvestorsvwillingnessvtov
pay.v(NewvyorkvStockvExchange)
DealervMarketv-vcorrectvanswer-
*Novphysicalvlocation*vmadevupvofvmultiplevdealersvwhovtakevinventoryvofvstocksvan
dvpricesv(NASDAQ)
ThevbidvAskvspreadv-vcorrectvanswer-
thevdifferencevbetweenvthevbidvpricevandvthevaskvprice
Limitvordersv-vcorrectvanswer-ordersvthatvarevpricevcontingentv-
vordersvarevonlyvexecutedvifvthevvaluevofvthevmarketvreachesvthevpricevofvthevlimit.
MarketvOrdersv-vcorrectvanswer-Ordersvthatvarevtimevcontingentv-
vFirstvcomevfirstvserve
Friedmansvthreevrolesvofvprices.v-vcorrectvanswer-
1.vPricesvconveyvinformationvtovconsumers.
2.vpricesvaffectvincentives
3.vpricesvaffectvthevdistributionvofvincome
PricevEfficiencyv-vcorrectvanswer-
whethervpricesvfullyvreflectvallvofvthevavailablevinformationvaboutvavparticularvsecurity
DollarvReturnsv-vcorrectvanswer-
calculatedvbyvtakingvthevdifferencevbetweenvthevpricevofvthevsecurityvduringvthevprev
iousvtimevperiodvandvthevpricevofvthevsecurityvatvthevcurrentvtimevperiod,vplusvanyvad
ditionalvcashvflowvthatvcamevfromvthevsecurity
PercentagevReturnsv-vcorrectvanswer-
Percentagevreturnsvarevcalculatedvbyvsimplyvdividingvthevdollarvreturnsvbyvthevpricev
ofvthevsecurityvatvtimevt-1,vorvthevpreviousvtimevperiod.
AgencyvCostv-vcorrectvanswer-
costsvthatvarevincurredvwhenvmanagementvdoesvnotvactvinvthevbestvinterestsvofvshar
eholders
2vissuesvthatveffectv*profitvmaximization*v-vcorrectvanswer-1.vAgencyvCosts
2.vPotentialveffectvofvfocusingvsolelyvonvprofitsv(Ethics)
CashvFlowvStatementv-vcorrectvanswer-
Cashvflowsvfromv*operations,vinvestingvandvfinancingvactivities*
Cashvaccountingv-vcorrectvanswer-
countsvcashvoutvasvexpensevandvcashvinvasvrevenue
Accrualvaccountingv-vcorrectvanswer-
Revenuevisvrecognizedvwhenvthevearningsvprocessvisvcomplete.
, RevenuevRecognitionv-vcorrectvanswer-
Timingvofvrecognitionvofvsalesvorvincomevbasedvonvcertainvrules.
GrossvProfitv-vcorrectvanswer-Revenuev-vCostvofvgoodsvsoldv(COGS)
EBITv-vcorrectvanswer-
EarningsvbeforevInterestvandvTaxesv(AKAv*OperatingvIncome*)
COGSv-vcorrectvanswer-Costvofvgoodsvsoldv=vdirectvlaborvandvmaterials.
GrossvFixedvAssetsv-vcorrectvanswer-
thevoriginalvcostvofvthevfirm'svfixedvassetsvbeforevaccumulatedvdepreciation
NetvPP&Ev-vcorrectvanswer-
originalvpurchasevpricev(historicalvcost)vminusvaccumulatedvdepreciation
HistoricalvCostv-vcorrectvanswer-
Whatvthevassetvwasvoriginallyvpurchasedvforvnotvthevcurrentvvalue.vUsedvinvaccrualv
accounting.v
v(mostvassetsvarevstatedvatvthevoriginalvcostvlessvdepreciation)
RetainedvEarningsv-vcorrectvanswer-
moneyvputvbackvintovthevcompanyvfromvpriorvnetvincome.
NetvIncomev=v-vcorrectvanswer-Dividendsv+vChangevinvretainedvEarnings
therevarevonlyvtwovthingsvavcompanyvcanvdovwithvnetvincomev-vcorrectvanswer-
1)vpayvitvoutvasvdividendsvtovshareholders,vorv2)vretainvitvwithinvthevfirm.
NewvRetainedvEarningsv=v-vcorrectvanswer-OldvRetainedvEarningsv+vNetvIncomev-
vDividends
Freevcashvflowv(FCF)v-vcorrectvanswer-
thevcashvthatvcanvbevdistributedvaftervfundingvrequiredvreinvestmentvinvPP&Evasvwel
lvasvincreasedvworkingvcapital.
GrossvCashvFlowsv-vcorrectvanswer-thevsumvofvCFO,vCFI,vandvCFF
Thingsvthatvcausevmanagersvtovmovevcashvfromvonevcategoryvtovanotherv-
vcorrectvanswer-Corevactivities
Cashvflowvmanagement
Marketvpressure
DifferencevbetweenvCFOvandvNetvincomev-vcorrectvanswer-
indirectvmethodv-vcorrectvanswer-
startvwithvnetvincomevandvadjustvforvdifferencesvbetweenvnetvincomevandvCFO.
CFO=v-vcorrectvanswer-
NetvIncomev+vdepreciationvexpensesv+vChangevinvOperatingvaccounts
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