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WGU C214 Financial Management
Objective Assessment Exam Questions and Answers (Verified Answers)
1.Trading on the NYSE is executed without a specialist (i.e. a market maker). (T/F)
ANS False
2.Stocks and bonds are two types of financial instruments (T/F)
ANS True
3.The matching principle in accrual accounting requires that
ANS Revenues be recognized when the earnings process is complete and matches expenses to revenues recognized.
4.A basic equation for the balance sheet is
ANS Equity = Assets – Liabilities .Why is the Balance Sheet known as a permanent statement
ANS Because the other statements are reset at the end of the fiscal year
6.How do you calculate the change in Retained Earnings
ANS Net Income - Divi- dends
7.Which of the following is generally true
ANS Operating Income and EBIT are the same
8.Which components are part of total assets
ANS Cash Accounts Receivable, Inventory, Long Term Assets
9.Which components are part of current assets
ANS Inventory, Cash, Accounts Receivable, Short Term Investments
10.Which components are part of Total Liabilities
ANS Bonds, Accounts Payable, Mortgage
11.When Fixed Assets increase what happens to Cash
ANS Cash decreases .Which is the purpose of the statement of cash flows
ANS 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
ANS EBIT, Total Assets
14.Why would a company be interested in the TAT-Total Asset Turnover-
ratio? a
ANS How efficient assets are at producing sales
15.Which of the following gives the largest effective rate (APY)
ANS 18.6% com- pounded daily
16.What does the beta coefficient represent
ANS It is a statistically-derived mea- sure of volatility
17.Why is depreciation expense taken out of the net income calculation, yet added back at the end
ANS Because depreciation expense is tax deductible
18.Why is the NPV preferred over the IRR? Pick Two
ANS 1-It measures the dollar value 2- It is harder to calculate .What does the Degree of Financial Leverage indicate
ANS 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
ANS Higher profits to shareholders
21.What is the cash cycle
ANS The amount of time to regenerate cash
22.Why is float important to understand
ANS To time cash expenditures
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