WGU C214 Financial Management
Objective Assessment Retake Exam
Questions and Answers (Verified Answers)
1. What does the Foreign Corrupt Practice Act forbid companies to do
ANS The Foreign Corrupt Practices Act 1977, as amended, 15 U.S.C. was
enacted for the purpose of making it unlawful for certain classes of
persons and entities to make payments to foreign government officials
to assist in obtaining or retaining business.
2. What are two basic types of financial instruments
ANS Stocks and bonds
3. What are secondary markets
ANS A secondary market is when you buy and sell stock in the stock
exchange.
4. What do cash flows from operating activities report
ANS Cash flow from oper- ating activities, cash generated from day to
,day business operations. CFO= Net Income = Depreciation Expense-
(Change in Current Assets- Change in Current Liabilities)
5. What does the statement of cash flows report
ANS The statement of cash flows shows the change in cash balance
over a period of time. The statement of cash flows describes how a
balance increases or decreases. The 3 components CFO, CFF, CFI help
describe changes in cash.
6. Write the equation that links the income to the balance sheet
ANS Retained Earnings Equation. Ending Retained Earnings= Beginning
Retained Earnings+ Net Income-Dividends Paid.
7. What is the firm's cash flow from financing activities
ANS Cash flow from financ- ing activities shows you the cash that is
generated from financing a business. CFF= Increase in LT Debt (bonds)
+ Increase in Stock - Dividends Paid.
8. Describe an income statement
ANS Revenues expenses and income (R.E.I)
9. What item is included in the income statement and not included in
the statement of cash flows
, ANS Depreciation Expense
10.A company sold goods in 2016 for $30,000 and collected the cash in
2017. In 2016, the company incurred and paid $20,000 in expenses related to
the goods sold. How much income should the company report in 2016 under
the accrual basis of accounting
ANS $30,000-$20,000= $10,000
11. EBIT: $1,000,000
Depreciation: $30,000
Change in working capital:
($5,000) Net capital expenditures:
$10,000 Tax rate: 40%
What is the company's free cash flow
ANS FCFF=EBIT * (1-Tax Rate)+ Deprecia- tion- Cap Exp- Increase in
NWC
1,000,000* (1-.40)+ 30,000-10,000- (5,000)
= 600,000+ 30,000-10,000+ 5,000
= $625,000
Objective Assessment Retake Exam
Questions and Answers (Verified Answers)
1. What does the Foreign Corrupt Practice Act forbid companies to do
ANS The Foreign Corrupt Practices Act 1977, as amended, 15 U.S.C. was
enacted for the purpose of making it unlawful for certain classes of
persons and entities to make payments to foreign government officials
to assist in obtaining or retaining business.
2. What are two basic types of financial instruments
ANS Stocks and bonds
3. What are secondary markets
ANS A secondary market is when you buy and sell stock in the stock
exchange.
4. What do cash flows from operating activities report
ANS Cash flow from oper- ating activities, cash generated from day to
,day business operations. CFO= Net Income = Depreciation Expense-
(Change in Current Assets- Change in Current Liabilities)
5. What does the statement of cash flows report
ANS The statement of cash flows shows the change in cash balance
over a period of time. The statement of cash flows describes how a
balance increases or decreases. The 3 components CFO, CFF, CFI help
describe changes in cash.
6. Write the equation that links the income to the balance sheet
ANS Retained Earnings Equation. Ending Retained Earnings= Beginning
Retained Earnings+ Net Income-Dividends Paid.
7. What is the firm's cash flow from financing activities
ANS Cash flow from financ- ing activities shows you the cash that is
generated from financing a business. CFF= Increase in LT Debt (bonds)
+ Increase in Stock - Dividends Paid.
8. Describe an income statement
ANS Revenues expenses and income (R.E.I)
9. What item is included in the income statement and not included in
the statement of cash flows
, ANS Depreciation Expense
10.A company sold goods in 2016 for $30,000 and collected the cash in
2017. In 2016, the company incurred and paid $20,000 in expenses related to
the goods sold. How much income should the company report in 2016 under
the accrual basis of accounting
ANS $30,000-$20,000= $10,000
11. EBIT: $1,000,000
Depreciation: $30,000
Change in working capital:
($5,000) Net capital expenditures:
$10,000 Tax rate: 40%
What is the company's free cash flow
ANS FCFF=EBIT * (1-Tax Rate)+ Deprecia- tion- Cap Exp- Increase in
NWC
1,000,000* (1-.40)+ 30,000-10,000- (5,000)
= 600,000+ 30,000-10,000+ 5,000
= $625,000
