WGU C213 ACCOUNTING FOR DECISION
MAKERS FINAL EXAMINATION TEST 2026 FULL
SOLUTION QUESTIONS AND ANSWERS
VERIFIED
◉ Materiality Answer: size of the thing that makes a difference and
could impact decisions. Important to auditors. If an item is material,
it equals or exceeds 2% of the sales, or 5% of owners equity, or 10%
of net income.
◉ Never Answer: Does materiality replace accounting judgment?
◉ Articulation Answer: Details. All three financial statements are not
isolated but rather an integrated set of reports on a companies
financial status.
◉ Statement of cash flows. Answer: What contains detailed
explanation of why the balance sheet cash amount changed form
beginning to end of the year?
◉ Income statement, combined with amount of dividends declared
during the year. Answer: This explains the change of retained
earnings shown on the balance sheet.
,◉ The accounting adjustments applied to the raw cash flow date.
Answer: cash from operations on the statement of cash flows is
transformed into net income through?
◉ Diagnos existing problems and to foreceast how a company will
perform it he future. Answer: Analysis of financial statement of
numbers can be used to do what?
◉ Financial ratios Answer: This ratio is the relationships between
two financial statement numbers and is often used in analyzing and
describing a companies performance
◉ Common size financial statement (subcategory of financial ratios)
Answer: This allows comparison of financial statements across years
and between companies. They are prepared by dividing all financial
staement numbers by the sales for the year.
◉ The Dupont Framework Answer: Decomposes return on equity
into profitability, efficiency, and leverage components.
◉ Cash flow ratios Answer: Frequently overlooked bc of traditional
analysis models are based on the balance sheet and the income
statement.
,◉ Financial statement analysis Answer: The examination of
RELATIONSHIPS among financial statements numbers over time for
the same company and compared to other companies in the same
industry. External users use this for investing decisions.
◉ Equation for common size financial statements Answer: Dividing
all financial statement numbers by the total sales for the year.
◉ Liquidity Answer: ability of a company to pay it's debt in the short
run
◉ The 6 most widely used financial ratios Answer: Debt ratio, return
on sales, return on equity, current ratio, asset turnover, and price
earnings ratio
◉ Amount to buy the company Answer: What is market value of
equity?
◉ Debt ratio Answer: Total liabilities/total assets. It is a measure of
leverage.
◉ Current ratio Answer: Current assets/current liabilities. Measure
of liquidity. Calculated using the balance sheet.
, ◉ Return on sales Answer: Net income/sales. A measure of the
amount of profit per dollar of sales. PROFITABILITY.
◉ Asset Turnover Answer: Sales/total assets. A measure of a
companies efficiency. This number can be understated and can be
misleading. IT is the number of dollars in sales generated by each
dollar of asset.
◉ Return on equity (ROE) Answer: Net income/Stockholder equity.
A measure of the amount of profit earned per dollar of investment.
◉ Mother of all financial ratios. if you are an investor, you want to
know the ROE, the number tells you as the investor how much
money you will make per year. Answer: ROE
◉ Price earning ratio Answer: Market value of shares/net income. A
measure of growth potential earnings stability, and management
capabilities.
◉ Price earnings ratio Answer: Reflects market expectations of
growth and earnings of the company in the future. Company with
P/E ratio of 10-25 is normal. Netflix was 679 in 2012!
MAKERS FINAL EXAMINATION TEST 2026 FULL
SOLUTION QUESTIONS AND ANSWERS
VERIFIED
◉ Materiality Answer: size of the thing that makes a difference and
could impact decisions. Important to auditors. If an item is material,
it equals or exceeds 2% of the sales, or 5% of owners equity, or 10%
of net income.
◉ Never Answer: Does materiality replace accounting judgment?
◉ Articulation Answer: Details. All three financial statements are not
isolated but rather an integrated set of reports on a companies
financial status.
◉ Statement of cash flows. Answer: What contains detailed
explanation of why the balance sheet cash amount changed form
beginning to end of the year?
◉ Income statement, combined with amount of dividends declared
during the year. Answer: This explains the change of retained
earnings shown on the balance sheet.
,◉ The accounting adjustments applied to the raw cash flow date.
Answer: cash from operations on the statement of cash flows is
transformed into net income through?
◉ Diagnos existing problems and to foreceast how a company will
perform it he future. Answer: Analysis of financial statement of
numbers can be used to do what?
◉ Financial ratios Answer: This ratio is the relationships between
two financial statement numbers and is often used in analyzing and
describing a companies performance
◉ Common size financial statement (subcategory of financial ratios)
Answer: This allows comparison of financial statements across years
and between companies. They are prepared by dividing all financial
staement numbers by the sales for the year.
◉ The Dupont Framework Answer: Decomposes return on equity
into profitability, efficiency, and leverage components.
◉ Cash flow ratios Answer: Frequently overlooked bc of traditional
analysis models are based on the balance sheet and the income
statement.
,◉ Financial statement analysis Answer: The examination of
RELATIONSHIPS among financial statements numbers over time for
the same company and compared to other companies in the same
industry. External users use this for investing decisions.
◉ Equation for common size financial statements Answer: Dividing
all financial statement numbers by the total sales for the year.
◉ Liquidity Answer: ability of a company to pay it's debt in the short
run
◉ The 6 most widely used financial ratios Answer: Debt ratio, return
on sales, return on equity, current ratio, asset turnover, and price
earnings ratio
◉ Amount to buy the company Answer: What is market value of
equity?
◉ Debt ratio Answer: Total liabilities/total assets. It is a measure of
leverage.
◉ Current ratio Answer: Current assets/current liabilities. Measure
of liquidity. Calculated using the balance sheet.
, ◉ Return on sales Answer: Net income/sales. A measure of the
amount of profit per dollar of sales. PROFITABILITY.
◉ Asset Turnover Answer: Sales/total assets. A measure of a
companies efficiency. This number can be understated and can be
misleading. IT is the number of dollars in sales generated by each
dollar of asset.
◉ Return on equity (ROE) Answer: Net income/Stockholder equity.
A measure of the amount of profit earned per dollar of investment.
◉ Mother of all financial ratios. if you are an investor, you want to
know the ROE, the number tells you as the investor how much
money you will make per year. Answer: ROE
◉ Price earning ratio Answer: Market value of shares/net income. A
measure of growth potential earnings stability, and management
capabilities.
◉ Price earnings ratio Answer: Reflects market expectations of
growth and earnings of the company in the future. Company with
P/E ratio of 10-25 is normal. Netflix was 679 in 2012!
