WGU C214 OA COMPREHENSIVE TEST PAPER
2026 COMPLETE QUESTIONS AND ANSWERS
EXPERT VERIFIED GRADED A+
◉ Increases in operating assets and decreases in operating liabilities
will. Answer: decrease CFO
NOTE: an increase in PP&E (assets) consumes operating cash;
decreases in equipment (liabilities) also consumes operating cash
(CFO)
◉ Unsecured loan. Answer: has no collateral
NOTE: a credit card is an example
◉ Assuming no asset disposals, CFI is. Answer: the change in Gross
PP&E -or- CFI is the change in NET PP&E plus depreciation expense
◉ Assuming no asset disposals, depreciation expense is equal to.
Answer: the change in ACCUMULATED depreciation
◉ Assets are financed by. Answer: other people's money or equity
◉ Dividends are considered. Answer: CFF (financing section)
,◉ A firm with positive CFO should be considered healthy. Answer:
FALSE
NOTE: a positive CFO can still be detrimental to the firm depending
on other factors
◉ The increase in yield (rate) causes. Answer: the bond prices to
decrease (and vice-versa)
NOTE: when interest rates increase, bond prices decrease
◉ A working capital increase caused by an increase in inventory will
be. Answer: a cash outflow
NOTE: capital increase is inventory purchased so money goes out
◉ A firm can sustain negative CFO indefinitely by borrowing, selling
equity, and/or by selling assets. Answer: FALSE
NOTE: a firm can NOT sustain negative CFO forever
◉ Which should NOT be included in the calculation of CFF. Answer: a
change in retained earnings
◉ Dividing CFO among the owners of a firm is a sustainable policy.
Answer: FALSE
NOTE: CFO doesn't allow for required reinvestment
, ◉ Dividing CFO among owners of a firm is NOT a sustainable policy.
Answer: TRUE
NOTE: CFO doesn't allow for required reinvestment
◉ A firm reports the following cash flow data CFO 1 million, CFI
750K, and CFF -100K. Is the firm sustainable. Answer: Yes, the firm
is sustainable. CFF may be due to paying down debt, buying back
stock, or paying dividends
◉ When calculating CFO, an increase in an operating liability such as
A/P or accrued wages represents. Answer: an inflow to the firm
NOTE: if the firm owes to suppliers, more inventory is purchased
and on hand (inflow)
NOTE: Operating liability accounts are:
Increases: an inflow of cash
Decreases: an outflow of cash
◉ CFO can be dramatically impacted by managerial discretion in the
financial reporting process. Answer: TRUE
NOTE: management has discretion which is why financial
statements can be misleading
2026 COMPLETE QUESTIONS AND ANSWERS
EXPERT VERIFIED GRADED A+
◉ Increases in operating assets and decreases in operating liabilities
will. Answer: decrease CFO
NOTE: an increase in PP&E (assets) consumes operating cash;
decreases in equipment (liabilities) also consumes operating cash
(CFO)
◉ Unsecured loan. Answer: has no collateral
NOTE: a credit card is an example
◉ Assuming no asset disposals, CFI is. Answer: the change in Gross
PP&E -or- CFI is the change in NET PP&E plus depreciation expense
◉ Assuming no asset disposals, depreciation expense is equal to.
Answer: the change in ACCUMULATED depreciation
◉ Assets are financed by. Answer: other people's money or equity
◉ Dividends are considered. Answer: CFF (financing section)
,◉ A firm with positive CFO should be considered healthy. Answer:
FALSE
NOTE: a positive CFO can still be detrimental to the firm depending
on other factors
◉ The increase in yield (rate) causes. Answer: the bond prices to
decrease (and vice-versa)
NOTE: when interest rates increase, bond prices decrease
◉ A working capital increase caused by an increase in inventory will
be. Answer: a cash outflow
NOTE: capital increase is inventory purchased so money goes out
◉ A firm can sustain negative CFO indefinitely by borrowing, selling
equity, and/or by selling assets. Answer: FALSE
NOTE: a firm can NOT sustain negative CFO forever
◉ Which should NOT be included in the calculation of CFF. Answer: a
change in retained earnings
◉ Dividing CFO among the owners of a firm is a sustainable policy.
Answer: FALSE
NOTE: CFO doesn't allow for required reinvestment
, ◉ Dividing CFO among owners of a firm is NOT a sustainable policy.
Answer: TRUE
NOTE: CFO doesn't allow for required reinvestment
◉ A firm reports the following cash flow data CFO 1 million, CFI
750K, and CFF -100K. Is the firm sustainable. Answer: Yes, the firm
is sustainable. CFF may be due to paying down debt, buying back
stock, or paying dividends
◉ When calculating CFO, an increase in an operating liability such as
A/P or accrued wages represents. Answer: an inflow to the firm
NOTE: if the firm owes to suppliers, more inventory is purchased
and on hand (inflow)
NOTE: Operating liability accounts are:
Increases: an inflow of cash
Decreases: an outflow of cash
◉ CFO can be dramatically impacted by managerial discretion in the
financial reporting process. Answer: TRUE
NOTE: management has discretion which is why financial
statements can be misleading
