C214 - Financial Management Study
Guide – WGU Question and answers
100% correct 2025/2026
Hedging - correct answer ✔The process of eliminating risk
Tariffs - correct answer ✔Taxes levied on goods imported into a country
Foreign Exchange Risk (AKA FX Risk) - correct answer ✔Risks associated with the changing values of
countries' concurrences
Direct Quote - correct answer ✔If you are located in the United States, a direct quote is one where the
foreign currency is in the denominator of the quote. EUR/USD = €1.11
Indirect Quote - correct answer ✔When a currency exchange rate is started with the currency of
interest in the denominator. USD/EUR = $0.901
Floating Exchange Rate - correct answer ✔If a country follows a floating exchange rate policy, the value
of the currency is determined strictly by supply and demand in the open market.
Fixed (Pegged) Exchange Rate - correct answer ✔A country's monetary authority (e.g., the Bank of
England for the UK) intervenes to maintain a constant value of the country's currency.
Managed (Dirty Floating) Exchange Rate - correct answer ✔Currencies are generally allowed to float
but the fluctuations are managed. A managed float is essentially a policy of allowing a currency to float
within a minimum and maximum value.
, The two primary methods used to hedge FX risk are: - correct answer ✔Financial derivatives and direct
investment.
Financial Derivatives - correct answer ✔To use a derivative contract also known as a Currency Forward.
Currency Forward - correct answer ✔An agreement for delayed delivery.
Direct Investment - correct answer ✔A direct investment strategy requires a firm build infrastructure in
the country where sales occur. It's very straight forward.
FX Hedging - correct answer ✔Allows firms to focus on making profits through their operations and not
trying to guess which direction FX rates will move.
Tariffs - correct answer ✔The motivation for tariffs is the protection of domestic industries.
Currency Restrictions - correct answer ✔The idea is to limit the ability of a foreign firm to take capital
out of a country.
FASB (Financial Accounting Standards Board) - correct answer ✔The U.S. accounting system is
governed by the Financial Accounting Standards Board (FASB), which is a private non-profit organization
that attempts to establish and regulate the generally accepted accounting principles of firms.
Outsourcing - correct answer ✔To produce a product or service outside of the country.
Outsourcing Disadvantage - correct answer ✔A potential disadvantage to this type of outsourcing is
that manufacturing jobs have dried up in the U.S.
Capital - correct answer ✔A financial asset the can be used by a firm. An example of capital may be
cash held by a firm or machinery.
Guide – WGU Question and answers
100% correct 2025/2026
Hedging - correct answer ✔The process of eliminating risk
Tariffs - correct answer ✔Taxes levied on goods imported into a country
Foreign Exchange Risk (AKA FX Risk) - correct answer ✔Risks associated with the changing values of
countries' concurrences
Direct Quote - correct answer ✔If you are located in the United States, a direct quote is one where the
foreign currency is in the denominator of the quote. EUR/USD = €1.11
Indirect Quote - correct answer ✔When a currency exchange rate is started with the currency of
interest in the denominator. USD/EUR = $0.901
Floating Exchange Rate - correct answer ✔If a country follows a floating exchange rate policy, the value
of the currency is determined strictly by supply and demand in the open market.
Fixed (Pegged) Exchange Rate - correct answer ✔A country's monetary authority (e.g., the Bank of
England for the UK) intervenes to maintain a constant value of the country's currency.
Managed (Dirty Floating) Exchange Rate - correct answer ✔Currencies are generally allowed to float
but the fluctuations are managed. A managed float is essentially a policy of allowing a currency to float
within a minimum and maximum value.
, The two primary methods used to hedge FX risk are: - correct answer ✔Financial derivatives and direct
investment.
Financial Derivatives - correct answer ✔To use a derivative contract also known as a Currency Forward.
Currency Forward - correct answer ✔An agreement for delayed delivery.
Direct Investment - correct answer ✔A direct investment strategy requires a firm build infrastructure in
the country where sales occur. It's very straight forward.
FX Hedging - correct answer ✔Allows firms to focus on making profits through their operations and not
trying to guess which direction FX rates will move.
Tariffs - correct answer ✔The motivation for tariffs is the protection of domestic industries.
Currency Restrictions - correct answer ✔The idea is to limit the ability of a foreign firm to take capital
out of a country.
FASB (Financial Accounting Standards Board) - correct answer ✔The U.S. accounting system is
governed by the Financial Accounting Standards Board (FASB), which is a private non-profit organization
that attempts to establish and regulate the generally accepted accounting principles of firms.
Outsourcing - correct answer ✔To produce a product or service outside of the country.
Outsourcing Disadvantage - correct answer ✔A potential disadvantage to this type of outsourcing is
that manufacturing jobs have dried up in the U.S.
Capital - correct answer ✔A financial asset the can be used by a firm. An example of capital may be
cash held by a firm or machinery.
