Pre-Assessment Exam C214 Question
and answers verified to pass
2025/2026
Pruhart Tech has an innovative app-based trading platform and expects its growth to boom in the next
few years. Before the company goes public, it wants to show a strong history of profit and is focusing its
efforts on improving its bottom line on the income statement.
What is a potential negative consequence if the firm focuses solely on profit maximization? - correct
answer ✔Unethical behavior and potential scandals
How might a privately held company define shareholder value differently from a publicly held company?
- correct answer ✔Privately held companies may value keeping the business within the family
What effect does a current devaluation have on a country's international trade? - correct answer ✔it
makes a country's exports cheaper internationally
- devaluation reduces the price of a country's goods and services abroad, making exports more
competitive while potentially increasing the volume of exports
How does global financing integration benefit corporations? - correct answer ✔it provides access to
wider range of funding sources and investment opportunities
What is an auction market in secondary financial markets? - correct answer ✔a market that operates
where prices are determined by the highest bidder
Why are efficient, well-developed financial markets important for stock pricing? - correct answer
✔they produce more reliable stock prices
, Talia is considering purchasing a small, local construction company. When reviewing the financials, she
notices that although the company produced $200,000 in net income during the last year, the retained
earnings increased only by $50,000.
Which scenario would explain why the change in retained earnings from the previous year did not
increase by the total income earned? - correct answer ✔the remaining earnings were paid out as
dividends to shareholders
- change in retained earnings is calculated as net income - dividends. This relationship indicates that net
income is either distributed as dividends or contributes to a change in the retained earnings of the
company
What does retained earnings represent in the equity section of the balance sheet? - correct answer
✔The cumulative total of earnings not paid out as dividends to stockholders
- RE: the earnings that the company has accumulated and retained over its entire history to finance the
firms asset based
In the statement of cash flows, why is depreciation expense added back to net income when calculating
cash flows from operations (CFO)? - correct answer ✔because it is a non-cash expense
- DE is included back in but doesn't represent an actual cash flow
An investor is considering putting money into a start up company. They ask for the company's projected
statement of cash flows for the next period.
How will this help the investor evaluate the start ups projected performance? - correct answer ✔it will
show the cash flows the firm expects from operating, investing and financing activities.
What can be concluded about the firms cash flows during the year? - correct answer ✔the company
relied heavily on external financing for cash during the year
and answers verified to pass
2025/2026
Pruhart Tech has an innovative app-based trading platform and expects its growth to boom in the next
few years. Before the company goes public, it wants to show a strong history of profit and is focusing its
efforts on improving its bottom line on the income statement.
What is a potential negative consequence if the firm focuses solely on profit maximization? - correct
answer ✔Unethical behavior and potential scandals
How might a privately held company define shareholder value differently from a publicly held company?
- correct answer ✔Privately held companies may value keeping the business within the family
What effect does a current devaluation have on a country's international trade? - correct answer ✔it
makes a country's exports cheaper internationally
- devaluation reduces the price of a country's goods and services abroad, making exports more
competitive while potentially increasing the volume of exports
How does global financing integration benefit corporations? - correct answer ✔it provides access to
wider range of funding sources and investment opportunities
What is an auction market in secondary financial markets? - correct answer ✔a market that operates
where prices are determined by the highest bidder
Why are efficient, well-developed financial markets important for stock pricing? - correct answer
✔they produce more reliable stock prices
, Talia is considering purchasing a small, local construction company. When reviewing the financials, she
notices that although the company produced $200,000 in net income during the last year, the retained
earnings increased only by $50,000.
Which scenario would explain why the change in retained earnings from the previous year did not
increase by the total income earned? - correct answer ✔the remaining earnings were paid out as
dividends to shareholders
- change in retained earnings is calculated as net income - dividends. This relationship indicates that net
income is either distributed as dividends or contributes to a change in the retained earnings of the
company
What does retained earnings represent in the equity section of the balance sheet? - correct answer
✔The cumulative total of earnings not paid out as dividends to stockholders
- RE: the earnings that the company has accumulated and retained over its entire history to finance the
firms asset based
In the statement of cash flows, why is depreciation expense added back to net income when calculating
cash flows from operations (CFO)? - correct answer ✔because it is a non-cash expense
- DE is included back in but doesn't represent an actual cash flow
An investor is considering putting money into a start up company. They ask for the company's projected
statement of cash flows for the next period.
How will this help the investor evaluate the start ups projected performance? - correct answer ✔it will
show the cash flows the firm expects from operating, investing and financing activities.
What can be concluded about the firms cash flows during the year? - correct answer ✔the company
relied heavily on external financing for cash during the year
