WGU C214 Question and answers
correctly solved 2025/2026
The goal of the corporation is to: - correct answer ✔maximize stock price
What makes an efficient market? - correct answer ✔Competitive market, liquidity, transparency
What is the relationship between risk and required return? - correct answer ✔As risk increases,
required return increases.
What are the 3 main financial statements? - correct answer ✔Income statement, the Balance Sheet.,
and the statement of cash flows
Which financial statement reflects a POINT in time (not a period in time) - correct answer ✔Balance
sheet
What is Revenue? - correct answer ✔Amount generated by sale of products and services
What is Expenses - correct answer ✔Amount incurred to manufacture products
What is Income? - correct answer ✔The difference between Revenue and Expenses
What are Assets? - correct answer ✔Items that are owned by the company
Land, building, equipment, machinery, supplies, inventory
,What's the difference between a long term asset and a short term asset? - correct answer ✔Short term
assets are expected to be converted to cash within one year, long term assets are typically more
valuable but less liquid (projected to keep for more than a year)
What is Equity? - correct answer ✔Amounts invested in the company by shareholders/investors.
Happens when somebody buys stock in your company.
What is reported on the Income Statement? - correct answer ✔Revenues, Expenses and Income
(Income statement is the FIRST statement a company has to prepare)
What is reported on the Balance Sheet? - correct answer ✔assets, liabilities, equity
Assets = Liability + Equity
What equation is the foundation for all of financial accounting? - correct answer ✔Assets = Liability +
Equity
What are liabilities? - correct answer ✔Amounts owed by the company to others.
i.e. Accounts payable, salaries payable, income tax payable. If you see the word "payable" it's a liability.
What are short term vs long term liabilities? - correct answer ✔Short term liabilities are those debts
that are paid off in one year such as accounts payable, salaries payable and short term loans.
Long term liabilities are due in more than a year, such as long term loans, bonds, and lease agreements.
LTL are used to finance major investments such as purchasing property, plant and equipment.
What is the Revenue Recognition principle? - correct answer ✔Revenue is recognized when product or
service is delivered to the customer.
*The moment you deliver the product or service, you have earned the revenue and have to report it in
the income statement. You don't have to be paid by the customer to report the revenue.
, What is the expense recognition principle? - correct answer ✔Expenses are recognized when expenses
are incurred by the company.
*You don't have to have paid for it yet. You recognize it when it is incurred (employees that work today,
you owe them today's work and it's recognized as today's expense)
What is the accrual based accounting system? - correct answer ✔It's the terminology that we use in
financial accounting for revenue recognition and expense recognition principle.
What is included in the income statement and NOT included in the statement of Cash Flows? - correct
answer ✔Depreciation Expense
(the only expense for which cash will never be paid)
What is the Statement of Retained Earnings? - correct answer ✔A company earns money/earnings
every year. Some of those earnings are paid back to the shareholders (dividends) and the rest is retained
by the company to grow the company and benefit the shareholders.
Net Income Equation if you know the sales revenue and the margin: - correct answer ✔Sales * Net
Margin
List and summarize the 4 financial statements: - correct answer ✔Income Statement: Prepared for a
period of time
Retained Earnings Statement: Prepared for a period of time
Balance Sheet: Prepared for a POINT in time
Statement of Cash Flows: Prepared for a period of time
Basic Equation for the Balance Sheet: - correct answer ✔Equity = Assets - Liabilities OR
Assets = Liabilities + Equity
correctly solved 2025/2026
The goal of the corporation is to: - correct answer ✔maximize stock price
What makes an efficient market? - correct answer ✔Competitive market, liquidity, transparency
What is the relationship between risk and required return? - correct answer ✔As risk increases,
required return increases.
What are the 3 main financial statements? - correct answer ✔Income statement, the Balance Sheet.,
and the statement of cash flows
Which financial statement reflects a POINT in time (not a period in time) - correct answer ✔Balance
sheet
What is Revenue? - correct answer ✔Amount generated by sale of products and services
What is Expenses - correct answer ✔Amount incurred to manufacture products
What is Income? - correct answer ✔The difference between Revenue and Expenses
What are Assets? - correct answer ✔Items that are owned by the company
Land, building, equipment, machinery, supplies, inventory
,What's the difference between a long term asset and a short term asset? - correct answer ✔Short term
assets are expected to be converted to cash within one year, long term assets are typically more
valuable but less liquid (projected to keep for more than a year)
What is Equity? - correct answer ✔Amounts invested in the company by shareholders/investors.
Happens when somebody buys stock in your company.
What is reported on the Income Statement? - correct answer ✔Revenues, Expenses and Income
(Income statement is the FIRST statement a company has to prepare)
What is reported on the Balance Sheet? - correct answer ✔assets, liabilities, equity
Assets = Liability + Equity
What equation is the foundation for all of financial accounting? - correct answer ✔Assets = Liability +
Equity
What are liabilities? - correct answer ✔Amounts owed by the company to others.
i.e. Accounts payable, salaries payable, income tax payable. If you see the word "payable" it's a liability.
What are short term vs long term liabilities? - correct answer ✔Short term liabilities are those debts
that are paid off in one year such as accounts payable, salaries payable and short term loans.
Long term liabilities are due in more than a year, such as long term loans, bonds, and lease agreements.
LTL are used to finance major investments such as purchasing property, plant and equipment.
What is the Revenue Recognition principle? - correct answer ✔Revenue is recognized when product or
service is delivered to the customer.
*The moment you deliver the product or service, you have earned the revenue and have to report it in
the income statement. You don't have to be paid by the customer to report the revenue.
, What is the expense recognition principle? - correct answer ✔Expenses are recognized when expenses
are incurred by the company.
*You don't have to have paid for it yet. You recognize it when it is incurred (employees that work today,
you owe them today's work and it's recognized as today's expense)
What is the accrual based accounting system? - correct answer ✔It's the terminology that we use in
financial accounting for revenue recognition and expense recognition principle.
What is included in the income statement and NOT included in the statement of Cash Flows? - correct
answer ✔Depreciation Expense
(the only expense for which cash will never be paid)
What is the Statement of Retained Earnings? - correct answer ✔A company earns money/earnings
every year. Some of those earnings are paid back to the shareholders (dividends) and the rest is retained
by the company to grow the company and benefit the shareholders.
Net Income Equation if you know the sales revenue and the margin: - correct answer ✔Sales * Net
Margin
List and summarize the 4 financial statements: - correct answer ✔Income Statement: Prepared for a
period of time
Retained Earnings Statement: Prepared for a period of time
Balance Sheet: Prepared for a POINT in time
Statement of Cash Flows: Prepared for a period of time
Basic Equation for the Balance Sheet: - correct answer ✔Equity = Assets - Liabilities OR
Assets = Liabilities + Equity
