C214 Practice Questions
Answer Key
Financial Management
(Western Governors
University)
,Overview of Finance
1. Trading on the NYSE is executed without a specialist (i.e. a market
maker). True/False*
2. Stocks and bonds are two types of financial instruments
*True/False
3. When revenue is matched with cost of sales in an income statement it is
called: Matching Principle
4.A high-quality customer just purchased $500,000 worth of product from your
company. The contract calls for immediate delivery of the product with a cash
payment of $300,000 today and $200,000 to be paid 60 days. The expense associated
with the product is $300,000, of which $100,000 has not been paid to your supplier.
Under accrual based accounting system, you will most likely report:
Revenues of Expenses of
Revenues 500,000 Expenses 300,000
Income Statement/Balance Sheet
5. A firm reported retained earnings of $300 in 12/31/20x2. For 12/31/20x3, the firm
reports retained earnings of $400 and pays dividends of $25. What was net income in
20x3?
Beg RE = 300, NI = 125, Div = -25, End RE = 400
6. A basic equation for the balance sheet
is: Equity = Assets – Liabilities
7. Why is the Balance Sheet known as a permanent statement?
Because the other statements are reset at the end of the fiscal
year
8. How do you calculate the change in Retained
Earnings? Net Income – Dividends
9. Sales minus Cost of Sales minus other expenses equals
what? Operating Income or EBIT
10. Name four accounts that are part of total assets?
Cash Accounts Receivable, Inventory, Long Term Assets
11. Name three accounts that are part of current assets?
Inventory, Cash, Accounts Receivable, Short Term
Investments
12. Name four accounts that are part of Total
Liabilities? Bonds, Accounts Payable, Mortgage
, Statement of Cash Flows
13. Intel reported the following for
2014: Net Income 100,000
Depreciation 20,000
Change in A/R 10,000
What is the cash flow from operating activities?
100 + 20 – 10 = 110
14. Name three accounts that are only included in Cash Flow from Financing (CFF)?
Common Stock, Dividends Paid, Bonds Payable
15. Define the Statement of Cash Flows:
Calculated for the same period of time as the Income Statement
Is calculated based on the Income Statement and the changes in the Balance Sheet
Is one of the three basic accounting statements
16. Intel reported the following for 2014:
Gross Equipment (1/1/14) 50,000
Gross Equipment (12/31/14) 65,000
Net income 100,000
Depreciation 20,000
What is the cash flow from investing activities for 2014?
(15,000) Depreciation is not counted when using Gross PPE
17. What is the Cash Flow from Operations given the following information?
Net Income 450,000
Change in Accounts Receivable 120,000
Change in Inventory - 90,000
Change in PP&E 60,000
Depreciation Expense 110,000
Change in Accounts Payable 50,000
Change in Accrued Expenses - 75,000
Change in Common Stock 300,000
450 + 110 Depn – 120 + 90 + 50 – 75 = 505,000
18.What is the Cash Flow from Investing?
Increase in Gross PP&E 125,000
Beginning Net PP&E 750,000
Ending Net PP&E 850,000
Depreciation Expense 25,000
Net End 850 less Net Beg 750 plus Depn 25 = 125 Outflow
(125,000)
19. What is the Cash Flow from Investing?
Answer Key
Financial Management
(Western Governors
University)
,Overview of Finance
1. Trading on the NYSE is executed without a specialist (i.e. a market
maker). True/False*
2. Stocks and bonds are two types of financial instruments
*True/False
3. When revenue is matched with cost of sales in an income statement it is
called: Matching Principle
4.A high-quality customer just purchased $500,000 worth of product from your
company. The contract calls for immediate delivery of the product with a cash
payment of $300,000 today and $200,000 to be paid 60 days. The expense associated
with the product is $300,000, of which $100,000 has not been paid to your supplier.
Under accrual based accounting system, you will most likely report:
Revenues of Expenses of
Revenues 500,000 Expenses 300,000
Income Statement/Balance Sheet
5. A firm reported retained earnings of $300 in 12/31/20x2. For 12/31/20x3, the firm
reports retained earnings of $400 and pays dividends of $25. What was net income in
20x3?
Beg RE = 300, NI = 125, Div = -25, End RE = 400
6. A basic equation for the balance sheet
is: Equity = Assets – Liabilities
7. Why is the Balance Sheet known as a permanent statement?
Because the other statements are reset at the end of the fiscal
year
8. How do you calculate the change in Retained
Earnings? Net Income – Dividends
9. Sales minus Cost of Sales minus other expenses equals
what? Operating Income or EBIT
10. Name four accounts that are part of total assets?
Cash Accounts Receivable, Inventory, Long Term Assets
11. Name three accounts that are part of current assets?
Inventory, Cash, Accounts Receivable, Short Term
Investments
12. Name four accounts that are part of Total
Liabilities? Bonds, Accounts Payable, Mortgage
, Statement of Cash Flows
13. Intel reported the following for
2014: Net Income 100,000
Depreciation 20,000
Change in A/R 10,000
What is the cash flow from operating activities?
100 + 20 – 10 = 110
14. Name three accounts that are only included in Cash Flow from Financing (CFF)?
Common Stock, Dividends Paid, Bonds Payable
15. Define the Statement of Cash Flows:
Calculated for the same period of time as the Income Statement
Is calculated based on the Income Statement and the changes in the Balance Sheet
Is one of the three basic accounting statements
16. Intel reported the following for 2014:
Gross Equipment (1/1/14) 50,000
Gross Equipment (12/31/14) 65,000
Net income 100,000
Depreciation 20,000
What is the cash flow from investing activities for 2014?
(15,000) Depreciation is not counted when using Gross PPE
17. What is the Cash Flow from Operations given the following information?
Net Income 450,000
Change in Accounts Receivable 120,000
Change in Inventory - 90,000
Change in PP&E 60,000
Depreciation Expense 110,000
Change in Accounts Payable 50,000
Change in Accrued Expenses - 75,000
Change in Common Stock 300,000
450 + 110 Depn – 120 + 90 + 50 – 75 = 505,000
18.What is the Cash Flow from Investing?
Increase in Gross PP&E 125,000
Beginning Net PP&E 750,000
Ending Net PP&E 850,000
Depreciation Expense 25,000
Net End 850 less Net Beg 750 plus Depn 25 = 125 Outflow
(125,000)
19. What is the Cash Flow from Investing?
