WGU C214 OA Financial Management Question
and Answer | Latest A+ Verified | 2026/2027
Exam Guide
• What makes an efficient market? -✓✓Competitive market, liquidity, transparency
• What is the relationship between risk and required return? -✓✓As risk increases,
required return increases.
• What are the 3 main financial statements? -✓✓Income statement, the Balance Sheet.,
and the statement of cash flows
• Which financial statement reflects a POINT in time (not a period in time) -✓✓Balance
sheet
• What is Revenue? -✓✓Amount generated by sale of products and services
• What is Expenses -✓✓Amount incurred to manufacture products
• What is Income? -✓✓The difference between Revenue and Expenses
• What are Assets? -✓✓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? -✓✓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? -✓✓Amounts invested in the company by shareholders/investors.
Happens when somebody buys stock in your company.
• What is reported on the Income Statement? -✓✓Revenues, Expenses and Income
(Income statement is the FIRST statement a company has to prepare)
• What is reported on the Balance Sheet? -✓✓assets, liabilities, equity
Assets = Liability + Equity
• What equation is the foundation for all of financial accounting? -✓✓Assets = Liability +
Equity
• What are liabilities? -✓✓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? -✓✓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? -✓✓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? -✓✓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? -✓✓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? -✓✓Depreciation Expense
(the only expense for which cash will never be paid)
• What is the Statement of Retained Earnings? -✓✓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: -✓✓Sales * Net
Margin
• List and summarize the 4 financial statements: -✓✓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: -✓✓Equity = Assets - Liabilities OR
Assets = Liabilities + Equity
• What is the statement of cash flows? -✓✓It shows the change in cash balance for a
period of time.
, • What are the 3 types of cash flows? -✓✓CFO: Cash flow from Operations
CFI: Cash flow from Investing
CFF: Cash flow from Financing
• What is increase in networking capital? -✓✓Change in current assets - change in
current liabilities
• List some current assets -✓✓Accounts receivable, Inventory, Prepaid Expenses
• List some Current Liabilities -✓✓Accounts Payable, Salaries Payable, Accrued
Expenses
• What's another word for Current Assets? -✓✓Operating Assets
• What's another word for Current Liabilities -✓✓Operating Liabilities
• What is change in current assets (formula) -✓✓Increase in current assets - Decrease
in current assets
• What is change in current liability (formula) -✓✓Increase in current liability - Decrease
in current liability
• What's the formula for change in Net PPE? -✓✓change in net PPE = PPE at the END
of the year - PPE at the Beginning of the year.
• What's the formula for net change in debt or stock? -✓✓Increase in Debt/stock -
Decrease in Debt/stock
• Debt is also known as... -✓✓Long Term Liabilities
• Stock is also known as... -✓✓Equities
• What is CFF -✓✓Cash flow from financing. Things like issuance of equity, repayment
of equity, payment of dividends, Issuance of debt, repayment of debt, capital/finance
lease payments.
• What is CFO -✓✓Cash flow from operations. Things like Salaries paid to employees,
cash paid to vendors and suppliers, cash collected from customers.
• What is CFI? -✓✓Cash flow from Investing. Things like making and collecting loans,
acquisition and disposition of debt or equity instruments
and Answer | Latest A+ Verified | 2026/2027
Exam Guide
• What makes an efficient market? -✓✓Competitive market, liquidity, transparency
• What is the relationship between risk and required return? -✓✓As risk increases,
required return increases.
• What are the 3 main financial statements? -✓✓Income statement, the Balance Sheet.,
and the statement of cash flows
• Which financial statement reflects a POINT in time (not a period in time) -✓✓Balance
sheet
• What is Revenue? -✓✓Amount generated by sale of products and services
• What is Expenses -✓✓Amount incurred to manufacture products
• What is Income? -✓✓The difference between Revenue and Expenses
• What are Assets? -✓✓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? -✓✓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? -✓✓Amounts invested in the company by shareholders/investors.
Happens when somebody buys stock in your company.
• What is reported on the Income Statement? -✓✓Revenues, Expenses and Income
(Income statement is the FIRST statement a company has to prepare)
• What is reported on the Balance Sheet? -✓✓assets, liabilities, equity
Assets = Liability + Equity
• What equation is the foundation for all of financial accounting? -✓✓Assets = Liability +
Equity
• What are liabilities? -✓✓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? -✓✓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? -✓✓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? -✓✓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? -✓✓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? -✓✓Depreciation Expense
(the only expense for which cash will never be paid)
• What is the Statement of Retained Earnings? -✓✓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: -✓✓Sales * Net
Margin
• List and summarize the 4 financial statements: -✓✓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: -✓✓Equity = Assets - Liabilities OR
Assets = Liabilities + Equity
• What is the statement of cash flows? -✓✓It shows the change in cash balance for a
period of time.
, • What are the 3 types of cash flows? -✓✓CFO: Cash flow from Operations
CFI: Cash flow from Investing
CFF: Cash flow from Financing
• What is increase in networking capital? -✓✓Change in current assets - change in
current liabilities
• List some current assets -✓✓Accounts receivable, Inventory, Prepaid Expenses
• List some Current Liabilities -✓✓Accounts Payable, Salaries Payable, Accrued
Expenses
• What's another word for Current Assets? -✓✓Operating Assets
• What's another word for Current Liabilities -✓✓Operating Liabilities
• What is change in current assets (formula) -✓✓Increase in current assets - Decrease
in current assets
• What is change in current liability (formula) -✓✓Increase in current liability - Decrease
in current liability
• What's the formula for change in Net PPE? -✓✓change in net PPE = PPE at the END
of the year - PPE at the Beginning of the year.
• What's the formula for net change in debt or stock? -✓✓Increase in Debt/stock -
Decrease in Debt/stock
• Debt is also known as... -✓✓Long Term Liabilities
• Stock is also known as... -✓✓Equities
• What is CFF -✓✓Cash flow from financing. Things like issuance of equity, repayment
of equity, payment of dividends, Issuance of debt, repayment of debt, capital/finance
lease payments.
• What is CFO -✓✓Cash flow from operations. Things like Salaries paid to employees,
cash paid to vendors and suppliers, cash collected from customers.
• What is CFI? -✓✓Cash flow from Investing. Things like making and collecting loans,
acquisition and disposition of debt or equity instruments
