WGU C214 Financial Management
Exam Questions and Correct Answers
(2026/2027) 100% Verified.
1. What does "leveraged" result in?
A) More equity than debt and higher stock prices
B) Equal amounts of debt and equity
C) Having more debt (bonds) than equity (stock) and lower stock prices
D) Higher dividends and increased market value
Answer: C
2. A bond premium occurs when:
A) The bond's stated interest rate is lower than the market interest rate
B) Bonds are issued for an amount greater than their face value due to a stated rate
higher than the market rate
C) The bond matures before its stated date
D) The bondholder defaults on payment
Answer: B
3. A change in notes payable (bank loans) will impact which section of the cash flow
statement?
A) CFO
B) CFI
C) CFF
D) Both CFO and CFI
Answer: C
4. A collection float is best defined as:
A) The time it takes a firm to pay its suppliers
B) The delay between issuing bonds and receiving funds
C) The time it takes for a firm to be able to use payments received from customers
D) The process of converting inventory into cash
Answer: C
5. A commonly used method for shortening float time is:
A) Issuing preferred stock
B) Increasing accounts receivable
C) Electronic check processing
D) Reducing inventory turnover
Answer: C
,6. A dealer market is classified as a:
A) Primary market
B) Secondary market
C) Tertiary market
D) Government-regulated market
Answer: B
7. A discount policy of "2/10 net 30" means:
A) A 10% discount is applied if payment is received within 2 days
B) A 2% discount applies if payment is received within 10 days; full bill due in 30
days
C) A 30% discount is applied if payment is received within 2 days
D) Payment must be made in 10 installments over 30 days
Answer: B
8. Can a firm sustain negative CFO indefinitely by borrowing or selling assets?
A) Yes, as long as it keeps selling equity
B) Yes, borrowing can sustain negative CFO forever
C) No, a firm cannot sustain negative CFO indefinitely
D) Yes, as long as bond issuance remains active
Answer: C
9. According to CAPM, if a firm has idiosyncratic risk, the return required by
shareholders will be higher. This statement is:
A) True, because idiosyncratic risk increases the beta
B) True, because investors demand compensation for all risks
C) False, because CAPM assumes idiosyncratic risk is diversified away
D) False, because idiosyncratic risk only affects bond holders
Answer: C
10. Accounting income compared to taxable income is:
A) Always higher than taxable income
B) Equal to taxable income
C) Lower than taxable income
D) Unrelated to taxable income
Answer: C
11. Accounts that vary directly with sales are called:
A) Fixed accounts
B) Permanent accounts
C) Spontaneous accounts
D) Incremental accounts
Answer: C
, 12. Why is accrual accounting considered superior to cash accounting?
A) Cash accounting records all transactions in real time
B) Accrual accounting ensures revenues and expenses are recorded when earned,
keeping records synchronized
C) Cash accounting is more accurate for long-term projects
D) Accrual accounting eliminates the need for depreciation
Answer: B
13. All firms wishing to make an IPO for non-accredited investors must:
A) Register with FINRA only
B) File public disclosure to the SEC
C) Issue preferred stock first
D) Obtain approval from the Federal Reserve
Answer: B
14. As corporate tax rates increase:
A) The firm's tax shield from interest decreases
B) The firm experiences a higher tax shield from interest
C) Bond prices increase
D) WACC decreases
Answer: B
15. Assuming no asset disposals, CFI is equal to:
A) The change in Net Income plus depreciation
B) The change in Gross PP&E OR the change in Net PP&E plus depreciation
expense
C) The change in A/P minus A/R
D) Total revenues minus total expenses
Answer: B
16. The basic Balance Sheet equation is:
A) Assets = Liabilities + Revenue
B) Equity = Assets + Liabilities at a point in time
C) Equity = Assets - Liabilities at a point in time
D) Revenue - Expenses = Net Income
Answer: C
17. A bond sells at face value when:
A) The coupon rate is higher than the required rate of return
B) The required rate of return equals the coupon rate
C) The bond is about to mature
D) Market interest rates are declining
Answer: B
Exam Questions and Correct Answers
(2026/2027) 100% Verified.
1. What does "leveraged" result in?
A) More equity than debt and higher stock prices
B) Equal amounts of debt and equity
C) Having more debt (bonds) than equity (stock) and lower stock prices
D) Higher dividends and increased market value
Answer: C
2. A bond premium occurs when:
A) The bond's stated interest rate is lower than the market interest rate
B) Bonds are issued for an amount greater than their face value due to a stated rate
higher than the market rate
C) The bond matures before its stated date
D) The bondholder defaults on payment
Answer: B
3. A change in notes payable (bank loans) will impact which section of the cash flow
statement?
A) CFO
B) CFI
C) CFF
D) Both CFO and CFI
Answer: C
4. A collection float is best defined as:
A) The time it takes a firm to pay its suppliers
B) The delay between issuing bonds and receiving funds
C) The time it takes for a firm to be able to use payments received from customers
D) The process of converting inventory into cash
Answer: C
5. A commonly used method for shortening float time is:
A) Issuing preferred stock
B) Increasing accounts receivable
C) Electronic check processing
D) Reducing inventory turnover
Answer: C
,6. A dealer market is classified as a:
A) Primary market
B) Secondary market
C) Tertiary market
D) Government-regulated market
Answer: B
7. A discount policy of "2/10 net 30" means:
A) A 10% discount is applied if payment is received within 2 days
B) A 2% discount applies if payment is received within 10 days; full bill due in 30
days
C) A 30% discount is applied if payment is received within 2 days
D) Payment must be made in 10 installments over 30 days
Answer: B
8. Can a firm sustain negative CFO indefinitely by borrowing or selling assets?
A) Yes, as long as it keeps selling equity
B) Yes, borrowing can sustain negative CFO forever
C) No, a firm cannot sustain negative CFO indefinitely
D) Yes, as long as bond issuance remains active
Answer: C
9. According to CAPM, if a firm has idiosyncratic risk, the return required by
shareholders will be higher. This statement is:
A) True, because idiosyncratic risk increases the beta
B) True, because investors demand compensation for all risks
C) False, because CAPM assumes idiosyncratic risk is diversified away
D) False, because idiosyncratic risk only affects bond holders
Answer: C
10. Accounting income compared to taxable income is:
A) Always higher than taxable income
B) Equal to taxable income
C) Lower than taxable income
D) Unrelated to taxable income
Answer: C
11. Accounts that vary directly with sales are called:
A) Fixed accounts
B) Permanent accounts
C) Spontaneous accounts
D) Incremental accounts
Answer: C
, 12. Why is accrual accounting considered superior to cash accounting?
A) Cash accounting records all transactions in real time
B) Accrual accounting ensures revenues and expenses are recorded when earned,
keeping records synchronized
C) Cash accounting is more accurate for long-term projects
D) Accrual accounting eliminates the need for depreciation
Answer: B
13. All firms wishing to make an IPO for non-accredited investors must:
A) Register with FINRA only
B) File public disclosure to the SEC
C) Issue preferred stock first
D) Obtain approval from the Federal Reserve
Answer: B
14. As corporate tax rates increase:
A) The firm's tax shield from interest decreases
B) The firm experiences a higher tax shield from interest
C) Bond prices increase
D) WACC decreases
Answer: B
15. Assuming no asset disposals, CFI is equal to:
A) The change in Net Income plus depreciation
B) The change in Gross PP&E OR the change in Net PP&E plus depreciation
expense
C) The change in A/P minus A/R
D) Total revenues minus total expenses
Answer: B
16. The basic Balance Sheet equation is:
A) Assets = Liabilities + Revenue
B) Equity = Assets + Liabilities at a point in time
C) Equity = Assets - Liabilities at a point in time
D) Revenue - Expenses = Net Income
Answer: C
17. A bond sells at face value when:
A) The coupon rate is higher than the required rate of return
B) The required rate of return equals the coupon rate
C) The bond is about to mature
D) Market interest rates are declining
Answer: B
