WGU C214 FINANCE/FINANCIAL MANAGEMENT | EXAM NEWEST
QUESTIONS AND 100% CORRECT ANSWERS | PASS GUARANTEE
1. Q: What is the primary purpose of the Income Statement? ANSWER
To report a company's revenues, expenses, and net income over a
specific period of time.
2. Q: What is the primary purpose of the Balance Sheet? ANSWER To
report a company's assets, liabilities, and stockholders' equity at a
specific point in time.
3. Q: What is the accounting equation? ANSWER Assets = Liabilities +
Stockholders' Equity.
4. Q: What does the Statement of Cash Flows detail? ANSWER The
inflows and outflows of cash categorized into operating, investing,
and financing activities.
5. Q: Which financial statement is used to calculate the Cash
Conversion Cycle? ANSWER The Balance Sheet (along with the
Income Statement).
6. Q: What are Current Assets? ANSWER Assets that are expected to
be converted into cash, sold, or consumed within one year or one
operating cycle.
7. Q: Give three examples of Current Assets. ANSWER Cash, Accounts
Receivable, Inventory.
8. Q: What are Fixed Assets (PP&E)? ANSWER Long-term, tangible
assets used in the operations of a business that are not expected to
be converted to cash within a year.
9. Q: What is depreciation? ANSWER The systematic allocation of the
cost of a tangible asset over its useful life.
,10. Q: Where is depreciation recorded on the Income Statement?
ANSWER As an operating expense (usually under Selling, General,
and Administrative or COGS).
11. Q: What is Accumulated Depreciation? ANSWER A contra-
asset account on the balance sheet that reduces the gross value of a
fixed asset.
12. Q: How do you calculate Net Fixed Assets? ANSWER Gross
Fixed Assets minus Accumulated Depreciation.
13. Q: What are Current Liabilities? ANSWER Obligations that are
due to be paid within one year or one operating cycle.
14. Q: Give three examples of Current Liabilities. ANSWER
Accounts Payable, Short-term debt, Accrued expenses.
15. Q: What is Retained Earnings? ANSWER The cumulative
amount of net income retained in the company since its inception,
minus any dividends paid out.
16. Q: What is the difference between EBIT and Net Income?
ANSWER EBIT (Earnings Before Interest and Taxes) does not
deduct interest or tax expenses; Net Income deducts all expenses
including interest and taxes.
17. Q: What does EBITDA stand for? ANSWER Earnings Before
Interest, Taxes, Depreciation, and Amortization.
18. Q: Why do analysts look at EBITDA? ANSWER To compare
profitability between companies without the effects of financing,
accounting, and tax environments.
19. Q: What are Operating Cash Flows? ANSWER Cash flows
directly related to the production and sale of a company's goods and
services.
20. Q: What are Investing Cash Flows? ANSWER Cash flows
related to the purchase and sale of long-term assets and
investments (e.g., buying equipment, selling real estate).
21. Q: What are Financing Cash Flows? ANSWER Cash flows
related to transactions with a company's creditors and owners (e.g.,
issuing stock, paying dividends, borrowing money).
, 22. Q: If a company issues new common stock, where is this
recorded on the Statement of Cash Flows? ANSWER As a positive
cash inflow in Financing Activities.
23. Q: If a company buys a new factory, where is this recorded?
ANSWER As a negative cash outflow in Investing Activities.
24. Q: What is an accrued expense? ANSWER An expense that has
been incurred on the income statement but has not yet been paid in
cash.
25. Q: What is unearned revenue? ANSWER Cash received from a
customer for goods or services that have not yet been delivered; it
is recorded as a liability.
26. Q: What does "pro forma" mean in financial statements?
ANSWER It refers to projected or estimated financial statements
based on certain assumptions.
27. Q: What is the LIFO method? ANSWER Last-In, First-Out; an
inventory valuation method where the most recently purchased
items are recorded as sold first.
28. Q: What is the FIFO method? ANSWER First-In, First-Out; an
inventory valuation method where the oldest items in inventory are
recorded as sold first.
29. Q: In a period of rising prices, which inventory method (LIFO
or FIFO) results in higher net income? ANSWER FIFO (because
older, cheaper inventory is recorded as Cost of Goods Sold).
30. Q: What is a "liquidating dividend"? ANSWER A dividend that
exceeds the balance in retained earnings; it is considered a return of
the investors' capital, not a distribution of profits.
Part 2: Liquidity & Efficiency Ratios (31-60)
31. Q: What do liquidity ratios measure? ANSWER A company's
ability to pay off its short-term debt obligations.
32. Q: What is the formula for the Current Ratio? ANSWER
Current Assets / Current Liabilities.
33. Q: What is considered a "good" Current Ratio? ANSWER
Generally, a ratio above 1.5 to 2.0 is considered healthy, though it
varies by industry.
QUESTIONS AND 100% CORRECT ANSWERS | PASS GUARANTEE
1. Q: What is the primary purpose of the Income Statement? ANSWER
To report a company's revenues, expenses, and net income over a
specific period of time.
2. Q: What is the primary purpose of the Balance Sheet? ANSWER To
report a company's assets, liabilities, and stockholders' equity at a
specific point in time.
3. Q: What is the accounting equation? ANSWER Assets = Liabilities +
Stockholders' Equity.
4. Q: What does the Statement of Cash Flows detail? ANSWER The
inflows and outflows of cash categorized into operating, investing,
and financing activities.
5. Q: Which financial statement is used to calculate the Cash
Conversion Cycle? ANSWER The Balance Sheet (along with the
Income Statement).
6. Q: What are Current Assets? ANSWER Assets that are expected to
be converted into cash, sold, or consumed within one year or one
operating cycle.
7. Q: Give three examples of Current Assets. ANSWER Cash, Accounts
Receivable, Inventory.
8. Q: What are Fixed Assets (PP&E)? ANSWER Long-term, tangible
assets used in the operations of a business that are not expected to
be converted to cash within a year.
9. Q: What is depreciation? ANSWER The systematic allocation of the
cost of a tangible asset over its useful life.
,10. Q: Where is depreciation recorded on the Income Statement?
ANSWER As an operating expense (usually under Selling, General,
and Administrative or COGS).
11. Q: What is Accumulated Depreciation? ANSWER A contra-
asset account on the balance sheet that reduces the gross value of a
fixed asset.
12. Q: How do you calculate Net Fixed Assets? ANSWER Gross
Fixed Assets minus Accumulated Depreciation.
13. Q: What are Current Liabilities? ANSWER Obligations that are
due to be paid within one year or one operating cycle.
14. Q: Give three examples of Current Liabilities. ANSWER
Accounts Payable, Short-term debt, Accrued expenses.
15. Q: What is Retained Earnings? ANSWER The cumulative
amount of net income retained in the company since its inception,
minus any dividends paid out.
16. Q: What is the difference between EBIT and Net Income?
ANSWER EBIT (Earnings Before Interest and Taxes) does not
deduct interest or tax expenses; Net Income deducts all expenses
including interest and taxes.
17. Q: What does EBITDA stand for? ANSWER Earnings Before
Interest, Taxes, Depreciation, and Amortization.
18. Q: Why do analysts look at EBITDA? ANSWER To compare
profitability between companies without the effects of financing,
accounting, and tax environments.
19. Q: What are Operating Cash Flows? ANSWER Cash flows
directly related to the production and sale of a company's goods and
services.
20. Q: What are Investing Cash Flows? ANSWER Cash flows
related to the purchase and sale of long-term assets and
investments (e.g., buying equipment, selling real estate).
21. Q: What are Financing Cash Flows? ANSWER Cash flows
related to transactions with a company's creditors and owners (e.g.,
issuing stock, paying dividends, borrowing money).
, 22. Q: If a company issues new common stock, where is this
recorded on the Statement of Cash Flows? ANSWER As a positive
cash inflow in Financing Activities.
23. Q: If a company buys a new factory, where is this recorded?
ANSWER As a negative cash outflow in Investing Activities.
24. Q: What is an accrued expense? ANSWER An expense that has
been incurred on the income statement but has not yet been paid in
cash.
25. Q: What is unearned revenue? ANSWER Cash received from a
customer for goods or services that have not yet been delivered; it
is recorded as a liability.
26. Q: What does "pro forma" mean in financial statements?
ANSWER It refers to projected or estimated financial statements
based on certain assumptions.
27. Q: What is the LIFO method? ANSWER Last-In, First-Out; an
inventory valuation method where the most recently purchased
items are recorded as sold first.
28. Q: What is the FIFO method? ANSWER First-In, First-Out; an
inventory valuation method where the oldest items in inventory are
recorded as sold first.
29. Q: In a period of rising prices, which inventory method (LIFO
or FIFO) results in higher net income? ANSWER FIFO (because
older, cheaper inventory is recorded as Cost of Goods Sold).
30. Q: What is a "liquidating dividend"? ANSWER A dividend that
exceeds the balance in retained earnings; it is considered a return of
the investors' capital, not a distribution of profits.
Part 2: Liquidity & Efficiency Ratios (31-60)
31. Q: What do liquidity ratios measure? ANSWER A company's
ability to pay off its short-term debt obligations.
32. Q: What is the formula for the Current Ratio? ANSWER
Current Assets / Current Liabilities.
33. Q: What is considered a "good" Current Ratio? ANSWER
Generally, a ratio above 1.5 to 2.0 is considered healthy, though it
varies by industry.
