Western Governors University
STPECNOC 412C
★ ★
WGU College of Business — C214 Financial Management
O N L I N E . N O N P R O F I T. C O M P E T E N C Y - B A S E D .
EST. 1997
WGU C214 Financial Management — Comprehensive Concepts & Terminology
OBJECTIVE ASSESSMENT PREPARATION — KEY TERMS, FORMULAS, DEFINITIONS & FINANCIAL PRINCIPLES | 2026/2027
INSTITUTION Western Governors University (WGU) COURSE CODE C214 — Financial Management Concepts
PROGRAM Master of Business Administration (MBA) ACADEMIC YEAR
DOCUMENT TYPE Comprehensive Concepts Glossary & Reference Guide TOTAL TERMS 250+ Key Financial Management Terms & Concepts
SUBJECT AREAS Accounting, Valuation, Capital Budgeting, Markets, Regulation FORMAT Glossary — Term & Definition Reference
HOW TO USE THIS REFERENCE GUIDE
▸ This comprehensive glossary contains 250+ key financial management terms organized alphabetically within topic sections.
▸ Terms are drawn from the WGU C214 Concepts Quizlets, Study Guide, Bootcamps, and Pre-Assessment materials.
▸ Each entry includes the term and its definition. Study these concepts thoroughly for Objective Assessment success.
▸ Key formulas and calculations are included within relevant term definitions.
▸ All content reflects current financial management concepts and MBA-level curriculum standards.
SECTION I — ACCOUNTING FUNDAMENTALS, FINANCIAL STATEMENTS & RATIO ANALYSIS Terms A – F
10-K
Annual audited financial statements filed with the SEC. Required by all public firms annually.
10-Q
Quarterly audited financial statements filed with the SEC. Required by all public firms quarterly.
Accrual Accounting
Accounting system based on recording accounts using historical prices and the matching principle. Revenues recognized when earned; expenses matched to revenue recognition.
Accounts Payable (AP)
Current liability representing money owed to suppliers. Typically does not carry interest.
Accounts Receivable (AR)
Current asset representing money owed to the firm for services rendered or products sold on credit.
AR Turnover
Credit Sales / AR. A liquidity ratio measuring how quickly the firm collects receivables.
Accumulated Depreciation
Total depreciation claimed against fixed assets over time (sum of depreciation expenses in prior years).
Additional Paid-in Capital (APIC)
Equity account representing proceeds from stock issuance minus par value (par is usually $1/share).
Agency Cost
Costs incurred when corporate management acts in self-interest rather than in stockholders' interests (principal-agent problem).
Annual Percentage Rate (APR)
The stated annual interest rate that ignores compounding effects.
Annual Percentage Yield (APY)
The actual yield including compounding (effective annual rate). APY = (1 + APR/n)^n - 1. Increases as compounding frequency increases.
Balance Sheet Equation
Assets = Liabilities + Equity. The fundamental accounting identity.
Beta (β)
Measure of individual stock's systematic risk relative to the market. β > 1 = more volatile; β < 1 = less volatile. Key input in CAPM.
Book Value
The accounting value recorded on the balance sheet (historical cost minus depreciation). May differ significantly from market value.
CAPM (Capital Asset Pricing Model)
Linear model relating risk and return: Re = Rf + β(Rm - Rf). Used to calculate required return on equity based on systematic risk.
Cash Flow From Operations (CFO)
Cash raised by producing and selling the firm's product. CFO = Net Income + Depreciation - Increase in NWC.
Cash Flow From Investing (CFI)
Cash used to buy PPE. CFI = (Change in Net PPE + Depreciation Expense) × (-1).
Cash Flow From Financing (CFF)
Cash raised by selling stocks and bonds, minus dividends paid. CFF = Increase in Debt + Increase in Stock - Dividends Paid.
Current Ratio
CA / CL. A liquidity ratio measuring ability to meet short-term obligations.
Degree of Financial Leverage (DFL)
DFL = EBIT / (EBIT - Interest Expense). Measures sensitivity of pre-tax profit to changes in EBIT.
Degree of Operating Leverage (DOL)
DOL = (Sales - Variable Costs) / EBIT. Measures sensitivity of operating income to changes in sales.
DuPont Formula
ROE = Net Margin × TAT × FLR. Decomposes ROE into profitability, efficiency, and leverage components.
EBIT
Earnings Before Interest and Taxes. Frequently used as a proxy for operating income.
Efficient Frontier
Asset mix providing maximum return for a given level of risk, or minimum risk for a given return.
Efficient Market Hypothesis (EMH)
Market prices fully reflect all available information. Intrinsic value = PV of expected cash flows.
STPECNOC 412C
★ ★
WGU College of Business — C214 Financial Management
O N L I N E . N O N P R O F I T. C O M P E T E N C Y - B A S E D .
EST. 1997
WGU C214 Financial Management — Comprehensive Concepts & Terminology
OBJECTIVE ASSESSMENT PREPARATION — KEY TERMS, FORMULAS, DEFINITIONS & FINANCIAL PRINCIPLES | 2026/2027
INSTITUTION Western Governors University (WGU) COURSE CODE C214 — Financial Management Concepts
PROGRAM Master of Business Administration (MBA) ACADEMIC YEAR
DOCUMENT TYPE Comprehensive Concepts Glossary & Reference Guide TOTAL TERMS 250+ Key Financial Management Terms & Concepts
SUBJECT AREAS Accounting, Valuation, Capital Budgeting, Markets, Regulation FORMAT Glossary — Term & Definition Reference
HOW TO USE THIS REFERENCE GUIDE
▸ This comprehensive glossary contains 250+ key financial management terms organized alphabetically within topic sections.
▸ Terms are drawn from the WGU C214 Concepts Quizlets, Study Guide, Bootcamps, and Pre-Assessment materials.
▸ Each entry includes the term and its definition. Study these concepts thoroughly for Objective Assessment success.
▸ Key formulas and calculations are included within relevant term definitions.
▸ All content reflects current financial management concepts and MBA-level curriculum standards.
SECTION I — ACCOUNTING FUNDAMENTALS, FINANCIAL STATEMENTS & RATIO ANALYSIS Terms A – F
10-K
Annual audited financial statements filed with the SEC. Required by all public firms annually.
10-Q
Quarterly audited financial statements filed with the SEC. Required by all public firms quarterly.
Accrual Accounting
Accounting system based on recording accounts using historical prices and the matching principle. Revenues recognized when earned; expenses matched to revenue recognition.
Accounts Payable (AP)
Current liability representing money owed to suppliers. Typically does not carry interest.
Accounts Receivable (AR)
Current asset representing money owed to the firm for services rendered or products sold on credit.
AR Turnover
Credit Sales / AR. A liquidity ratio measuring how quickly the firm collects receivables.
Accumulated Depreciation
Total depreciation claimed against fixed assets over time (sum of depreciation expenses in prior years).
Additional Paid-in Capital (APIC)
Equity account representing proceeds from stock issuance minus par value (par is usually $1/share).
Agency Cost
Costs incurred when corporate management acts in self-interest rather than in stockholders' interests (principal-agent problem).
Annual Percentage Rate (APR)
The stated annual interest rate that ignores compounding effects.
Annual Percentage Yield (APY)
The actual yield including compounding (effective annual rate). APY = (1 + APR/n)^n - 1. Increases as compounding frequency increases.
Balance Sheet Equation
Assets = Liabilities + Equity. The fundamental accounting identity.
Beta (β)
Measure of individual stock's systematic risk relative to the market. β > 1 = more volatile; β < 1 = less volatile. Key input in CAPM.
Book Value
The accounting value recorded on the balance sheet (historical cost minus depreciation). May differ significantly from market value.
CAPM (Capital Asset Pricing Model)
Linear model relating risk and return: Re = Rf + β(Rm - Rf). Used to calculate required return on equity based on systematic risk.
Cash Flow From Operations (CFO)
Cash raised by producing and selling the firm's product. CFO = Net Income + Depreciation - Increase in NWC.
Cash Flow From Investing (CFI)
Cash used to buy PPE. CFI = (Change in Net PPE + Depreciation Expense) × (-1).
Cash Flow From Financing (CFF)
Cash raised by selling stocks and bonds, minus dividends paid. CFF = Increase in Debt + Increase in Stock - Dividends Paid.
Current Ratio
CA / CL. A liquidity ratio measuring ability to meet short-term obligations.
Degree of Financial Leverage (DFL)
DFL = EBIT / (EBIT - Interest Expense). Measures sensitivity of pre-tax profit to changes in EBIT.
Degree of Operating Leverage (DOL)
DOL = (Sales - Variable Costs) / EBIT. Measures sensitivity of operating income to changes in sales.
DuPont Formula
ROE = Net Margin × TAT × FLR. Decomposes ROE into profitability, efficiency, and leverage components.
EBIT
Earnings Before Interest and Taxes. Frequently used as a proxy for operating income.
Efficient Frontier
Asset mix providing maximum return for a given level of risk, or minimum risk for a given return.
Efficient Market Hypothesis (EMH)
Market prices fully reflect all available information. Intrinsic value = PV of expected cash flows.
