WGU C214 Financial Management OA
Trading on the NYSE is executed without a specialist (i.e. a market maker). True
or False? Correct Answer: False
Stocks and Bonds are two types of financial instruments. True or False? Correct
Answer: True
When revenue is matched with cost of sales in an Income statement it is called?
Correct Answer: Matching principle
Basic balance sheet equation is what? Correct Answer: Equity = Assets -
Liabilities
Why is the balance sheet known as the permanent statement? Correct Answer:
Because the other statements are reset at the end of the fiscal year.
How do you calculate the change in retained earnings? Correct Answer: Net
income-dividends
Sales - Cost of Sales - other expenses = Correct Answer: Operating Income or
EBiT
Name four accounts that are part of total assets? Correct Answer: Cash, Accounts
receivable, inventory, long term assets
Name three accounts that are part of total liabilities? Correct Answer: Bonds,
accounts payable and mortgage
Name four accounts that are part of current assets? Correct Answer: Inventory,
cash, accounts receivable and short term investments.
Name three accounts that are only included in cash flow from financing? Correct
Answer: Common stock, dividends paid and bonds payable
Define the statement of cash flows? Correct Answer: Calculated for the same
period of time as the incomes statement is calculated based on the income
statement and changes in the balance sheet is one of the three basic accounting
statements.
, When fixed assets increase what happens to cash? Correct Answer: Cash will
decrease
What is the purpose of the statement of cash flows? Correct Answer: Explains the
change in cash over the course of the specified time frame.
Suppose the inventory turnover of a company is higher than the industry. Based on
this observation, which of the following is most likely? Correct Answer: The firm
has too little inventory resulting in lost sales or stock-outs.
If a company wishes to obtain a bank loan, will it want to have a higher current
ratio or a lower current ratio? Correct Answer: Higher
The Operating Income Return on Investment (OIROI) uses what elements on the
income statement? Correct Answer: EBIT and total assets
Why would a company be interested in the Total Asset Turnover (TAT) ratio?
Correct Answer: To see how efficient are at producing sales
What annual interest will be paid for a zero coupon bond? Correct Answer: 0%
What is the most significant characteristic of subordinated debt? Correct Answer:
Senior debt is paid off first
If a company wants to increase its debt capital, how will they raise the funds?
Correct Answer: Sell bonds
What is the lowest level investment bond Correct Answer: BBB
What can cause the bond price to fluctuate? Correct Answer: A change in the bond
rating, a change in the financial condition, general change in interest rates.
What does a company use as security for a bond? Correct Answer: Credit
worthiness
Under the efficient market hypothesis, what will companies endeavor to do?
Correct Answer: Maximize profits for a given level of risk
Trading on the NYSE is executed without a specialist (i.e. a market maker). True
or False? Correct Answer: False
Stocks and Bonds are two types of financial instruments. True or False? Correct
Answer: True
When revenue is matched with cost of sales in an Income statement it is called?
Correct Answer: Matching principle
Basic balance sheet equation is what? Correct Answer: Equity = Assets -
Liabilities
Why is the balance sheet known as the permanent statement? Correct Answer:
Because the other statements are reset at the end of the fiscal year.
How do you calculate the change in retained earnings? Correct Answer: Net
income-dividends
Sales - Cost of Sales - other expenses = Correct Answer: Operating Income or
EBiT
Name four accounts that are part of total assets? Correct Answer: Cash, Accounts
receivable, inventory, long term assets
Name three accounts that are part of total liabilities? Correct Answer: Bonds,
accounts payable and mortgage
Name four accounts that are part of current assets? Correct Answer: Inventory,
cash, accounts receivable and short term investments.
Name three accounts that are only included in cash flow from financing? Correct
Answer: Common stock, dividends paid and bonds payable
Define the statement of cash flows? Correct Answer: Calculated for the same
period of time as the incomes statement is calculated based on the income
statement and changes in the balance sheet is one of the three basic accounting
statements.
, When fixed assets increase what happens to cash? Correct Answer: Cash will
decrease
What is the purpose of the statement of cash flows? Correct Answer: Explains the
change in cash over the course of the specified time frame.
Suppose the inventory turnover of a company is higher than the industry. Based on
this observation, which of the following is most likely? Correct Answer: The firm
has too little inventory resulting in lost sales or stock-outs.
If a company wishes to obtain a bank loan, will it want to have a higher current
ratio or a lower current ratio? Correct Answer: Higher
The Operating Income Return on Investment (OIROI) uses what elements on the
income statement? Correct Answer: EBIT and total assets
Why would a company be interested in the Total Asset Turnover (TAT) ratio?
Correct Answer: To see how efficient are at producing sales
What annual interest will be paid for a zero coupon bond? Correct Answer: 0%
What is the most significant characteristic of subordinated debt? Correct Answer:
Senior debt is paid off first
If a company wants to increase its debt capital, how will they raise the funds?
Correct Answer: Sell bonds
What is the lowest level investment bond Correct Answer: BBB
What can cause the bond price to fluctuate? Correct Answer: A change in the bond
rating, a change in the financial condition, general change in interest rates.
What does a company use as security for a bond? Correct Answer: Credit
worthiness
Under the efficient market hypothesis, what will companies endeavor to do?
Correct Answer: Maximize profits for a given level of risk
