WGU C214 2023 questions and correct answers

WGU C214 2023 questions and correct answers Corporate Finance - correct answer focuses on financial decision making by a firms management Investments - correct answer various types of financial instruments (stocks, bonds, etc) Banking or Financial Institutions - correct answer make money by paying depositors a smaller interest rate than the interest rate charged to borrowers Treasury Securities - correct answer generally bonds that are issued by the US government Corporate Bonds - correct answer firms borrowing from the public Stocks - correct answer a share of ownership in a company Primary financial markets - correct answer markets where securities are first issued Syndicate - correct answer a group that is temporarily formed to handle a bond or stock issue: generally large investment bank or institutional investors Underwriter - correct answer responsible for determining the value of the security; may purchase all the securities & then resale to investors Competitive sale - correct answer underwriters submit bids offering highest price/lowest interest rate; underwriter resales a slightly higher price Negotiated sale - correct answer underwriters submit bids, go thru interview to be selected Secondary financial markets - correct answer where securities are traded after the initial offering (stock market) Auction market - correct answer has a physical location & prices are determined by the highest price an investor is willing to pay (New York Stock Exchange) Dealer market - correct answer no physical location- securities are bought & sold thru a network of dealers that trade for themselves; multi dealers per stock (NASDAQ) Role of financial markets - correct answer they reduce the cost of borrowing from the public or selling ownership to the public Role of Specialist (NYSE) or Dealers - correct answer provide liquidity for a fair & orderly market; may increase the spread to do so (charge a lower price to seller and a higher price to buyer) Financial market liquidity - correct answer the ease of trading in the market (high frquency traders) Market orders - correct answer time sensitive; sales at current bid price/buys at current asking price when order is placed-immediately Limited orders - correct answer price sensitive; sell occurs when price of stock matches order price Role of price - correct answer convet information to consumers; affect incentives &affect the distribution of income Dollar Returns - correct answer Pt - Pt-1 + CFt (Pt= sold price, Pt-1=bought price, CFt=cash flow-coupons for bonds/dividians for stocks) Percentage Returns - correct answer Pt - Pt-1/Pt-1 + CFt/Pt-1 x 100 (1.2) (figure for dollar return and divide into bought price) Goal of company/firm - correct answer to maximize shareholder value or maximize profit Agency costs - correct answer costs that are incurred when management doesn't act in the best interests of shareholders Profit maximizarion - correct answer the potential effect of focusing soley on profits Accounting - correct answer is backward-looking and risk free Finance - correct answer is forward-looking and involes massive uncertainty Income Statement - correct answer show results of operation over time; revenues - expenses = net income Balance Sheet - correct answer a "snap shot" of a firm's assests & financing at a paticular point in time; Assets= Liabilities + Owner's Equity Statement of Cash Flows - correct answer tracks all cash in and out of the firm Cash Accounting - correct answer cash in =revenue; cash out=expense Accrual Accounting - correct answer revenues are recognized when the earnings process is complete; expenses are "matched" to recongized revenues Cash-based income - correct answer an informal metric based on cash in & cash out of the firm Income for tax purposes - correct answer based on the government's definition of income, this is the amount of income the government will tax Accounting income - correct answer the income calculated using accrual accounting (aka, GAAP); best & most complicated metric for understanding the operations of the firm On the Income statement - correct answer Revenues- Cost of goods sold= Gross profit - Operating expenses= earning before interest & taxes - interest expenses, - taxes= Net income Revenue - correct answer recognized when "earned" Cost of Goods Sold - correct answer direct costs of materials & labor Gross profit - correct answer revenue - cost of goods sold Operating Expenses - correct answer expenses not directly associated with production (office expenses, administrative expenses, depreciation, research & development) EBIT - correct answer Earnings before interest & tax; Gross profit - operating expenses (also known as operating income) Net Income on balance sheet - correct answer EBIT - interest - taxes Current Assets - correct answer cash marketable securities, A/R, inventory Fixed Assests - correct answer gross fixed assets- accumulated depreciation Current Liabilities - correct answer A/P, accruals, notes payable Equity - correct answer Commonstock, paid-in capital, retained earnings Accumulated depreciation - correct answer total of all depreciation claimed against the firms fixed assets Net PP&E - correct answer original cost (Gross PP&E) - accumulated depreciation Net Income (linking balance sheet & income statement) - correct answer income statement) dividends + change in retained earnings New Retained earnings - correct answer 0d retained earnings + change in retained earnings or old retained earnings + net income - dividends Gross PP&E - correct answer orginal cost of property, plant & equipment Statement of Cash Flows - correct answer cash flow reveals the true health of a company; explains cash in & cash out from operations, investing & financing CFO + CFI + CFF = change in cash - beginning cash = end cash