WGU C214 Finance Management PVCC with complete
solution
How can a private firm appropriately maximize shareholder value?
By making decisions that keep the control of the business with the owners
Why are American regulators focused on international investing in a global
marketplace?
Because international investing in a global marketplace is the concern of American
investors
What is one of the two basic types of financial instruments?
Bonds
Which two effects does the unbundling and offshoring of production have on
employment when the global value chain is taken into consideration?
Unbundling and offshoring allows firms to offer intermediate and final goods at lower
prices, thus increasing employment.
Unbundling and offshoring decreases costs, which results in expansion of sales and
higher employment
What is true about the content and structure of a balance sheet?
It reports the assets, liabilities, and equity at a point in time
A company reported an increase in accounts receivable of $5,000 during the
recent period. Half of this amount is expected to be collected next period.
How will this change in accounts receivable affect the cash flows from the
operating activities section?
The change will decrease cash flows from operations by $5,000
Which statement accurately explains the recognition of revenues and expenses
under accounting income and income for tax purposes?
Revenues and expenses are always recognized in the same period for accounting
income purposes and income for tax purposes
What is the basic equation for a balance sheet?
Assets=liabilities+equity
What do cash flows from investing activities generally relate to?
A firm's purchase and sale of long-term assets
Which transaction is reflected in cash flow from operating activities?
Cash sales to customers
What does free cash flow represent?
Cash available for distribution after funding required reinvestment
An analyst is comparing the ratios of two different firms and needs to address
timing differences.
What would be considered an example of a timing difference between the two
firms?
The firms have different fiscal years
A companys year end balance sheet for 2013:
AR: 900
, Inventory: 1200
Fixed assets: 1000
AP: 1300
Sales: 4000
Salaries: 275
What is their fixed asset turnover ratio?
Net Sales / Average Net Fixed Assets Sales @ 4000 / Fixed Assets @ 1000= 4.0
A firm has a ROE of 0.27 and the industry average ROE is 0.24
Which conclusion would an analyst draw when comparing the firm to the
industry?
The firm is generating higher returns to owners than the industry
What is an example of an inventory method for accounting purposes?
Last in, first out method
A teacher won $100,000 and invests this money for 5 years at an interest rate of
4% (compounded annually).
How much will the teacher have in principal and interest at the end of the 5
years?
N 5, I/Y 4%, PV 100,000, PMT 0, Solve for FV = $121,665
An accountant is 40 years old with an anticipated retirement age of 70 years old.
The accountant plans to save $6,000 per year at the end of the next 30 years to
fund retirement.
How much will the accountant have upon retirement, if the accountant is able to
earn 4% annually on his investment?
N 30 yrs., I/Y 4%, PV 0, PMT 6,000, solve for FV = $336,510 or $336,509.6265
An investor deposits $2,000 per year (beginning today) for 10 years in a 4%
interest bearing account. The last cash flow is received 1 year prior to the end of
the tenth year.
What is the investor's future balance after 10 years?
N 10 yrs, I/Y 4%, PV 0, PMT 2,000, solve for FV = $24,012.21
What is the par value (face value) of a bond?
The sum of money that the corporation promises to pay upon expiration of the bond
A broker is considering purchasing common stock in a company that has
average but consistent operating performance.
Which factor should lead the broker to purchase shares in this company?
Intrinsic value is 25% below the current stock price
A broker is considering buying a dividend-paying stock. The dividend will be paid
at the end of the year. The analyst consensus is the stock will be worth $36 in one
year. The company pays a $2.25 annual dividend (ex dividend date is not a
consideration, the broker will receive the full $2.25), and the broker expects a 12%
rate of return.
What is the highest price the broker should be willing to pay for stock?
$34.15
solution
How can a private firm appropriately maximize shareholder value?
By making decisions that keep the control of the business with the owners
Why are American regulators focused on international investing in a global
marketplace?
Because international investing in a global marketplace is the concern of American
investors
What is one of the two basic types of financial instruments?
Bonds
Which two effects does the unbundling and offshoring of production have on
employment when the global value chain is taken into consideration?
Unbundling and offshoring allows firms to offer intermediate and final goods at lower
prices, thus increasing employment.
Unbundling and offshoring decreases costs, which results in expansion of sales and
higher employment
What is true about the content and structure of a balance sheet?
It reports the assets, liabilities, and equity at a point in time
A company reported an increase in accounts receivable of $5,000 during the
recent period. Half of this amount is expected to be collected next period.
How will this change in accounts receivable affect the cash flows from the
operating activities section?
The change will decrease cash flows from operations by $5,000
Which statement accurately explains the recognition of revenues and expenses
under accounting income and income for tax purposes?
Revenues and expenses are always recognized in the same period for accounting
income purposes and income for tax purposes
What is the basic equation for a balance sheet?
Assets=liabilities+equity
What do cash flows from investing activities generally relate to?
A firm's purchase and sale of long-term assets
Which transaction is reflected in cash flow from operating activities?
Cash sales to customers
What does free cash flow represent?
Cash available for distribution after funding required reinvestment
An analyst is comparing the ratios of two different firms and needs to address
timing differences.
What would be considered an example of a timing difference between the two
firms?
The firms have different fiscal years
A companys year end balance sheet for 2013:
AR: 900
, Inventory: 1200
Fixed assets: 1000
AP: 1300
Sales: 4000
Salaries: 275
What is their fixed asset turnover ratio?
Net Sales / Average Net Fixed Assets Sales @ 4000 / Fixed Assets @ 1000= 4.0
A firm has a ROE of 0.27 and the industry average ROE is 0.24
Which conclusion would an analyst draw when comparing the firm to the
industry?
The firm is generating higher returns to owners than the industry
What is an example of an inventory method for accounting purposes?
Last in, first out method
A teacher won $100,000 and invests this money for 5 years at an interest rate of
4% (compounded annually).
How much will the teacher have in principal and interest at the end of the 5
years?
N 5, I/Y 4%, PV 100,000, PMT 0, Solve for FV = $121,665
An accountant is 40 years old with an anticipated retirement age of 70 years old.
The accountant plans to save $6,000 per year at the end of the next 30 years to
fund retirement.
How much will the accountant have upon retirement, if the accountant is able to
earn 4% annually on his investment?
N 30 yrs., I/Y 4%, PV 0, PMT 6,000, solve for FV = $336,510 or $336,509.6265
An investor deposits $2,000 per year (beginning today) for 10 years in a 4%
interest bearing account. The last cash flow is received 1 year prior to the end of
the tenth year.
What is the investor's future balance after 10 years?
N 10 yrs, I/Y 4%, PV 0, PMT 2,000, solve for FV = $24,012.21
What is the par value (face value) of a bond?
The sum of money that the corporation promises to pay upon expiration of the bond
A broker is considering purchasing common stock in a company that has
average but consistent operating performance.
Which factor should lead the broker to purchase shares in this company?
Intrinsic value is 25% below the current stock price
A broker is considering buying a dividend-paying stock. The dividend will be paid
at the end of the year. The analyst consensus is the stock will be worth $36 in one
year. The company pays a $2.25 annual dividend (ex dividend date is not a
consideration, the broker will receive the full $2.25), and the broker expects a 12%
rate of return.
What is the highest price the broker should be willing to pay for stock?
$34.15
