WGU C708 Principles of Finance - Pre
Assessment with Verified Solutions
Corporations establish goals in areas including finance, diversity, and social responsibility. Match
the corporate goal with the area that it addresses.
Answer options may be used more than once or not at all. Select your answers from the pull-down
list.
Environmental goal
Diversity goal
Financial goal
Financial goal ✔✔Environmental goal-Create zero waste
Diversity goal-Promote women and minorities
Financial goal-Make a profitable investment for the company
Financial goal-Switch to a freight company that provides a high volume discount
An analysis of a potential purchase of a new piece of equipment has been completed. The analysis
included a review of the initial cost of the equipment, annual operating expenses, and the value of
the expected increased production adjusted for the time value of money over the life of the
equipment.
Place the investments in the order they should be selected based on their valuation (from highest
to lowest value).
Select your answers from the pull-down list.
Total costs of $700,000 and expected income $850,000
,Total costs of $500,000 and expected income of $700,000
Total costs of $700,000 and expected income $875,000
Total costs of $500,000 and expected income $600,000 ✔✔2) Total costs of $700,000 and
expected income $850,000
3) Total costs of $500,000 and expected income of $700,000
1) Total costs of $700,000 and expected income $875,000
4) Total costs of $500,000 and expected income $600,000
Classify each item as to whether it has or lacks a fundamental influence on valuation.
Answer options may be used more than once or not at all. Select your answers from the pull-down
list. ✔✔Fundamental influence-Opportunity cost
Fundamental influence-Cash flow
Not a fundamental influence-Taxable income
Not a fundamental influence-Revenue recognition
Which scenario illustrates the strong form of the efficient market hypothesis (EMH)? ✔✔An
investor is making an investment decision based on public information, as well as private
information that is known only to company insiders. This type of information is also known as
insider trading.
A company's accounting records include inflated numbers that give the company a higher net
income than its actual numbers. This overstatement was agreed upon by the company and its
auditors. This collusion between the company and its auditors would be caught rather quickly due
to regulations.
What agency regulates accounting practices between companies and their accounting firms?
✔✔Public Company Accounting Oversight Board
,In credit unions, boards of directors that hire executives are elected from among volunteering
members (whereas in commercial banks, they are hired by the stockholders from among non-
member outsiders).
Which agency problem with banks does this structure seek to eliminate? ✔✔Between owners and
board of directors
Why is transferability of ownership relatively easy in the case of corporations? ✔✔Stocks can be
bought and sold in the stock market.
Match each account to the pair of financial accounting statements that it appears on.
Answer options may be used more than once or not at all. Select your answers from the pull-down
list. ✔✔Cash-Balance sheet and statement of cash flows
Net income-Income statement and statement of cash flows
Retained earnings-Balance sheet and income statement
How could a company that has a positive accounting income also be in trouble of going bankrupt
when looking at its cash balance? ✔✔Accounting income does not take into account the cash that
is needed to pay salaries and dividends.
Which section of the statement of cash flows includes such transactions as paying dividends to
shareholders, repurchasing common stock, and proceeds from the sale of long-term debt? ✔✔Cash
flows from financing activities
Use the following income statement for the current year. Assume the sales are 35% higher than
the last year sales of $800,000.
, Calculate the net income. ✔✔$604,000
Assume that the cost of goods sold for 2012 increases 10% from the previous year. Other expenses
remain constant for 2012.
What is the net income forecast for the year 2012?
$65,000
-5,850 ✔✔$59,150
Use the following partial income statement data to answer the question below.
What is the 2013 ending balance of accounts payable? ✔✔$7,600
Use the following information to answer the question below.
Cash balance was a fixed percentage of sales for 2012. The same percentage will be used for 2013
for cash.
Accounts Receivables were $4,500 in 2013.
Sales in 2012 were $87,000.
Sales in 2013 are projected at $99,300.
Inventory increased by 10% for 2013.
What is the ending cash balance for 2013? ✔✔$2,850
Assessment with Verified Solutions
Corporations establish goals in areas including finance, diversity, and social responsibility. Match
the corporate goal with the area that it addresses.
Answer options may be used more than once or not at all. Select your answers from the pull-down
list.
Environmental goal
Diversity goal
Financial goal
Financial goal ✔✔Environmental goal-Create zero waste
Diversity goal-Promote women and minorities
Financial goal-Make a profitable investment for the company
Financial goal-Switch to a freight company that provides a high volume discount
An analysis of a potential purchase of a new piece of equipment has been completed. The analysis
included a review of the initial cost of the equipment, annual operating expenses, and the value of
the expected increased production adjusted for the time value of money over the life of the
equipment.
Place the investments in the order they should be selected based on their valuation (from highest
to lowest value).
Select your answers from the pull-down list.
Total costs of $700,000 and expected income $850,000
,Total costs of $500,000 and expected income of $700,000
Total costs of $700,000 and expected income $875,000
Total costs of $500,000 and expected income $600,000 ✔✔2) Total costs of $700,000 and
expected income $850,000
3) Total costs of $500,000 and expected income of $700,000
1) Total costs of $700,000 and expected income $875,000
4) Total costs of $500,000 and expected income $600,000
Classify each item as to whether it has or lacks a fundamental influence on valuation.
Answer options may be used more than once or not at all. Select your answers from the pull-down
list. ✔✔Fundamental influence-Opportunity cost
Fundamental influence-Cash flow
Not a fundamental influence-Taxable income
Not a fundamental influence-Revenue recognition
Which scenario illustrates the strong form of the efficient market hypothesis (EMH)? ✔✔An
investor is making an investment decision based on public information, as well as private
information that is known only to company insiders. This type of information is also known as
insider trading.
A company's accounting records include inflated numbers that give the company a higher net
income than its actual numbers. This overstatement was agreed upon by the company and its
auditors. This collusion between the company and its auditors would be caught rather quickly due
to regulations.
What agency regulates accounting practices between companies and their accounting firms?
✔✔Public Company Accounting Oversight Board
,In credit unions, boards of directors that hire executives are elected from among volunteering
members (whereas in commercial banks, they are hired by the stockholders from among non-
member outsiders).
Which agency problem with banks does this structure seek to eliminate? ✔✔Between owners and
board of directors
Why is transferability of ownership relatively easy in the case of corporations? ✔✔Stocks can be
bought and sold in the stock market.
Match each account to the pair of financial accounting statements that it appears on.
Answer options may be used more than once or not at all. Select your answers from the pull-down
list. ✔✔Cash-Balance sheet and statement of cash flows
Net income-Income statement and statement of cash flows
Retained earnings-Balance sheet and income statement
How could a company that has a positive accounting income also be in trouble of going bankrupt
when looking at its cash balance? ✔✔Accounting income does not take into account the cash that
is needed to pay salaries and dividends.
Which section of the statement of cash flows includes such transactions as paying dividends to
shareholders, repurchasing common stock, and proceeds from the sale of long-term debt? ✔✔Cash
flows from financing activities
Use the following income statement for the current year. Assume the sales are 35% higher than
the last year sales of $800,000.
, Calculate the net income. ✔✔$604,000
Assume that the cost of goods sold for 2012 increases 10% from the previous year. Other expenses
remain constant for 2012.
What is the net income forecast for the year 2012?
$65,000
-5,850 ✔✔$59,150
Use the following partial income statement data to answer the question below.
What is the 2013 ending balance of accounts payable? ✔✔$7,600
Use the following information to answer the question below.
Cash balance was a fixed percentage of sales for 2012. The same percentage will be used for 2013
for cash.
Accounts Receivables were $4,500 in 2013.
Sales in 2012 were $87,000.
Sales in 2013 are projected at $99,300.
Inventory increased by 10% for 2013.
What is the ending cash balance for 2013? ✔✔$2,850
