WGU C214 FINANCIAL MANAGEMENT COMPREHENSIVE
STUDY GUIDE QUICK BREAK THROUGH |2024UPDATE|
Net Income = - (correct answer) Revenues - Expenses
Revenues - Cost of Goods Sold (COGS) - (correct answer) Gross Profit
Gross Profit - Operating Expenses - (correct answer) EBIT
EBIT = - (correct answer) Sales - Costs - Depreciation
EBIT = - (correct answer) Operating Profit or Operating Income
EBIT - Interest Expense = - (correct answer) Earnings Before Taxes
Earnings before Taxes - Tax Expense = - (correct answer) Net Income (NI)
Retained Earnings - (correct answer) End RE = Beg RE + NI - Dividends
END RE = - (correct answer) Beg RE + (Sales Revenue X Margin%) - Dividend
Payout Ratio x (Sales Revenue X Margin %)
Assets = - (correct answer) Liabilities + Owner's Equity
Equity = - (correct answer) Assets - Liabilities
State of Cash Flows - (correct answer) Shows the change in cash balance for a
period of time
Cash Flow from Operating Activities (CFO) - (correct answer) Net Income +
Depreciation + Decrease in operating assets - increase in current assets - decrease in
current liabilities + increase in current liabilities.
Most common operating asset - (correct answer) Accounts Receivable
Most common operating liability - (correct answer) Accounts Payable
Cash Flow from Investing (CFI) - (correct answer) Investing activities in Property,
Plant and Equipment (PP&E)
CFI = - (correct answer) Gross PP&E end - Gross PP&E Beg
CFI = - (correct answer) Net Change in PP&E(Current PP&E - Last Year PP&E) +
Depreciation for Current Year
, Cash Flow from Financing (CFF) - (correct answer) Cash generated from financial
activities
CFF = - (correct answer) Net change in common stock + net change in long term
liabilities - Dividends
Gordon Growth Model (GGM) - (correct answer) Growth Rate and Dividends
Vo (Value Today) = - (correct answer) D1 (dividend at eoy) / Kcs(required or
expected rate of return) - g (growth rate)
Kcs (required or expected rate of return) = - (correct answer) D1 ( dividend at EOY)/
Vo(value today) + g (growth rate)
D1 (dividend at EOY) = - (correct answer) Do (Dividend now) x (1 + g(growth)
Vps (value of preferred stock) = - (correct answer) D(always the same for PS)/ Kps
(required or expected rate of return)
Capital Asset Pricing Model - (correct answer) CAPM
Capital Asset Pricing Model (CAPM) - (correct answer) a model that relates the
required rate of return on a security to its systematic risk as measured by beta
Efficient Frontier - (correct answer) Ratio that maximizes expected returns for a
given level of risk
Efficient Market Hypothesis (EMH) - (correct answer) Sophisticated investors will
look at the stock and first forecast the cash flow that the stock will generate for the
foreseeable future then will calculate the PV of the cash flows, that is how the price is
determined.
Capital Budgeting - (correct answer) Long term investment decisions, the process
used in making investment decisions involving projects that generate cash flows over a
multi- year time horizon
Initial Outlay = - (correct answer) costs of assets + shipping costs + Working capital
Initial Outlay (IO) = - (correct answer) Purchase price of new equipment + shipping
and handling + WC
Initial Outlay - (correct answer) Purchase price of the asset (usually negative) + S&H
= Depreciable Asset + Old asset price + WC +/- tax or gain or loss (salvage)
Salvage Value = - (correct answer) Old asset price sold -/+ book value X tax rate
STUDY GUIDE QUICK BREAK THROUGH |2024UPDATE|
Net Income = - (correct answer) Revenues - Expenses
Revenues - Cost of Goods Sold (COGS) - (correct answer) Gross Profit
Gross Profit - Operating Expenses - (correct answer) EBIT
EBIT = - (correct answer) Sales - Costs - Depreciation
EBIT = - (correct answer) Operating Profit or Operating Income
EBIT - Interest Expense = - (correct answer) Earnings Before Taxes
Earnings before Taxes - Tax Expense = - (correct answer) Net Income (NI)
Retained Earnings - (correct answer) End RE = Beg RE + NI - Dividends
END RE = - (correct answer) Beg RE + (Sales Revenue X Margin%) - Dividend
Payout Ratio x (Sales Revenue X Margin %)
Assets = - (correct answer) Liabilities + Owner's Equity
Equity = - (correct answer) Assets - Liabilities
State of Cash Flows - (correct answer) Shows the change in cash balance for a
period of time
Cash Flow from Operating Activities (CFO) - (correct answer) Net Income +
Depreciation + Decrease in operating assets - increase in current assets - decrease in
current liabilities + increase in current liabilities.
Most common operating asset - (correct answer) Accounts Receivable
Most common operating liability - (correct answer) Accounts Payable
Cash Flow from Investing (CFI) - (correct answer) Investing activities in Property,
Plant and Equipment (PP&E)
CFI = - (correct answer) Gross PP&E end - Gross PP&E Beg
CFI = - (correct answer) Net Change in PP&E(Current PP&E - Last Year PP&E) +
Depreciation for Current Year
, Cash Flow from Financing (CFF) - (correct answer) Cash generated from financial
activities
CFF = - (correct answer) Net change in common stock + net change in long term
liabilities - Dividends
Gordon Growth Model (GGM) - (correct answer) Growth Rate and Dividends
Vo (Value Today) = - (correct answer) D1 (dividend at eoy) / Kcs(required or
expected rate of return) - g (growth rate)
Kcs (required or expected rate of return) = - (correct answer) D1 ( dividend at EOY)/
Vo(value today) + g (growth rate)
D1 (dividend at EOY) = - (correct answer) Do (Dividend now) x (1 + g(growth)
Vps (value of preferred stock) = - (correct answer) D(always the same for PS)/ Kps
(required or expected rate of return)
Capital Asset Pricing Model - (correct answer) CAPM
Capital Asset Pricing Model (CAPM) - (correct answer) a model that relates the
required rate of return on a security to its systematic risk as measured by beta
Efficient Frontier - (correct answer) Ratio that maximizes expected returns for a
given level of risk
Efficient Market Hypothesis (EMH) - (correct answer) Sophisticated investors will
look at the stock and first forecast the cash flow that the stock will generate for the
foreseeable future then will calculate the PV of the cash flows, that is how the price is
determined.
Capital Budgeting - (correct answer) Long term investment decisions, the process
used in making investment decisions involving projects that generate cash flows over a
multi- year time horizon
Initial Outlay = - (correct answer) costs of assets + shipping costs + Working capital
Initial Outlay (IO) = - (correct answer) Purchase price of new equipment + shipping
and handling + WC
Initial Outlay - (correct answer) Purchase price of the asset (usually negative) + S&H
= Depreciable Asset + Old asset price + WC +/- tax or gain or loss (salvage)
Salvage Value = - (correct answer) Old asset price sold -/+ book value X tax rate
