WGU - C214 Financial Management – Final Exam Questions and Answers

WGU - C214 Financial Management – Final Exam Questions and Answers Statement of Cash Flows - Answer- Shows the change in cash balance for a period of time. Focuses only on items where cash is received, or cash is paid. Cash Flow from Operating Activities (CFO) - Answer- Cash flow that a company generates as a result of day-to-day business operations. Deals with Current Assets and Current Liabilities. Cash Flow from Investing Activities (CFI) - Answer- Cash flow that is generated from investments in long term assets. Cash Flow from Financing Activities (CFF) - Answer- Cash flow that is used to fund the company. Cash flow that is generated from financing the business. Includes Debt & Equity. How does an increase in Accounts receivable impact CFO? - Answer- An Increase in Accounts receivable will decrease CFO How does an increase in Accounts payable impact CFO? - Answer- An Increase in Accounts Payable will increase CFO What financial statement is prepared at a point in time - Answer- Balance Sheet What financial statements are prepared for a period of time? - Answer- · Income Statement · Retained Earnings Statement · Statement of Cash Flows Define Efficient Frontier - Answer- Maximizes expected return for a given level of risk Where would a risk averse investor fall on the efficient frontier? - Answer- 100% Bonds Where would a risk-taking investor fall on the efficient frontier? - Answer- 100% Stocks What is a Beta? - Answer- A Measure of Risk - A Beta 1 is the average risk of all stocks. Anytime a beta is below 1, it is less risk. If it is more than 1, it is high risk. Define efficient market hypothesis as it relates to a firm? - Answer- For any company to survive, they need to make profitable decisions. Otherwise, investors will shun their business. The firm needs to invest where the return is more than the cost. What is the intrinsic value of a stock under efficient market hypothesis? - Answer- The intrinsic value of stock is the present value of the stock's after tax net cash flows. Whenever the question states that dividend was paid recently or was just paid, what must be calculated first? - Answer- Expected Dividend For every Bond question, what must be entered? - Answer- FV must be entered as 1000 PMT must be entered as 1000 x Coupon Rate What is Capital Budgeting? - Answer- Refers to long term investment decision making. Refers to the process used in making investment decisions involving