WGU C214 Finance questions with verified answers
A firm facing bankruptcy will reduce debt to avoid associated high levels of
bankruptcy costs. Ans✓✓✓ How does the anticipation of bankruptcy affect a
firm's capital structure?
A firm's annual report to the SEC Ans✓✓✓ What is a 10-K?
A firm's purchase and sale of long-term assets Ans✓✓✓ What do cash flows from
investing activities generally relate to?
A greater percentage decrease in Company Y's pre-tax profit Ans✓✓✓ Company
Y has a greater degree of financial risk than Company Z.What would be a result of
a 1% decrease in EBIT for both companies?
Accept when the project return is greater than the required return Ans✓✓✓
What is the acceptance criteria when using internal rate of return to evaluate a
project?
Accounting difference Ans✓✓✓ Firms using different valuation methods is an
example of what?
Accounts receivable turnover Ans✓✓✓ Which financial ratio is used to measure a
company's effectiveness in extending credit as well as collecting debts?
Added to last differential cash flow Ans✓✓✓ In evaluation of investments, how is
the terminal cash flow treated?
,Annual cash flows for the life of the new project
Cash flow when the firm terminates the project
The initial cost of the new project
(all end with the word project) Ans✓✓✓ Which three pieces of data are needed
to perform a capital budget analysis?
Any time the number of compounding periods is greater than annual. Ans✓✓✓
Under which circumstances will annual percentage yield (APY) be greater than the
annual percentage rate (APR)?
AP and accrued expenses Ans✓✓✓ Current liabilities for CFO are
AR and inventory (no cash) Ans✓✓✓ Current assets for CFO are
As risk increases, required return increases Ans✓✓✓ What is meant by "risk-
return trade-off"?
Asset turnover Ans✓✓✓ To assess firm efficiency, which ratio would you use?
Assets = Liabilities + Equity Ans✓✓✓ What is the basic equation for a balance
sheet?
Audit internal controls Ans✓✓✓ What does the Sarbanes-Oxley Act require
companies to do?
, Balance risk and profit to maximize the stock price Ans✓✓✓ Which best
describes the goal of a corporation?
Banking Industry Ans✓✓✓ Dodd-Frank regulates which segment of the U.S.
Economy?
BBB Ans✓✓✓ Junk bonds are those whose rating is below
Because international investing in a global marketplace is the concern of
American investors Ans✓✓✓ Why are American regulators focused on
international investing in a global marketplace?
Bond issuance Ans✓✓✓ Which is a technique for increasing financial leverage?
Bonds Ans✓✓✓ What is one of the two basic types of financial instruments?
Both Increased fear of bankruptcy and Increased required returns Ans✓✓✓ Why
does excessive leverage cause the stock price to drop?
BOTH Requires projections of future cash flows, and Some inputs may be
estimates Ans✓✓✓ Why are financial decisions made under uncertainty?
Both Uncertainty of forecast assumptions and Formula inputs are estimates
Ans✓✓✓ Why does finance require decision-making under uncertainty?
Buy back bonds Ans✓✓✓ If a firm wished to decrease financial leverage, it would
A firm facing bankruptcy will reduce debt to avoid associated high levels of
bankruptcy costs. Ans✓✓✓ How does the anticipation of bankruptcy affect a
firm's capital structure?
A firm's annual report to the SEC Ans✓✓✓ What is a 10-K?
A firm's purchase and sale of long-term assets Ans✓✓✓ What do cash flows from
investing activities generally relate to?
A greater percentage decrease in Company Y's pre-tax profit Ans✓✓✓ Company
Y has a greater degree of financial risk than Company Z.What would be a result of
a 1% decrease in EBIT for both companies?
Accept when the project return is greater than the required return Ans✓✓✓
What is the acceptance criteria when using internal rate of return to evaluate a
project?
Accounting difference Ans✓✓✓ Firms using different valuation methods is an
example of what?
Accounts receivable turnover Ans✓✓✓ Which financial ratio is used to measure a
company's effectiveness in extending credit as well as collecting debts?
Added to last differential cash flow Ans✓✓✓ In evaluation of investments, how is
the terminal cash flow treated?
,Annual cash flows for the life of the new project
Cash flow when the firm terminates the project
The initial cost of the new project
(all end with the word project) Ans✓✓✓ Which three pieces of data are needed
to perform a capital budget analysis?
Any time the number of compounding periods is greater than annual. Ans✓✓✓
Under which circumstances will annual percentage yield (APY) be greater than the
annual percentage rate (APR)?
AP and accrued expenses Ans✓✓✓ Current liabilities for CFO are
AR and inventory (no cash) Ans✓✓✓ Current assets for CFO are
As risk increases, required return increases Ans✓✓✓ What is meant by "risk-
return trade-off"?
Asset turnover Ans✓✓✓ To assess firm efficiency, which ratio would you use?
Assets = Liabilities + Equity Ans✓✓✓ What is the basic equation for a balance
sheet?
Audit internal controls Ans✓✓✓ What does the Sarbanes-Oxley Act require
companies to do?
, Balance risk and profit to maximize the stock price Ans✓✓✓ Which best
describes the goal of a corporation?
Banking Industry Ans✓✓✓ Dodd-Frank regulates which segment of the U.S.
Economy?
BBB Ans✓✓✓ Junk bonds are those whose rating is below
Because international investing in a global marketplace is the concern of
American investors Ans✓✓✓ Why are American regulators focused on
international investing in a global marketplace?
Bond issuance Ans✓✓✓ Which is a technique for increasing financial leverage?
Bonds Ans✓✓✓ What is one of the two basic types of financial instruments?
Both Increased fear of bankruptcy and Increased required returns Ans✓✓✓ Why
does excessive leverage cause the stock price to drop?
BOTH Requires projections of future cash flows, and Some inputs may be
estimates Ans✓✓✓ Why are financial decisions made under uncertainty?
Both Uncertainty of forecast assumptions and Formula inputs are estimates
Ans✓✓✓ Why does finance require decision-making under uncertainty?
Buy back bonds Ans✓✓✓ If a firm wished to decrease financial leverage, it would
