WGU C214 OA FinAnCiAl MAnAGeMent
RetAke All POssible QUestiOns And
AnsWeRs | 2025 UPdAte
New start up ventures often issue - CORRECT ANSWER-preferred stock (in an
IPO)
What stock is considered a hybrid - CORRECT ANSWER-preferred stock
One thing common stock and preferred stock have in common is - CORRECT
ANSWER-both have no maturity date
Which type of security has voting rights - CORRECT ANSWER-common stock
Debt covenants and restrictions help to ensure that - CORRECT ANSWER-
management is meeting bond and shareholder expectations
NOTE: covenants are promises meant to be kept
What is true regarding bonds - CORRECT ANSWER--when bond matures,
bondholder gets lump sum back
-coupon rate doesn't change
-maturity is in years
-PAR value is typically $1000
,-Future value (same as PAR) is typically $1000
Bond sells at face value when - CORRECT ANSWER-required rate of return is
equal to the coupon rate
Why are bonds the primary method for raising capital - CORRECT ANSWER-
because bonds remove the intermediary costs
NOTE: IPO's require an intermediary known as a syndicate - a group of banks
underwriting the security issue
What type of bond can be traded for stock - CORRECT ANSWER-convertible
bonds
What is the interest rate for annual payments of a bond known as - CORRECT
ANSWER-the coupon rate
NOTE: coupon rate is the established interest rate for the life of the bond and
will remain unchanged
Coupon rate is the established rate of the bond and should - CORRECT ANSWER-
never change
Characteristics of preferred stock includes - CORRECT ANSWER--dividends in
arrears
-dividends are cumulative
-higher payoff claim in a BK (has first dibs in a BK)
-considered "hybrid" (part stock/part bond)
-no fixed maturity date
-no voting rights
-can skip dividend payments
,-dividends don't change year-after-year
-used in start ups (IPO)
Preferred stock dividends - CORRECT ANSWER-can go without payment and pay
in arrears the following year
Characteristics of common stock are - CORRECT ANSWER--voting rights
-no maturity date
-corporate governance
-lower payoff claim in BK
-variable returns
-unlimited earnings potential
-earnings are in dividends & the increase in price of stock
Debentures are - CORRECT ANSWER-secured bonds
NOTE: debentures are a debt instrument (bond) issued to raise cash, secured
against a company's assets and backed by credit, transferable by the holder,
and may also be unsecured
Secured loan - CORRECT ANSWER-has collateral like a mortgage
The amount repaid at the expiration date of a bond is - CORRECT ANSWER-PAR
value
NOTE: expiration date is also known as maturity date PAR (or Face Value) is
typically $1000
, Duration measures - CORRECT ANSWER-the market risk of a bond and is the
percentage drop in price caused by a 1% increase in yield (rate)
NOTE: measurement of the drop in price after a rate increase
Maturity of bonds is calculated in - CORRECT ANSWER-years
A bond premium occurs when - CORRECT ANSWER-bonds are issued for an
amount greater than their face or maturity amount; caused by the bonds
having a stated interest rate that is higher than the market interest rate for
similar bonds
Junk Bonds are - CORRECT ANSWER-high yield bonds without any stability
"Leveraged" results in - CORRECT ANSWER-having more debt (bonds) than
equity (stock) and lower stock prices
NOTE: recall that debt is safer and levels out risk in a portfolio
In current assets, inventory is the - CORRECT ANSWER-LEAST liquid of current
assets
NOTE: current assets take less than 12 months to make liquid
Net fixed assets are - CORRECT ANSWER-long term assets such as buildings,
land, equipment, machinery
NOTE: assets that are not current
A/P represents money paid to - CORRECT ANSWER-suppliers for what is bought
on credit and amount owed by a business to suppliers by agreement
NOTE: A/P is supplies, inventory, or PP&E
RetAke All POssible QUestiOns And
AnsWeRs | 2025 UPdAte
New start up ventures often issue - CORRECT ANSWER-preferred stock (in an
IPO)
What stock is considered a hybrid - CORRECT ANSWER-preferred stock
One thing common stock and preferred stock have in common is - CORRECT
ANSWER-both have no maturity date
Which type of security has voting rights - CORRECT ANSWER-common stock
Debt covenants and restrictions help to ensure that - CORRECT ANSWER-
management is meeting bond and shareholder expectations
NOTE: covenants are promises meant to be kept
What is true regarding bonds - CORRECT ANSWER--when bond matures,
bondholder gets lump sum back
-coupon rate doesn't change
-maturity is in years
-PAR value is typically $1000
,-Future value (same as PAR) is typically $1000
Bond sells at face value when - CORRECT ANSWER-required rate of return is
equal to the coupon rate
Why are bonds the primary method for raising capital - CORRECT ANSWER-
because bonds remove the intermediary costs
NOTE: IPO's require an intermediary known as a syndicate - a group of banks
underwriting the security issue
What type of bond can be traded for stock - CORRECT ANSWER-convertible
bonds
What is the interest rate for annual payments of a bond known as - CORRECT
ANSWER-the coupon rate
NOTE: coupon rate is the established interest rate for the life of the bond and
will remain unchanged
Coupon rate is the established rate of the bond and should - CORRECT ANSWER-
never change
Characteristics of preferred stock includes - CORRECT ANSWER--dividends in
arrears
-dividends are cumulative
-higher payoff claim in a BK (has first dibs in a BK)
-considered "hybrid" (part stock/part bond)
-no fixed maturity date
-no voting rights
-can skip dividend payments
,-dividends don't change year-after-year
-used in start ups (IPO)
Preferred stock dividends - CORRECT ANSWER-can go without payment and pay
in arrears the following year
Characteristics of common stock are - CORRECT ANSWER--voting rights
-no maturity date
-corporate governance
-lower payoff claim in BK
-variable returns
-unlimited earnings potential
-earnings are in dividends & the increase in price of stock
Debentures are - CORRECT ANSWER-secured bonds
NOTE: debentures are a debt instrument (bond) issued to raise cash, secured
against a company's assets and backed by credit, transferable by the holder,
and may also be unsecured
Secured loan - CORRECT ANSWER-has collateral like a mortgage
The amount repaid at the expiration date of a bond is - CORRECT ANSWER-PAR
value
NOTE: expiration date is also known as maturity date PAR (or Face Value) is
typically $1000
, Duration measures - CORRECT ANSWER-the market risk of a bond and is the
percentage drop in price caused by a 1% increase in yield (rate)
NOTE: measurement of the drop in price after a rate increase
Maturity of bonds is calculated in - CORRECT ANSWER-years
A bond premium occurs when - CORRECT ANSWER-bonds are issued for an
amount greater than their face or maturity amount; caused by the bonds
having a stated interest rate that is higher than the market interest rate for
similar bonds
Junk Bonds are - CORRECT ANSWER-high yield bonds without any stability
"Leveraged" results in - CORRECT ANSWER-having more debt (bonds) than
equity (stock) and lower stock prices
NOTE: recall that debt is safer and levels out risk in a portfolio
In current assets, inventory is the - CORRECT ANSWER-LEAST liquid of current
assets
NOTE: current assets take less than 12 months to make liquid
Net fixed assets are - CORRECT ANSWER-long term assets such as buildings,
land, equipment, machinery
NOTE: assets that are not current
A/P represents money paid to - CORRECT ANSWER-suppliers for what is bought
on credit and amount owed by a business to suppliers by agreement
NOTE: A/P is supplies, inventory, or PP&E
