WGU C214 Concepts Only Multi Choice Version
Exam 203 Questions with Verified Answers
False - CORRECT ANSWER Trading on the NYSE is executed without a specialist (i.e.
a market maker).
True - CORRECT ANSWER Stocks and bonds are two types of financial instruments.
a. Revenues be recognized when the earnings process is complete and matches
expenses to revenues recognized. - CORRECT ANSWER The matching principle in
accrual accounting requires that:
a. Equity = Assets - Liabilities - CORRECT ANSWER A basic equation for the balance
sheet is:
b. Because the other statements are reset at the end of the fiscal year. - CORRECT
ANSWER Why is the Balance Sheet known as a permanent statement?
d. Net Income - Dividends - CORRECT ANSWER How do you calculate the change
in Retained Earnings?
c. Operating Income and EBIT are the same. - CORRECT ANSWER Which of the
following is generally true?
b. Cash Accounts Receivable, Inventory, Long Term Assets - CORRECT ANSWER
Which components are part of total assets?
,d. Inventory, Cash, Accounts Receivable, Short Term Investments - CORRECT
ANSWER Which components are part of current assets?
c. Bonds, Accounts Payable, Mortgage - CORRECT ANSWER Which components are
part of Total Liabilities?
c. Cash decreases. - CORRECT ANSWER When Fixed Assets increase what happens
to Cash?
c. Explains the change in cash balance for one period of time. - CORRECT ANSWER
Which is the purpose of the statement of cash flows?
b. EBIT, Total Assets - CORRECT ANSWER The OIROI (Operating Income Return on
Investment) uses what elements on the income statement?
c. How efficient assets are at producing sales - CORRECT ANSWER Why would a
company be interested in the TAT(Total Asset Turnover) ratio?
b. 18.6% compounded daily - CORRECT ANSWER Which of the following gives the
largest effective rate (APY)?
a. It is a statistically-derived measure of volatility. - CORRECT ANSWER What does
the beta coefficient represent?
, d. Because depreciation expense is tax deductible. - CORRECT ANSWER Why is
depreciation expense taken out of the net income calculation, yet added back at
the end?
b. It measures the dollar value.
c. It is more reliable. - CORRECT ANSWER Why is the NPV preferred over the IRR?
Pick Two
c. The reliance on debt - CORRECT ANSWER What does the Degree of Financial
Leverage indicate?
d. Higher profits to shareholders - CORRECT ANSWER If a company has a high
degree of financial leverage, what does that tell us about the firm's risk profile?
d. The amount of time to regenerate cash - CORRECT ANSWER What is the cash
cycle?
d. To time cash expenditures. - CORRECT ANSWER Why is float important to
understand?
a. Collect quickly and pay slowly. - CORRECT ANSWER What should a company do
to manage its working capital?
a. Building Appraisal - CORRECT ANSWER What would be a source of information
to determine Replacement Cost?
Exam 203 Questions with Verified Answers
False - CORRECT ANSWER Trading on the NYSE is executed without a specialist (i.e.
a market maker).
True - CORRECT ANSWER Stocks and bonds are two types of financial instruments.
a. Revenues be recognized when the earnings process is complete and matches
expenses to revenues recognized. - CORRECT ANSWER The matching principle in
accrual accounting requires that:
a. Equity = Assets - Liabilities - CORRECT ANSWER A basic equation for the balance
sheet is:
b. Because the other statements are reset at the end of the fiscal year. - CORRECT
ANSWER Why is the Balance Sheet known as a permanent statement?
d. Net Income - Dividends - CORRECT ANSWER How do you calculate the change
in Retained Earnings?
c. Operating Income and EBIT are the same. - CORRECT ANSWER Which of the
following is generally true?
b. Cash Accounts Receivable, Inventory, Long Term Assets - CORRECT ANSWER
Which components are part of total assets?
,d. Inventory, Cash, Accounts Receivable, Short Term Investments - CORRECT
ANSWER Which components are part of current assets?
c. Bonds, Accounts Payable, Mortgage - CORRECT ANSWER Which components are
part of Total Liabilities?
c. Cash decreases. - CORRECT ANSWER When Fixed Assets increase what happens
to Cash?
c. Explains the change in cash balance for one period of time. - CORRECT ANSWER
Which is the purpose of the statement of cash flows?
b. EBIT, Total Assets - CORRECT ANSWER The OIROI (Operating Income Return on
Investment) uses what elements on the income statement?
c. How efficient assets are at producing sales - CORRECT ANSWER Why would a
company be interested in the TAT(Total Asset Turnover) ratio?
b. 18.6% compounded daily - CORRECT ANSWER Which of the following gives the
largest effective rate (APY)?
a. It is a statistically-derived measure of volatility. - CORRECT ANSWER What does
the beta coefficient represent?
, d. Because depreciation expense is tax deductible. - CORRECT ANSWER Why is
depreciation expense taken out of the net income calculation, yet added back at
the end?
b. It measures the dollar value.
c. It is more reliable. - CORRECT ANSWER Why is the NPV preferred over the IRR?
Pick Two
c. The reliance on debt - CORRECT ANSWER What does the Degree of Financial
Leverage indicate?
d. Higher profits to shareholders - CORRECT ANSWER If a company has a high
degree of financial leverage, what does that tell us about the firm's risk profile?
d. The amount of time to regenerate cash - CORRECT ANSWER What is the cash
cycle?
d. To time cash expenditures. - CORRECT ANSWER Why is float important to
understand?
a. Collect quickly and pay slowly. - CORRECT ANSWER What should a company do
to manage its working capital?
a. Building Appraisal - CORRECT ANSWER What would be a source of information
to determine Replacement Cost?
