WGU C214 Financial Management ExamQuestions and Correct
Answers & Step-by-Step Rationales
Question 1
Investors will often sell as stock that has gains rather than a stock that is suffering losses in their portfolio, despite
subsidized tax relief when selling at a loss. What are the logic defying behavioral implications of such a decision?
A. Selling a stock at a gain results in dollar cost averaging benefits
B. Maintaining winning positions in the portfolio enhances
future portfolio growth rate
C. Investors hate taking a loss, especially when they can realize a gain.
D. Selling an equity position at any point results in a favorable tax benefit.
Correct Answer
b
Page 1 of 101
,Question 2
What factor determines the "market risk premium" on stocks?
a. The level of Treasury yields
b. The investor-perceived riskiness of stocks
c. Seasonality
d. Projected future earnings
Correct Answer
b
Question 3
Which of the following characterizes collection float
a. Longer float indicates good financial practices
b. Increased float indicates slower processing time
c. Accounts receivable increase with shorter float
d. Liquidity is enhanced with longer float
Correct Answer
b
Page 2 of 101
,Question 4
If a company produces and sells a product only in the U.S., what international developments may affect its sales?
a. Fluctuating exchange rates
b. Imports of competing products
c. Immigration policy
d. Inflation in Europe
Correct Answer
b
Question 5
Which components are part of total assets?
a. Cash, Accounts Receivable, Short Term Debt
b. Cash Accounts Receivable, Inventory, Long Term Assets
c. Accounts Payable, Long Term Assets, Long Term Debt
d. Accounts Payable, Net Income, Equity
Correct Answer
b
Page 3 of 101
, Question 6
Which is the purpose of the statement of cash flows?
a. serves as the replacement for the income statement and balance sheet
b. explains the change in cash balance at one point in time
c. explains the change in cash balance for one period of time
d. both (a) and (b) above
Correct Answer
c
Question 7
What is the priority order of repayment (first to last) to a company's investors and creditors?
A. Creditors, common stockholders, preferred stockholders
B. Preferred stockholders, creditors, common stockholders
C. Creditors, preferred stockholders, common stockholders
D. Common stockholders, preferred stockholders, creditors
Correct Answer
c
Page 4 of 101
Answers & Step-by-Step Rationales
Question 1
Investors will often sell as stock that has gains rather than a stock that is suffering losses in their portfolio, despite
subsidized tax relief when selling at a loss. What are the logic defying behavioral implications of such a decision?
A. Selling a stock at a gain results in dollar cost averaging benefits
B. Maintaining winning positions in the portfolio enhances
future portfolio growth rate
C. Investors hate taking a loss, especially when they can realize a gain.
D. Selling an equity position at any point results in a favorable tax benefit.
Correct Answer
b
Page 1 of 101
,Question 2
What factor determines the "market risk premium" on stocks?
a. The level of Treasury yields
b. The investor-perceived riskiness of stocks
c. Seasonality
d. Projected future earnings
Correct Answer
b
Question 3
Which of the following characterizes collection float
a. Longer float indicates good financial practices
b. Increased float indicates slower processing time
c. Accounts receivable increase with shorter float
d. Liquidity is enhanced with longer float
Correct Answer
b
Page 2 of 101
,Question 4
If a company produces and sells a product only in the U.S., what international developments may affect its sales?
a. Fluctuating exchange rates
b. Imports of competing products
c. Immigration policy
d. Inflation in Europe
Correct Answer
b
Question 5
Which components are part of total assets?
a. Cash, Accounts Receivable, Short Term Debt
b. Cash Accounts Receivable, Inventory, Long Term Assets
c. Accounts Payable, Long Term Assets, Long Term Debt
d. Accounts Payable, Net Income, Equity
Correct Answer
b
Page 3 of 101
, Question 6
Which is the purpose of the statement of cash flows?
a. serves as the replacement for the income statement and balance sheet
b. explains the change in cash balance at one point in time
c. explains the change in cash balance for one period of time
d. both (a) and (b) above
Correct Answer
c
Question 7
What is the priority order of repayment (first to last) to a company's investors and creditors?
A. Creditors, common stockholders, preferred stockholders
B. Preferred stockholders, creditors, common stockholders
C. Creditors, preferred stockholders, common stockholders
D. Common stockholders, preferred stockholders, creditors
Correct Answer
c
Page 4 of 101
