WGU C214 OA UPDATED ACTUAL
QUESTIONS AND CORRECT ANSWERS
COMPREHENSIVE STUDY GUIDE
●● Stocks and Bonds are two types of financial instruments. True or
False?
Answer: True
●● When revenue is matched with cost of sales in an Income statement
it is called?
Answer: Matching principle
●● Basic balance sheet equation is what?
Answer: Equity = Assets - Liabilities
●● Why is the balance sheet known as the permanent statement?
Answer: Because the other statements are reset at the end of the fiscal
year.
●● How do you calculate the change in retained earnings?
Answer: Net income-dividends
,●● Sales - Cost of Sales - other expenses =
Answer: Operating Income or EBiT
●● Name four accounts that are part of total assets?
Answer: Cash, Accounts receivable, inventory, long term assets
●● Name three accounts that are part of total liabilities?
Answer: Bonds, accounts payable and mortgage
●● Name four accounts that are part of current assets?
Answer: Inventory, cash, accounts receivable and short term
investments.
●● Name three accounts that are only included in cash flow from
financing?
Answer: Common stock, dividends paid and bonds payable
●● Define the statement of cash flows?
Answer: Calculated for the same period of time as the incomes statement
is calculated based on the income statement and changes in the balance
sheet is one of the three basic accounting statements.
●● When fixed assets increase what happens to cash?
, Answer: Cash will decrease
●● What is the purpose of the statement of cash flows?
Answer: Explains the change in cash over the course of the specified
time frame.
●● Suppose the inventory turnover of a company is higher than the
industry. Based on this observation, which of the following is most
likely?
Answer: The firm has too little inventory resulting in lost sales or stock-
outs.
●● If a company wishes to obtain a bank loan, will it want to have a
higher current ratio or a lower current ratio?
Answer: Higher
●● The Operating Income Return on Investment (OIROI) uses what
elements on the income statement?
Answer: EBIT and total assets
●● Why would a company be interested in the Total Asset Turnover
(TAT) ratio?
Answer: To see how efficient are at producing sales
QUESTIONS AND CORRECT ANSWERS
COMPREHENSIVE STUDY GUIDE
●● Stocks and Bonds are two types of financial instruments. True or
False?
Answer: True
●● When revenue is matched with cost of sales in an Income statement
it is called?
Answer: Matching principle
●● Basic balance sheet equation is what?
Answer: Equity = Assets - Liabilities
●● Why is the balance sheet known as the permanent statement?
Answer: Because the other statements are reset at the end of the fiscal
year.
●● How do you calculate the change in retained earnings?
Answer: Net income-dividends
,●● Sales - Cost of Sales - other expenses =
Answer: Operating Income or EBiT
●● Name four accounts that are part of total assets?
Answer: Cash, Accounts receivable, inventory, long term assets
●● Name three accounts that are part of total liabilities?
Answer: Bonds, accounts payable and mortgage
●● Name four accounts that are part of current assets?
Answer: Inventory, cash, accounts receivable and short term
investments.
●● Name three accounts that are only included in cash flow from
financing?
Answer: Common stock, dividends paid and bonds payable
●● Define the statement of cash flows?
Answer: Calculated for the same period of time as the incomes statement
is calculated based on the income statement and changes in the balance
sheet is one of the three basic accounting statements.
●● When fixed assets increase what happens to cash?
, Answer: Cash will decrease
●● What is the purpose of the statement of cash flows?
Answer: Explains the change in cash over the course of the specified
time frame.
●● Suppose the inventory turnover of a company is higher than the
industry. Based on this observation, which of the following is most
likely?
Answer: The firm has too little inventory resulting in lost sales or stock-
outs.
●● If a company wishes to obtain a bank loan, will it want to have a
higher current ratio or a lower current ratio?
Answer: Higher
●● The Operating Income Return on Investment (OIROI) uses what
elements on the income statement?
Answer: EBIT and total assets
●● Why would a company be interested in the Total Asset Turnover
(TAT) ratio?
Answer: To see how efficient are at producing sales
