WGU C214 FINANCIAL MANAGEMENT FINAL UPDATED
QUESTIONS AND CORRECT ANSWERS
Question:
1. Statement of Cash Flows
Answer:
Shows the change in cash balance for a period of time. Focuses only on items where cash is received,
or cash is paid.
Question:
2. Cash Flow from Operating Activi-ties (CFO)
Answer:
Cash flow that a company generates as a result of day-to-day business operations. Deals with Current
Assets and Current Liabilities.
Question:
3. Cash Flow from Investing Activi-ties (CFI)
Answer:
Cash flow that is generated from investments in long term assets.
Question:
4. Cash Flow from Financing Activi-ties (CFF)
Answer:
Cash flow that is used to fund the company. Cash flow that is generated from financing the business.
Includes Debt & Equity.
Question:
5. How does an increase in Ac-counts receivable impact CFO?
Answer:
An Increase in Accounts receivable will decrease CFO
Question:
6. How does an increase in Ac-counts payable impact CFO?
Answer:
An Increase in Accounts Payable will increase CFO
Question:
7. What financial statement is pre-pared at a point in time
Answer:
Balance Sheet
Question:
8. What financial statements are prepared for a period of time?
Answer:
· Income Statement · Retained Earnings Statement · Statement of Cash Flows
, Question:
9. Define Efficient Frontier
Answer:
Maximizes expected return for a given level of risk
Question:
10. Where would a risk averse in-vestor fall on the efficient frontier?
Answer:
100% Bonds
Question:
11. Where would a risk-taking in-vestor fall on the efficient frontier?
Answer:
100% Stocks
Question:
12. What is a Beta?
Answer:
A Measure of Risk - A Beta 1 is the average risk of all stocks. Anytime a beta is below 1, it is less
risk. If it is more than 1, it is high risk.
Question:
13. Define efficient market hypothe-sis as it relates to a firm?
Answer:
For any company to survive, they need to make profitable decisions. Otherwise, investors will shun
their business. The firm needs to invest where the return is more than the cost.
Question:
14. What is the in-trinsic value of a stock under effi-cient market hy-pothesis?
Answer:
The intrinsic value of stock is the present value of the stock's after tax net cash flows.
Question:
15. Whenever the question states that dividend was paid recently or was just paid, what must be
cal-culated first?
Answer:
Expected Dividend
Question:
16. For every Bond question, what must be entered?
Answer:
FV must be entered as 1000 PMT must be entered as 1000 x Coupon Rate
Question:
17. What is Capital Budgeting?
QUESTIONS AND CORRECT ANSWERS
Question:
1. Statement of Cash Flows
Answer:
Shows the change in cash balance for a period of time. Focuses only on items where cash is received,
or cash is paid.
Question:
2. Cash Flow from Operating Activi-ties (CFO)
Answer:
Cash flow that a company generates as a result of day-to-day business operations. Deals with Current
Assets and Current Liabilities.
Question:
3. Cash Flow from Investing Activi-ties (CFI)
Answer:
Cash flow that is generated from investments in long term assets.
Question:
4. Cash Flow from Financing Activi-ties (CFF)
Answer:
Cash flow that is used to fund the company. Cash flow that is generated from financing the business.
Includes Debt & Equity.
Question:
5. How does an increase in Ac-counts receivable impact CFO?
Answer:
An Increase in Accounts receivable will decrease CFO
Question:
6. How does an increase in Ac-counts payable impact CFO?
Answer:
An Increase in Accounts Payable will increase CFO
Question:
7. What financial statement is pre-pared at a point in time
Answer:
Balance Sheet
Question:
8. What financial statements are prepared for a period of time?
Answer:
· Income Statement · Retained Earnings Statement · Statement of Cash Flows
, Question:
9. Define Efficient Frontier
Answer:
Maximizes expected return for a given level of risk
Question:
10. Where would a risk averse in-vestor fall on the efficient frontier?
Answer:
100% Bonds
Question:
11. Where would a risk-taking in-vestor fall on the efficient frontier?
Answer:
100% Stocks
Question:
12. What is a Beta?
Answer:
A Measure of Risk - A Beta 1 is the average risk of all stocks. Anytime a beta is below 1, it is less
risk. If it is more than 1, it is high risk.
Question:
13. Define efficient market hypothe-sis as it relates to a firm?
Answer:
For any company to survive, they need to make profitable decisions. Otherwise, investors will shun
their business. The firm needs to invest where the return is more than the cost.
Question:
14. What is the in-trinsic value of a stock under effi-cient market hy-pothesis?
Answer:
The intrinsic value of stock is the present value of the stock's after tax net cash flows.
Question:
15. Whenever the question states that dividend was paid recently or was just paid, what must be
cal-culated first?
Answer:
Expected Dividend
Question:
16. For every Bond question, what must be entered?
Answer:
FV must be entered as 1000 PMT must be entered as 1000 x Coupon Rate
Question:
17. What is Capital Budgeting?
