WGU C214 OA FINANCIAL MANAGEMENT EXAM ACTUAL
COMPLETE REAL EXAM QUESTIONS AND 100% CORRECT
ANSWERS/A+ GRADE
Why would a farmer buy a hedge when he signs a contract to sell
products oversees? - ANSWER -To reduce currency risk
Which factor does not impact a stocks price? - ANSWER -Maturity
date
If the firm believes that the market under-values its stock, it
should? - ANSWER Buy back stock
A firm is a good investment if? - ANSWER -It's price is less than
intrinsic value Why does a firm calculate WACC? - ANSWER -It is
the cost of financing the firm
Which is a difference between stocks and bonds? - ANSWER -
Increased required return always reduces price
Which is the correct order in terms of lowest to highest required
return? - ANSWER -Secured bonds, preferred stock, common
stock
,Which measures sales growth that can be financed internally? -
ANSWER -SGR
Why are accurate sales forecast desirable? - ANSWER -To plan
resource acquisition
What components of ICF are included in Gross PPE? - ANSWER -
Cost of asset, shipping & installation installment
If an equipment salvage value is greater than book value? -
ANSWER -There is a tax cash outflow
A potential project should be adopted if? - ANSWER -IRR is
greater than WACC
A firm will have volatile profits if? - ANSWER -It has high
operating leverage, high financial leverage and high combined
cash leverage.
Which firm is more likely to use high financial leverage? -
ANSWER -Firm with stable sales and manual production
Excess leverage will likely result in? - ANSWER -Increased WACC
and reduced stock price
Why might a firm by back stock? - ANSWER -Increase leverage
and boost the stock price
, Which ratio might be used in working capital management? -
ANSWER -Quick ratio
How might a firm incentivize customers to pay sooner? -
ANSWER -Larger discount
Which ratio is used to value a private firm? - ANSWER -PE
The SEC regulates financial markets to achieve what goal? -
ANSWER -Protect investors, increase transparency and increase
market efficiency.
When a company uses more leverage as evidenced by a higher
degree of either financial or operating leverage, what effect does
it have on changes in profitability? - ANSWER -Higher leverage
leads to higher profitability for a given sale level.
What does the degree of financial leverage indicate? - ANSWER -
The reliance on debt
If a company has a high degree of financial leverage, what does
that tell us about the firms risk profile? - ANSWER -Financial
leverage also means that more financing is done through debt,
not equity. Higher profits to shareholders.
COMPLETE REAL EXAM QUESTIONS AND 100% CORRECT
ANSWERS/A+ GRADE
Why would a farmer buy a hedge when he signs a contract to sell
products oversees? - ANSWER -To reduce currency risk
Which factor does not impact a stocks price? - ANSWER -Maturity
date
If the firm believes that the market under-values its stock, it
should? - ANSWER Buy back stock
A firm is a good investment if? - ANSWER -It's price is less than
intrinsic value Why does a firm calculate WACC? - ANSWER -It is
the cost of financing the firm
Which is a difference between stocks and bonds? - ANSWER -
Increased required return always reduces price
Which is the correct order in terms of lowest to highest required
return? - ANSWER -Secured bonds, preferred stock, common
stock
,Which measures sales growth that can be financed internally? -
ANSWER -SGR
Why are accurate sales forecast desirable? - ANSWER -To plan
resource acquisition
What components of ICF are included in Gross PPE? - ANSWER -
Cost of asset, shipping & installation installment
If an equipment salvage value is greater than book value? -
ANSWER -There is a tax cash outflow
A potential project should be adopted if? - ANSWER -IRR is
greater than WACC
A firm will have volatile profits if? - ANSWER -It has high
operating leverage, high financial leverage and high combined
cash leverage.
Which firm is more likely to use high financial leverage? -
ANSWER -Firm with stable sales and manual production
Excess leverage will likely result in? - ANSWER -Increased WACC
and reduced stock price
Why might a firm by back stock? - ANSWER -Increase leverage
and boost the stock price
, Which ratio might be used in working capital management? -
ANSWER -Quick ratio
How might a firm incentivize customers to pay sooner? -
ANSWER -Larger discount
Which ratio is used to value a private firm? - ANSWER -PE
The SEC regulates financial markets to achieve what goal? -
ANSWER -Protect investors, increase transparency and increase
market efficiency.
When a company uses more leverage as evidenced by a higher
degree of either financial or operating leverage, what effect does
it have on changes in profitability? - ANSWER -Higher leverage
leads to higher profitability for a given sale level.
What does the degree of financial leverage indicate? - ANSWER -
The reliance on debt
If a company has a high degree of financial leverage, what does
that tell us about the firms risk profile? - ANSWER -Financial
leverage also means that more financing is done through debt,
not equity. Higher profits to shareholders.
