C214 OA QUESTIONS & ANSWERS||
LATEST UPDATE 2025
least liquid asset - ANSWER inventory
Inventory consists of 3 parts - ANSWER Raw material, Work in progress, & finished
goods
Collection Float - ANSWER Time from account receivable to collect cash
Components of WACC (Weighted Average Cost of Capital) - ANSWER Market value,
tax, equity/common stock, cost of capital, debt, preferred stock, ALL OF THE ABOVE
3 Methods used to Value a Firm/Company - ANSWER Replacement costs (car wrecked
- KBB or AutoTrader Magazine) - compare similar products if need to be replaced
Comparable Multiple (Costco vs Walmart) - P/E Ratio
Discounted Cash Flow (DCF) - Bring future money or cash flow to today's value (PV)
ALL OF THE ABOVE
Why do companies keep cash for day to day operations - ANSWER To pay bills
What are your CURRENT assets? (Own by company) - ANSWER Inventory, cash,
accts receivable, short term investments
Current Liabilities - ANSWER accounts payable & accrued expenses
Operating Leverage (sidebar formula) - ANSWER Carries business risk
BETA (Risk of stock price of specific company) - ANSWER Sensitive to market changes
- NOT A MARKET RISK
NPV vs IRR - ANSWER Net Present Value (NPV) - present value of future inflows
exceeds initial investment - means NPV greater than initial startup (NPV = 30 - 20
startup) = 10 positive- accept project
Internal Rate of Return (IRR) is discount rate that forces NPV to equal zero
Both have to be positive numbers to choose the project
Hedging - ANSWER Eliminating risk
Volker Rule (VRL) - ANSWER Limits proprietary/hedge fund trading by banks
FINRA (Financial Industry Regulatory Authority) - ANSWER Every player in the market
behaves ethically and honestly. Check sales practices, bar unethical persons;
competency test
,EX: Board created after SEC, Traders are not to give insider information, Every form
and agreement are done, Traders are to get regular training
IFRS (International Financial Reporting Standards) - ANSWER US is NOT a part of this
yet
They want everyone to use the format and standards to do their balance sheets
ROE vs ROA (What is similar - Use sidebar formulas) - ANSWER Both use Net
Incomes
Outsourcing effects - ANSWER Domestic employment decreases (workers in America
lose their jobs)
Profits of the company likely go up, and price of product is cheaper
Tariffs - ANSWER Additional taxes
Protection for domestic economy
Words used interchangeably - ANSWER PV= price or how much, amount
Sales = Revenue
Equity = Common equity/stock
Preferred Stock = Hybrid (for raising money and can be used as Debt)
Treasury rate = Risk Free Rate (RF)
Balance Sheet = Snapshot
Par Value = Face Value ($1,000)
EBIT = Operating Income
Capital Budget Formulas (Sidebar) - ANSWER Initial Cash Outflow = Asses Cost +
Shipping & Installation + Increase in NWC
Differential Cash Flow = NI + Depreciation Expense
Terminal Cash Flow = Salvage Value - Taxes Paid + NWC Recapture
Treasury Securities - ANSWER Issued by the Federal (US) Government
Dealer Markets - ANSWER Online
No physical location
Auction Markets - ANSWER NYSE - New York Stock exchange
Goal of Private Company - ANSWER Keep control of business
Goal of Public Company - ANSWER Maximize shareholder's value
Annuity Due - ANSWER Pay at the beginning of a period (RENT)
Ordinary Annuities - ANSWER Pay at the end of the period (Credit Cards)
, APY vs APR - ANSWER APY = Annual Percentage Yield
APR = Annual Percentage Rate
APR is EQUAL to APY when period is = 1
APY is ALWAYS greater after period 1
Income Statement for Accounting - ANSWER For reporting
Income Statement for Taxes - ANSWER For the IRS
Matching Principle - ANSWER Matching revenues to expenses during a period
Income Statement - ANSWER Over a period of time
Balance Sheet (Snapshot) - ANSWER One point in time
Retained Earnings (Sidebar Formula) - ANSWER Beg RE + NI - Dividends Paid
Time Value of money components (Calculator Keys) - ANSWER N: Time, I/Y: Yield or
Interest Rate, PV: Present Value, PMT: Payment, FV: Future Value
Rule 144-A - ANSWER Safe harbor, protection for US investors raising capital in the
Private Market (NOT regulated by SEC), sell private securities in US to US investors
Regulation S - ANSWER Safe harbor, protection also for NON-US Investors raising
money in capital market, sell private securities off-shore to foreigner investors
Gordon Growth Model (GGM) measures? (Sidebar Formula) - ANSWER Price and
Required Return
What is the purpose of SEC - ANSWER Requires audited financial statements;
regulates security trading (transparency)
What is true when income for tax purposes is lower than accounting income? -
ANSWER Actual income taxes payable will be lower than accounting income tax
expense
Which cash flow is used to monitor the change in long term assets? - ANSWER Cash
flow from investing activities
What is the yield to maturity (YTM) of a bond - ANSWER The rate the bond will earn
from the purchase date to maturity
A prudent investor looks at risk and return in the following way: - ANSWER Looking for
the highest return for an acceptable amount of risk
What is beta? - ANSWER A measure of the volatility of stock's specific risk
LATEST UPDATE 2025
least liquid asset - ANSWER inventory
Inventory consists of 3 parts - ANSWER Raw material, Work in progress, & finished
goods
Collection Float - ANSWER Time from account receivable to collect cash
Components of WACC (Weighted Average Cost of Capital) - ANSWER Market value,
tax, equity/common stock, cost of capital, debt, preferred stock, ALL OF THE ABOVE
3 Methods used to Value a Firm/Company - ANSWER Replacement costs (car wrecked
- KBB or AutoTrader Magazine) - compare similar products if need to be replaced
Comparable Multiple (Costco vs Walmart) - P/E Ratio
Discounted Cash Flow (DCF) - Bring future money or cash flow to today's value (PV)
ALL OF THE ABOVE
Why do companies keep cash for day to day operations - ANSWER To pay bills
What are your CURRENT assets? (Own by company) - ANSWER Inventory, cash,
accts receivable, short term investments
Current Liabilities - ANSWER accounts payable & accrued expenses
Operating Leverage (sidebar formula) - ANSWER Carries business risk
BETA (Risk of stock price of specific company) - ANSWER Sensitive to market changes
- NOT A MARKET RISK
NPV vs IRR - ANSWER Net Present Value (NPV) - present value of future inflows
exceeds initial investment - means NPV greater than initial startup (NPV = 30 - 20
startup) = 10 positive- accept project
Internal Rate of Return (IRR) is discount rate that forces NPV to equal zero
Both have to be positive numbers to choose the project
Hedging - ANSWER Eliminating risk
Volker Rule (VRL) - ANSWER Limits proprietary/hedge fund trading by banks
FINRA (Financial Industry Regulatory Authority) - ANSWER Every player in the market
behaves ethically and honestly. Check sales practices, bar unethical persons;
competency test
,EX: Board created after SEC, Traders are not to give insider information, Every form
and agreement are done, Traders are to get regular training
IFRS (International Financial Reporting Standards) - ANSWER US is NOT a part of this
yet
They want everyone to use the format and standards to do their balance sheets
ROE vs ROA (What is similar - Use sidebar formulas) - ANSWER Both use Net
Incomes
Outsourcing effects - ANSWER Domestic employment decreases (workers in America
lose their jobs)
Profits of the company likely go up, and price of product is cheaper
Tariffs - ANSWER Additional taxes
Protection for domestic economy
Words used interchangeably - ANSWER PV= price or how much, amount
Sales = Revenue
Equity = Common equity/stock
Preferred Stock = Hybrid (for raising money and can be used as Debt)
Treasury rate = Risk Free Rate (RF)
Balance Sheet = Snapshot
Par Value = Face Value ($1,000)
EBIT = Operating Income
Capital Budget Formulas (Sidebar) - ANSWER Initial Cash Outflow = Asses Cost +
Shipping & Installation + Increase in NWC
Differential Cash Flow = NI + Depreciation Expense
Terminal Cash Flow = Salvage Value - Taxes Paid + NWC Recapture
Treasury Securities - ANSWER Issued by the Federal (US) Government
Dealer Markets - ANSWER Online
No physical location
Auction Markets - ANSWER NYSE - New York Stock exchange
Goal of Private Company - ANSWER Keep control of business
Goal of Public Company - ANSWER Maximize shareholder's value
Annuity Due - ANSWER Pay at the beginning of a period (RENT)
Ordinary Annuities - ANSWER Pay at the end of the period (Credit Cards)
, APY vs APR - ANSWER APY = Annual Percentage Yield
APR = Annual Percentage Rate
APR is EQUAL to APY when period is = 1
APY is ALWAYS greater after period 1
Income Statement for Accounting - ANSWER For reporting
Income Statement for Taxes - ANSWER For the IRS
Matching Principle - ANSWER Matching revenues to expenses during a period
Income Statement - ANSWER Over a period of time
Balance Sheet (Snapshot) - ANSWER One point in time
Retained Earnings (Sidebar Formula) - ANSWER Beg RE + NI - Dividends Paid
Time Value of money components (Calculator Keys) - ANSWER N: Time, I/Y: Yield or
Interest Rate, PV: Present Value, PMT: Payment, FV: Future Value
Rule 144-A - ANSWER Safe harbor, protection for US investors raising capital in the
Private Market (NOT regulated by SEC), sell private securities in US to US investors
Regulation S - ANSWER Safe harbor, protection also for NON-US Investors raising
money in capital market, sell private securities off-shore to foreigner investors
Gordon Growth Model (GGM) measures? (Sidebar Formula) - ANSWER Price and
Required Return
What is the purpose of SEC - ANSWER Requires audited financial statements;
regulates security trading (transparency)
What is true when income for tax purposes is lower than accounting income? -
ANSWER Actual income taxes payable will be lower than accounting income tax
expense
Which cash flow is used to monitor the change in long term assets? - ANSWER Cash
flow from investing activities
What is the yield to maturity (YTM) of a bond - ANSWER The rate the bond will earn
from the purchase date to maturity
A prudent investor looks at risk and return in the following way: - ANSWER Looking for
the highest return for an acceptable amount of risk
What is beta? - ANSWER A measure of the volatility of stock's specific risk
