WGU C214 Financial Management OA
Study Set
Trading on the NYSE is executed without a specialist (i.e. a market maker). True or False?
answer False
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.
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, 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
What annual interest will be paid for a zero coupon bond?answer 0%
What is the most significant characteristic of subordinated debt?answer Senior debt is
paid off first
If a company wants to increase its debt capital, how will they raise the funds?answer
Sell bonds
What is the lowest level investment bondanswer BBB
What can cause the bond price to fluctuate?answer A change in the bond rating, a
change in the financial condition, general change in interest rates.
What does a company use as security for a bond?answer Credit worthiness
Under the efficient market hypothesis, what will companies endeavor to do?answer
Maximize profits for a given level of risk
What does the beta coefficient represent?answer It is a statistically derived measure of
volatility.
If an investor knows the idiosyncratic risk, the investor knows the?answer Beta
Coefficient
Why is the depreciation expense taken out of the net income calculation, yet added
back at the end?answer Because depreciation expense is tax deductible.
Why would we reject a project based on NPV?answer The NPV is a negative number
Why would we reject a project based on IRR?answer The discount rate is higher than
the IRR
What are two key elements of differential cash flow?answer Depreciation expense and
net income
Why is the NPV preferred over the IRR?answer It measures the dollar value and is
more reliable.
This study source was downloaded by 100000899579226 from CourseHero.com on 06-12-2025 09:27:04 GMT -05:00
https://www.coursehero.com/file/250196046/2025-EXAM-129docx/
Study Set
Trading on the NYSE is executed without a specialist (i.e. a market maker). True or False?
answer False
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.
This study source was downloaded by 100000899579226 from CourseHero.com on 06-12-2025 09:27:04 GMT -05:00
https://www.coursehero.com/file/250196046/2025-EXAM-129docx/
, 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
What annual interest will be paid for a zero coupon bond?answer 0%
What is the most significant characteristic of subordinated debt?answer Senior debt is
paid off first
If a company wants to increase its debt capital, how will they raise the funds?answer
Sell bonds
What is the lowest level investment bondanswer BBB
What can cause the bond price to fluctuate?answer A change in the bond rating, a
change in the financial condition, general change in interest rates.
What does a company use as security for a bond?answer Credit worthiness
Under the efficient market hypothesis, what will companies endeavor to do?answer
Maximize profits for a given level of risk
What does the beta coefficient represent?answer It is a statistically derived measure of
volatility.
If an investor knows the idiosyncratic risk, the investor knows the?answer Beta
Coefficient
Why is the depreciation expense taken out of the net income calculation, yet added
back at the end?answer Because depreciation expense is tax deductible.
Why would we reject a project based on NPV?answer The NPV is a negative number
Why would we reject a project based on IRR?answer The discount rate is higher than
the IRR
What are two key elements of differential cash flow?answer Depreciation expense and
net income
Why is the NPV preferred over the IRR?answer It measures the dollar value and is
more reliable.
This study source was downloaded by 100000899579226 from CourseHero.com on 06-12-2025 09:27:04 GMT -05:00
https://www.coursehero.com/file/250196046/2025-EXAM-129docx/
