WGU C214 Financial Management OA Study Set and Concept Quiz
1. Trading on the NYSE is executed without a specialist False
(i.e. a market maker). True or False?
2. Stocks and Bonds are two types of financial instru- True
ments. True or False?
3. When revenue is matched with cost of sales in an Matching principle
Income statement it is called?
4. Basic balance sheet equation is what? Equity = Assets - Liabilities
5. Why is the balance sheet known as the permanent Because the other state-
statement? ments are reset at the end
of the fiscal year.
6. How do you calculate the change in retained earn- Net income-dividends
ings?
7. Sales - Cost of Sales - other expenses = Operating Income or EBiT
8. Name four accounts that are part of total assets? Cash, Accounts receivable,
inventory, long term as-
sets
9. Name three accounts that are part of total liabilities? Bonds, accounts payable
and mortgage
10. Name four accounts that are part of current assets? Inventory, cash, accounts
receivable and short term
investments.
11. Name three accounts that are only included in cash Common stock, dividends
flow from financing? paid and bonds payable
, WGU C214 Financial Management OA Study Set and Concept Quiz
12. Define the statement of cash flows? Calculated for the same
period of time as the in-
comes statement is calcu-
lated based on the income
statement and changes in
the balance sheet is one of
the three basic accounting
statements.
13. When fixed assets increase what happens to cash? Cash will decrease
14. What is the purpose of the statement of cash flows? Explains the change in
cash over the course of the
specified time frame.
15. Suppose the inventory turnover of a company is high- The firm has too little in-
er than the industry. Based on this observation, which ventory resulting in lost
of the following is most likely? sales or stock-outs.
16. If a company wishes to obtain a bank loan, will it want Higher
to have a higher current ratio or a lower current ratio?
17. The Operating Income Return on Investment (OIROI) EBIT and total assets
uses what elements on the income statement?
18. Why would a company be interested in the Total Asset To see how efficient are at
Turnover (TAT) ratio? producing sales
19. What annual interest will be paid for a zero coupon 0%
bond?
20. What is the most significant characteristic of subordi- Senior debt is paid off first
nated debt?
, WGU C214 Financial Management OA Study Set and Concept Quiz
21. If a company wants to increase its debt capital, how Sell bonds
will they raise the funds?
22. What is the lowest level investment bond BBB
23. What can cause the bond price to fluctuate? A change in the bond rat-
ing, a change in the fi-
nancial condition, general
change in interest rates.
24. What does a company use as security for a bond? Credit worthiness
25. Under the efficient market hypothesis, what will com- Maximize profits for a giv-
panies endeavor to do? en level of risk
26. What does the beta coefficient represent? It is a statistically derived
measure of volatility.
27. If an investor knows the idiosyncratic risk, the investor Beta Coefficient
knows the?
28. Why is the depreciation expense taken out of the net Because depreciation ex-
income calculation, yet added back at the end? pense is tax deductible.
29. Why would we reject a project based on NPV? The NPV is a negative
number
30. Why would we reject a project based on IRR? The discount rate is higher
than the IRR
31. What are two key elements of differential cash flow? Depreciation expense and
net income
32. Why is the NPV preferred over the IRR?
, WGU C214 Financial Management OA Study Set and Concept Quiz
It measures the dollar val-
ue and is more reliable.
33. When a company uses more leverage as evidenced Higher leverage leads to
by a higher degree of either financial or operating higher profitability for a
leverage, what effect does it have on changes in prof- given sale level.
itability?
34. What does the degree of financial leverage indicate? The reliance on debt
35. If a company has a high degree of financial leverage, Financial leverage also
what does that tell us about the firms risk profile? means that more financ-
ing is done through debt,
not equity. Higher profits
to shareholders.
36. What is the cash cycle? The amount of time to re-
generate cash.
37. Why is float important to understand? To time cash expenditures
38. What should a company do to manage its working Collect quickly and pay
capital? slowly
39. Name what characterizes increased collection float? Increased float indicates
slower processing time.
40. In regards to Accounts Payable Balances, what is a Paying off A/P on the last
good policy? day due is a good policy.
41. What would be a good source of information to deter- Building Appraisal
mine replacement cost?
42. Banking industry
1. Trading on the NYSE is executed without a specialist False
(i.e. a market maker). True or False?
2. Stocks and Bonds are two types of financial instru- True
ments. True or False?
3. When revenue is matched with cost of sales in an Matching principle
Income statement it is called?
4. Basic balance sheet equation is what? Equity = Assets - Liabilities
5. Why is the balance sheet known as the permanent Because the other state-
statement? ments are reset at the end
of the fiscal year.
6. How do you calculate the change in retained earn- Net income-dividends
ings?
7. Sales - Cost of Sales - other expenses = Operating Income or EBiT
8. Name four accounts that are part of total assets? Cash, Accounts receivable,
inventory, long term as-
sets
9. Name three accounts that are part of total liabilities? Bonds, accounts payable
and mortgage
10. Name four accounts that are part of current assets? Inventory, cash, accounts
receivable and short term
investments.
11. Name three accounts that are only included in cash Common stock, dividends
flow from financing? paid and bonds payable
, WGU C214 Financial Management OA Study Set and Concept Quiz
12. Define the statement of cash flows? Calculated for the same
period of time as the in-
comes statement is calcu-
lated based on the income
statement and changes in
the balance sheet is one of
the three basic accounting
statements.
13. When fixed assets increase what happens to cash? Cash will decrease
14. What is the purpose of the statement of cash flows? Explains the change in
cash over the course of the
specified time frame.
15. Suppose the inventory turnover of a company is high- The firm has too little in-
er than the industry. Based on this observation, which ventory resulting in lost
of the following is most likely? sales or stock-outs.
16. If a company wishes to obtain a bank loan, will it want Higher
to have a higher current ratio or a lower current ratio?
17. The Operating Income Return on Investment (OIROI) EBIT and total assets
uses what elements on the income statement?
18. Why would a company be interested in the Total Asset To see how efficient are at
Turnover (TAT) ratio? producing sales
19. What annual interest will be paid for a zero coupon 0%
bond?
20. What is the most significant characteristic of subordi- Senior debt is paid off first
nated debt?
, WGU C214 Financial Management OA Study Set and Concept Quiz
21. If a company wants to increase its debt capital, how Sell bonds
will they raise the funds?
22. What is the lowest level investment bond BBB
23. What can cause the bond price to fluctuate? A change in the bond rat-
ing, a change in the fi-
nancial condition, general
change in interest rates.
24. What does a company use as security for a bond? Credit worthiness
25. Under the efficient market hypothesis, what will com- Maximize profits for a giv-
panies endeavor to do? en level of risk
26. What does the beta coefficient represent? It is a statistically derived
measure of volatility.
27. If an investor knows the idiosyncratic risk, the investor Beta Coefficient
knows the?
28. Why is the depreciation expense taken out of the net Because depreciation ex-
income calculation, yet added back at the end? pense is tax deductible.
29. Why would we reject a project based on NPV? The NPV is a negative
number
30. Why would we reject a project based on IRR? The discount rate is higher
than the IRR
31. What are two key elements of differential cash flow? Depreciation expense and
net income
32. Why is the NPV preferred over the IRR?
, WGU C214 Financial Management OA Study Set and Concept Quiz
It measures the dollar val-
ue and is more reliable.
33. When a company uses more leverage as evidenced Higher leverage leads to
by a higher degree of either financial or operating higher profitability for a
leverage, what effect does it have on changes in prof- given sale level.
itability?
34. What does the degree of financial leverage indicate? The reliance on debt
35. If a company has a high degree of financial leverage, Financial leverage also
what does that tell us about the firms risk profile? means that more financ-
ing is done through debt,
not equity. Higher profits
to shareholders.
36. What is the cash cycle? The amount of time to re-
generate cash.
37. Why is float important to understand? To time cash expenditures
38. What should a company do to manage its working Collect quickly and pay
capital? slowly
39. Name what characterizes increased collection float? Increased float indicates
slower processing time.
40. In regards to Accounts Payable Balances, what is a Paying off A/P on the last
good policy? day due is a good policy.
41. What would be a good source of information to deter- Building Appraisal
mine replacement cost?
42. Banking industry
