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2025 WGU C214 Financial
Management Final Exam – 50
Authentic Questions with 100%
Verified Answers & Expert
Rationales | A+ Graded
Student Name: _________________________ Date: _______________
Time Limit: 120 minutes Total Questions: 65
Financial Statements
1. What does the Statement of Cash Flows primarily show?
a. Net income for the period
b. Change in cash balance over time
c. Total assets and liabilities
d. Revenue and expenses
Answer: b. Change in cash balance over time
Rationale: The Statement of Cash Flows tracks cash inflows and outflows from
operating, investing, and financing activities, showing how cash balances change over a
period. [Web:3]
2. Which item is included in the income statement but not in the cash flow statement?
a. Cash sales
b. Depreciation expense
c. Dividends paid
d. Accounts receivable
Answer: b. Depreciation expense
Rationale: Depreciation is a non-cash expense recorded on the income statement to
allocate asset costs over time but is added back in the cash flow statement as it does not
affect cash. [Web:2]
3. A company reports $50,000 in sales and $30,000 in expenses for 2024 under accrual
accounting. If $20,000 of sales were collected in 2025, what is the 2024 net income?
a. $20,000
b. $30,000
c. $50,000
d. $80,000
Answer: a. $20,000
, 2
Rationale: Under accrual accounting, net income is calculated as revenues earned minus
expenses incurred, regardless of cash collection. Thus, $50,000 - $30,000 = $20,000.
[Web:2]
4. What is the basic equation for the balance sheet?
a. Assets = Liabilities + Revenue
b. Equity = Assets + Liabilities
c. Assets = Liabilities + Equity
d. Revenue = Expenses + Equity
Answer: c. Assets = Liabilities + Equity
Rationale: The balance sheet follows the accounting equation: Assets = Liabilities +
Equity, reflecting a company’s financial position at a point in time. [Web:5]
5. A company’s year-end balance sheet shows: Accounts Receivable $1,200, Inventory
$1,800, Fixed Assets $2,000, Accounts Payable $1,500. What is the working capital?
a. $1,500
b. $2,000
c. $3,000
d. $4,500
Answer: b. $2,000
Rationale: Working capital = Current Assets - Current Liabilities. Current Assets =
$1,200 + $1,800 = $3,000; Current Liabilities = $1,500. Thus, $3,000 - $1,500 =
$2,000. [Web:4]
6. Why is the balance sheet considered a permanent statement?
a. It resets annually
b. It reflects cumulative financial position
c. It tracks cash flows
d. It includes only current assets
Answer: b. It reflects cumulative financial position
Rationale: The balance sheet carries forward account balances (e.g., retained earnings)
across periods, unlike the income statement, which resets annually. [Web:5]
7. A company’s income statement shows EBIT of $500,000, interest expense of $100,000,
and a tax rate of 30%. What is the net income?
a. $280,000
b. $350,000
c. $400,000
d. $500,000
Answer: a. $280,000
Rationale: Net Income = EBIT - Interest - Taxes. Taxes = (EBIT - Interest) × Tax Rate =
($500,000 - $100,000) × 0.3 = $120,000. Thus, $500,000 - $100,000 - $120,000 =
$280,000.
8. What does an increase in accounts receivable impact on cash flow from operations
(CFO)?
a. Increases CFO
b. Decreases CFO
c. No impact on CFO
d. Increases cash flow from investing
Answer: b. Decreases CFO
2025 WGU C214 Financial
Management Final Exam – 50
Authentic Questions with 100%
Verified Answers & Expert
Rationales | A+ Graded
Student Name: _________________________ Date: _______________
Time Limit: 120 minutes Total Questions: 65
Financial Statements
1. What does the Statement of Cash Flows primarily show?
a. Net income for the period
b. Change in cash balance over time
c. Total assets and liabilities
d. Revenue and expenses
Answer: b. Change in cash balance over time
Rationale: The Statement of Cash Flows tracks cash inflows and outflows from
operating, investing, and financing activities, showing how cash balances change over a
period. [Web:3]
2. Which item is included in the income statement but not in the cash flow statement?
a. Cash sales
b. Depreciation expense
c. Dividends paid
d. Accounts receivable
Answer: b. Depreciation expense
Rationale: Depreciation is a non-cash expense recorded on the income statement to
allocate asset costs over time but is added back in the cash flow statement as it does not
affect cash. [Web:2]
3. A company reports $50,000 in sales and $30,000 in expenses for 2024 under accrual
accounting. If $20,000 of sales were collected in 2025, what is the 2024 net income?
a. $20,000
b. $30,000
c. $50,000
d. $80,000
Answer: a. $20,000
, 2
Rationale: Under accrual accounting, net income is calculated as revenues earned minus
expenses incurred, regardless of cash collection. Thus, $50,000 - $30,000 = $20,000.
[Web:2]
4. What is the basic equation for the balance sheet?
a. Assets = Liabilities + Revenue
b. Equity = Assets + Liabilities
c. Assets = Liabilities + Equity
d. Revenue = Expenses + Equity
Answer: c. Assets = Liabilities + Equity
Rationale: The balance sheet follows the accounting equation: Assets = Liabilities +
Equity, reflecting a company’s financial position at a point in time. [Web:5]
5. A company’s year-end balance sheet shows: Accounts Receivable $1,200, Inventory
$1,800, Fixed Assets $2,000, Accounts Payable $1,500. What is the working capital?
a. $1,500
b. $2,000
c. $3,000
d. $4,500
Answer: b. $2,000
Rationale: Working capital = Current Assets - Current Liabilities. Current Assets =
$1,200 + $1,800 = $3,000; Current Liabilities = $1,500. Thus, $3,000 - $1,500 =
$2,000. [Web:4]
6. Why is the balance sheet considered a permanent statement?
a. It resets annually
b. It reflects cumulative financial position
c. It tracks cash flows
d. It includes only current assets
Answer: b. It reflects cumulative financial position
Rationale: The balance sheet carries forward account balances (e.g., retained earnings)
across periods, unlike the income statement, which resets annually. [Web:5]
7. A company’s income statement shows EBIT of $500,000, interest expense of $100,000,
and a tax rate of 30%. What is the net income?
a. $280,000
b. $350,000
c. $400,000
d. $500,000
Answer: a. $280,000
Rationale: Net Income = EBIT - Interest - Taxes. Taxes = (EBIT - Interest) × Tax Rate =
($500,000 - $100,000) × 0.3 = $120,000. Thus, $500,000 - $100,000 - $120,000 =
$280,000.
8. What does an increase in accounts receivable impact on cash flow from operations
(CFO)?
a. Increases CFO
b. Decreases CFO
c. No impact on CFO
d. Increases cash flow from investing
Answer: b. Decreases CFO
