WGU C214 Financial Management Exam 144
Questions with Verified Answers
CFO decreases - CORRECT ANSWER If accounts receivable increases, what is the
impact on CFO?
No.
Actual Taxes = IRS Rules
Income Statement = GAAP - CORRECT ANSWER Are actual taxes paid the same as
how on the GAAP income statement?
Economic life of a new asset. - CORRECT ANSWER Which decisions require using
subjective estimates?
70%
*The sum of probabilities must equal 100% - CORRECT ANSWER If there is a 30%
change of a recession, what is the probability of expansion?
2 years and 3 months:
2 + (3/12) = 2 + (.25) = 2.25
6% x 1,000 = $60 per year
,$60 x 2.25 = $135 - CORRECT ANSWER How much interest is paid on a 6% bond
over 2 years and 3 months?
Seeks the highest return for "appropriate" amount of risk. - CORRECT ANSWER
How does a "prudent investor" select investments?
The maximum return for a given level of risk; maximum Return-to-Risk ratio. -
CORRECT ANSWER What do points on the Efficient Frontier measure?
Measure of a stock's risk relative to the market. - CORRECT ANSWER What is
"Beta?"
Plan for resources for production; accurate evaluation of capital projects. -
CORRECT ANSWER Why are accurate forecasts important?
PE ratio in the "Comparable Multiples" method. - CORRECT ANSWER Which ratio
is used in valuing a private company?
1. Product
2. Storage
3. Opportunity - CORRECT ANSWER What are 3 costs associated with holding
inventory?
Idiosyncratic Risk - Risk affecting a single firm. - CORRECT ANSWER What risk is
eliminated by a diversified portfolio?
, Fewer U.S. jobs and lower priced products. - CORRECT ANSWER What are the
impacts of outsourcing?
More U.S. jobs and higher product costs for consumers. - CORRECT ANSWER What
are the impacts of tariffs?
Municipal bond interest is tax-exempt. Treasury securities ARE taxable. - CORRECT
ANSWER What securities are exempt from FEDERAL income taxation?
Debt has a lower required return. Debt interest is tax deductible. - CORRECT
ANSWER Why would a firm prefer to issue bonds rather than stock?
APY increases - CORRECT ANSWER What is the impact on the APY as the number
of interest payments per year increase?
Intrinsic Value - The "real" value of the stock. PV of cash to investor. - CORRECT
ANSWER What is the present value of future cash flows of a stock called?
The price of the stock is less than the "intrinsic value." - CORRECT ANSWER What
indicates if a stock is a "good investment?"
1. Creditors
2. Subordinated Debt
3. Preferred Stock
Questions with Verified Answers
CFO decreases - CORRECT ANSWER If accounts receivable increases, what is the
impact on CFO?
No.
Actual Taxes = IRS Rules
Income Statement = GAAP - CORRECT ANSWER Are actual taxes paid the same as
how on the GAAP income statement?
Economic life of a new asset. - CORRECT ANSWER Which decisions require using
subjective estimates?
70%
*The sum of probabilities must equal 100% - CORRECT ANSWER If there is a 30%
change of a recession, what is the probability of expansion?
2 years and 3 months:
2 + (3/12) = 2 + (.25) = 2.25
6% x 1,000 = $60 per year
,$60 x 2.25 = $135 - CORRECT ANSWER How much interest is paid on a 6% bond
over 2 years and 3 months?
Seeks the highest return for "appropriate" amount of risk. - CORRECT ANSWER
How does a "prudent investor" select investments?
The maximum return for a given level of risk; maximum Return-to-Risk ratio. -
CORRECT ANSWER What do points on the Efficient Frontier measure?
Measure of a stock's risk relative to the market. - CORRECT ANSWER What is
"Beta?"
Plan for resources for production; accurate evaluation of capital projects. -
CORRECT ANSWER Why are accurate forecasts important?
PE ratio in the "Comparable Multiples" method. - CORRECT ANSWER Which ratio
is used in valuing a private company?
1. Product
2. Storage
3. Opportunity - CORRECT ANSWER What are 3 costs associated with holding
inventory?
Idiosyncratic Risk - Risk affecting a single firm. - CORRECT ANSWER What risk is
eliminated by a diversified portfolio?
, Fewer U.S. jobs and lower priced products. - CORRECT ANSWER What are the
impacts of outsourcing?
More U.S. jobs and higher product costs for consumers. - CORRECT ANSWER What
are the impacts of tariffs?
Municipal bond interest is tax-exempt. Treasury securities ARE taxable. - CORRECT
ANSWER What securities are exempt from FEDERAL income taxation?
Debt has a lower required return. Debt interest is tax deductible. - CORRECT
ANSWER Why would a firm prefer to issue bonds rather than stock?
APY increases - CORRECT ANSWER What is the impact on the APY as the number
of interest payments per year increase?
Intrinsic Value - The "real" value of the stock. PV of cash to investor. - CORRECT
ANSWER What is the present value of future cash flows of a stock called?
The price of the stock is less than the "intrinsic value." - CORRECT ANSWER What
indicates if a stock is a "good investment?"
1. Creditors
2. Subordinated Debt
3. Preferred Stock
