WGU C214 UPDATED EXAM SCRIPT QUESTIONS AND
ANSWERS RATED A+
✔✔Coupon rate is the established rate of the bond and should - ✔✔never change
✔✔Debentures are - ✔✔secured bonds
NOTE: debentures are a debt instrument (bond) issued to raise cash, secured against a
company's assets and backed by credit, transferable by the holder, and may also be
unsecured
✔✔Secured loan - ✔✔has collateral like a mortgage
✔✔The amount repaid at the expiration date of a bond is - ✔✔PAR value
NOTE: expiration date is also known as maturity date PAR (or Face Value) is typically
$1000
✔✔Duration measures - ✔✔the market risk of a bond and is the percentage drop in
price caused by a 1% increase in yield (rate)
NOTE: measurement of the drop in price after a rate increase
✔✔Maturity of bonds is calculated in - ✔✔years
✔✔A bond premium occurs when - ✔✔bonds are issued for an amount greater than
their face or maturity amount; caused by the bonds having a stated interest rate that is
higher than the market interest rate for similar bonds
✔✔Junk Bonds are - ✔✔high yield bonds without any stability
✔✔"Leveraged" results in - ✔✔having more debt (bonds) than equity (stock) and lower
stock prices
NOTE: recall that debt is safer and levels out risk in a portfolio
✔✔In current assets, inventory is the - ✔✔LEAST liquid of current assets
NOTE: current assets take less than 12 months to make liquid
✔✔Net fixed assets are - ✔✔long term assets such as buildings, land, equipment,
machinery
NOTE: assets that are not current
✔✔A/P represents money paid to - ✔✔suppliers for what is bought on credit and
amount owed by a business to suppliers by agreement
NOTE: A/P is supplies, inventory, or PP&E
, ✔✔Notes payable involves - ✔✔an explicit interest bearing arrangement with the lender
at interest cost
NOTE: notes payable is a long-term liability
✔✔Current liabilities are listed in order of - ✔✔maturity
NOTE: current liabilities are to be paid within 12 months
✔✔Two things you can do with net income - ✔✔pay out as dividends or retain (plow
back into the firm)
✔✔On the Statement of Cash Flows, CFO's include - ✔✔-cash receipts from customers
(inflow)
-cash paid for inventory (outflow)
-cash paid for wages (outflow)
NOTE: receipts of cash is inflow & what is paid out is outflow
✔✔Which is NOT considered an operating expense - ✔✔interest expense is NOT
considered an operating expense
✔✔On the Statement of Cash Flows, CFI includes - ✔✔cash receipts from sale of
property and equipment (inflow), cash paid for purchase of equipment (outflow)
NOTE: receipts of cash is inflow & what is paid out is outflow
✔✔Which of the following is true with respect to CFO - ✔✔an increase in inventory
indicates a reduction in CFO
NOTE: there is a cost (reduction) to purchasing (increasing) inventory
✔✔The Statement of Cash Flows is not useful when addressing the financial health of a
firm due to the impact of accrual accounting - ✔✔FALSE - the impact of accrual
accounting is seen as MOST useful in relation to net income
✔✔Which is true with respect to CFF - ✔✔an increase in notes payable indicates an
increase in CFF
✔✔Which is not a part of the Statement of Cash Flows - ✔✔cash flows from liquidating
activities
NOTE: cash flows are operating, investing, and financing
✔✔The sum of CFO + CFI + CFF is equal to - ✔✔the change in cash during the period
✔✔Depreciation expense is a significant source of difference between net income and
CFO because - ✔✔depreciation is a non-cash expense on the Income Statement
associated with the acquisition of long-term assets
ANSWERS RATED A+
✔✔Coupon rate is the established rate of the bond and should - ✔✔never change
✔✔Debentures are - ✔✔secured bonds
NOTE: debentures are a debt instrument (bond) issued to raise cash, secured against a
company's assets and backed by credit, transferable by the holder, and may also be
unsecured
✔✔Secured loan - ✔✔has collateral like a mortgage
✔✔The amount repaid at the expiration date of a bond is - ✔✔PAR value
NOTE: expiration date is also known as maturity date PAR (or Face Value) is typically
$1000
✔✔Duration measures - ✔✔the market risk of a bond and is the percentage drop in
price caused by a 1% increase in yield (rate)
NOTE: measurement of the drop in price after a rate increase
✔✔Maturity of bonds is calculated in - ✔✔years
✔✔A bond premium occurs when - ✔✔bonds are issued for an amount greater than
their face or maturity amount; caused by the bonds having a stated interest rate that is
higher than the market interest rate for similar bonds
✔✔Junk Bonds are - ✔✔high yield bonds without any stability
✔✔"Leveraged" results in - ✔✔having more debt (bonds) than equity (stock) and lower
stock prices
NOTE: recall that debt is safer and levels out risk in a portfolio
✔✔In current assets, inventory is the - ✔✔LEAST liquid of current assets
NOTE: current assets take less than 12 months to make liquid
✔✔Net fixed assets are - ✔✔long term assets such as buildings, land, equipment,
machinery
NOTE: assets that are not current
✔✔A/P represents money paid to - ✔✔suppliers for what is bought on credit and
amount owed by a business to suppliers by agreement
NOTE: A/P is supplies, inventory, or PP&E
, ✔✔Notes payable involves - ✔✔an explicit interest bearing arrangement with the lender
at interest cost
NOTE: notes payable is a long-term liability
✔✔Current liabilities are listed in order of - ✔✔maturity
NOTE: current liabilities are to be paid within 12 months
✔✔Two things you can do with net income - ✔✔pay out as dividends or retain (plow
back into the firm)
✔✔On the Statement of Cash Flows, CFO's include - ✔✔-cash receipts from customers
(inflow)
-cash paid for inventory (outflow)
-cash paid for wages (outflow)
NOTE: receipts of cash is inflow & what is paid out is outflow
✔✔Which is NOT considered an operating expense - ✔✔interest expense is NOT
considered an operating expense
✔✔On the Statement of Cash Flows, CFI includes - ✔✔cash receipts from sale of
property and equipment (inflow), cash paid for purchase of equipment (outflow)
NOTE: receipts of cash is inflow & what is paid out is outflow
✔✔Which of the following is true with respect to CFO - ✔✔an increase in inventory
indicates a reduction in CFO
NOTE: there is a cost (reduction) to purchasing (increasing) inventory
✔✔The Statement of Cash Flows is not useful when addressing the financial health of a
firm due to the impact of accrual accounting - ✔✔FALSE - the impact of accrual
accounting is seen as MOST useful in relation to net income
✔✔Which is true with respect to CFF - ✔✔an increase in notes payable indicates an
increase in CFF
✔✔Which is not a part of the Statement of Cash Flows - ✔✔cash flows from liquidating
activities
NOTE: cash flows are operating, investing, and financing
✔✔The sum of CFO + CFI + CFF is equal to - ✔✔the change in cash during the period
✔✔Depreciation expense is a significant source of difference between net income and
CFO because - ✔✔depreciation is a non-cash expense on the Income Statement
associated with the acquisition of long-term assets
