C214 OA Question and answers
verified to pass 2025/2026
least liquid asset - correct answer ✔inventory
Inventory consists of 3 parts - correct answer ✔Raw material, Work in progress, & finished goods
Collection Float - correct answer ✔Time from account receivable to collect cash
Components of WACC (Weighted Average Cost of Capital) - correct answer ✔Market value, tax,
equity/common stock, cost of capital, debt, preferred stock, ALL OF THE ABOVE
3 Methods used to Value a Firm/Company - correct answer ✔Replacement costs (car wrecked - KBB or
AutoTrader Magazine) - compare similar products if need to be replaced
Comparable Multiple (Costco vs Walmart) - P/E Ratio
Discounted Cash Flow (DCF) - Bring future money or cash flow to today's value (PV)
ALL OF THE ABOVE
Why do companies keep cash for day to day operations - correct answer ✔To pay bills
What are your CURRENT assets? (Own by company) - correct answer ✔Inventory, cash, accts
receivable, short term investments
Current Liabilities - correct answer ✔accounts payable & accrued expenses
Operating Leverage (sidebar formula) - correct answer ✔Carries business risk
,BETA (Risk of stock price of specific company) - correct answer ✔Sensitive to market changes - NOT A
MARKET RISK
NPV vs IRR - correct answer ✔Net Present Value (NPV) - present value of future inflows exceeds initial
investment - means NPV greater than initial startup (NPV = 30 - 20 startup) = 10 positive- accept project
Internal Rate of Return (IRR) is discount rate that forces NPV to equal zero
Both have to be positive numbers to choose the project
Hedging - correct answer ✔Eliminating risk
Volker Rule (VRL) - correct answer ✔Limits proprietary/hedge fund trading by banks
FINRA (Financial Industry Regulatory Authority) - correct answer ✔Every player in the market behaves
ethically and honestly. Check sales practices, bar unethical persons; competency test
EX: Board created after SEC, Traders are not to give insider information, Every form and agreement are
done, Traders are to get regular training
IFRS (International Financial Reporting Standards) - correct answer ✔US is NOT a part of this yet
They want everyone to use the format and standards to do their balance sheets
ROE vs ROA (What is similar - Use sidebar formulas) - correct answer ✔Both use Net Incomes
Outsourcing effects - correct answer ✔Domestic employment decreases (workers in America lose their
jobs)
Profits of the company likely go up, and price of product is cheaper
, Tariffs - correct answer ✔Additional taxes
Protection for domestic economy
Words used interchangeably - correct answer ✔PV= price or how much, amount
Sales = Revenue
Equity = Common equity/stock
Preferred Stock = Hybrid (for raising money and can be used as Debt)
Treasury rate = Risk Free Rate (RF)
Balance Sheet = Snapshot
Par Value = Face Value ($1,000)
EBIT = Operating Income
Capital Budget Formulas (Sidebar) - correct answer ✔Initial Cash Outflow = Asses Cost + Shipping &
Installation + Increase in NWC
Differential Cash Flow = NI + Depreciation Expense
Terminal Cash Flow = Salvage Value - Taxes Paid + NWC Recapture
Treasury Securities - correct answer ✔Issued by the Federal (US) Government
Dealer Markets - correct answer ✔Online
No physical location
Auction Markets - correct answer ✔NYSE - New York Stock exchange
Goal of Private Company - correct answer ✔Keep control of business
verified to pass 2025/2026
least liquid asset - correct answer ✔inventory
Inventory consists of 3 parts - correct answer ✔Raw material, Work in progress, & finished goods
Collection Float - correct answer ✔Time from account receivable to collect cash
Components of WACC (Weighted Average Cost of Capital) - correct answer ✔Market value, tax,
equity/common stock, cost of capital, debt, preferred stock, ALL OF THE ABOVE
3 Methods used to Value a Firm/Company - correct answer ✔Replacement costs (car wrecked - KBB or
AutoTrader Magazine) - compare similar products if need to be replaced
Comparable Multiple (Costco vs Walmart) - P/E Ratio
Discounted Cash Flow (DCF) - Bring future money or cash flow to today's value (PV)
ALL OF THE ABOVE
Why do companies keep cash for day to day operations - correct answer ✔To pay bills
What are your CURRENT assets? (Own by company) - correct answer ✔Inventory, cash, accts
receivable, short term investments
Current Liabilities - correct answer ✔accounts payable & accrued expenses
Operating Leverage (sidebar formula) - correct answer ✔Carries business risk
,BETA (Risk of stock price of specific company) - correct answer ✔Sensitive to market changes - NOT A
MARKET RISK
NPV vs IRR - correct answer ✔Net Present Value (NPV) - present value of future inflows exceeds initial
investment - means NPV greater than initial startup (NPV = 30 - 20 startup) = 10 positive- accept project
Internal Rate of Return (IRR) is discount rate that forces NPV to equal zero
Both have to be positive numbers to choose the project
Hedging - correct answer ✔Eliminating risk
Volker Rule (VRL) - correct answer ✔Limits proprietary/hedge fund trading by banks
FINRA (Financial Industry Regulatory Authority) - correct answer ✔Every player in the market behaves
ethically and honestly. Check sales practices, bar unethical persons; competency test
EX: Board created after SEC, Traders are not to give insider information, Every form and agreement are
done, Traders are to get regular training
IFRS (International Financial Reporting Standards) - correct answer ✔US is NOT a part of this yet
They want everyone to use the format and standards to do their balance sheets
ROE vs ROA (What is similar - Use sidebar formulas) - correct answer ✔Both use Net Incomes
Outsourcing effects - correct answer ✔Domestic employment decreases (workers in America lose their
jobs)
Profits of the company likely go up, and price of product is cheaper
, Tariffs - correct answer ✔Additional taxes
Protection for domestic economy
Words used interchangeably - correct answer ✔PV= price or how much, amount
Sales = Revenue
Equity = Common equity/stock
Preferred Stock = Hybrid (for raising money and can be used as Debt)
Treasury rate = Risk Free Rate (RF)
Balance Sheet = Snapshot
Par Value = Face Value ($1,000)
EBIT = Operating Income
Capital Budget Formulas (Sidebar) - correct answer ✔Initial Cash Outflow = Asses Cost + Shipping &
Installation + Increase in NWC
Differential Cash Flow = NI + Depreciation Expense
Terminal Cash Flow = Salvage Value - Taxes Paid + NWC Recapture
Treasury Securities - correct answer ✔Issued by the Federal (US) Government
Dealer Markets - correct answer ✔Online
No physical location
Auction Markets - correct answer ✔NYSE - New York Stock exchange
Goal of Private Company - correct answer ✔Keep control of business
