WGU C214 Financial Management Exam
Actual Exam 2026/2027 – Complete
Exam-Style Questions | 100% Verified –
Pass Guaranteed – A+ Graded
SECTION 1: FINANCIAL STATEMENT ANALYSIS (Q1–Q25)
Q1. A company reports net income of $500,000, interest expense of $50,000, and taxes of $150,000.
What is the company's operating income (EBIT)?
A. $300,000
B. $400,000
C. $700,000 [CORRECT]
D. $600,000
Correct Answer: C
Rationale: Operating income (EBIT) = Net income + Interest expense + Taxes = $500,000 + $50,000 +
$150,000 = $700,000.
Q2. A firm has current assets of $800,000 and current liabilities of $400,000. What is the current ratio?
A. 0.5
B. 1.0
C. 2.0 [CORRECT]
D. 3.0
Correct Answer: C
Rationale: Current ratio = Current assets / Current liabilities = $800,000 / $400,000 = 2.0.
Q3. A company has total assets of $2,000,000 and total liabilities of $1,200,000. What is the debt-to-
equity ratio?
,A. 0.6
B. 1.5 [CORRECT]
C. 2.5
D. 0.4
Correct Answer: B
Rationale: Debt-to-equity ratio = Total liabilities / Total equity = $1,200,000 / ($2,000,000 – $1,200,000)
= $1,200,000 / $800,000 = 1.5.
Q4. A firm's net sales are $1,000,000 and its average accounts receivable is $200,000. What is the
accounts receivable turnover ratio?
A. 2.0
B. 4.0
C. 5.0 [CORRECT]
D. 10.0
Correct Answer: C
Rationale: Accounts receivable turnover = Net sales / Average accounts receivable = $1,000,000 /
$200,000 = 5.0.
Q5. A company has cost of goods sold of $600,000 and average inventory of $150,000. What is the
inventory turnover ratio?
A. 2.0
B. 3.0
C. 4.0 [CORRECT]
D. 6.0
Correct Answer: C
Rationale: Inventory turnover = Cost of goods sold / Average inventory = $600,000 / $150,000 = 4.0.
Q6. A firm reports net income of $300,000 and average total assets of $2,000,000. What is the return on
assets (ROA)?
A. 6.0%
B. 10.0%
C. 15.0% [CORRECT]
D. 20.0%
,Correct Answer: C
Rationale: ROA = Net income / Average total assets = $300,000 / $2,000,000 = 0.15 = 15.0%.
Q7. A company has net income of $400,000 and average shareholders' equity of $2,500,000. What is the
return on equity (ROE)?
A. 10.0%
B. 16.0% [CORRECT]
C. 25.0%
D. 6.25%
Correct Answer: B
Rationale: ROE = Net income / Average shareholders' equity = $400,000 / $2,500,000 = 0.16 = 16.0%.
Q8. A firm has earnings before interest and taxes (EBIT) of $500,000, interest expense of $100,000, and
taxes of $120,000. What is the times interest earned ratio?
A. 3.0
B. 4.0
C. 5.0 [CORRECT]
D. 6.0
Correct Answer: C
Rationale: Times interest earned = EBIT / Interest expense = $500,000 / $100,000 = 5.0.
Q9. A company's gross profit is $400,000 and net sales are $1,000,000. What is the gross profit margin?
A. 25.0%
B. 40.0% [CORRECT]
C. 60.0%
D. 50.0%
Correct Answer: B
Rationale: Gross profit margin = Gross profit / Net sales = $400,000 / $1,000,000 = 0.40 = 40.0%.
Q10. A firm has net income of $250,000 and net sales of $1,250,000. What is the net profit margin?
A. 15.0%
B. 20.0% [CORRECT]
, C. 25.0%
D. 10.0%
Correct Answer: B
Rationale: Net profit margin = Net income / Net sales = $250,000 / $1,250,000 = 0.20 = 20.0%.
Q11. A company has total liabilities of $800,000 and total assets of $2,000,000. What is the debt ratio?
A. 0.25
B. 0.40 [CORRECT]
C. 0.60
D. 0.80
Correct Answer: B
Rationale: Debt ratio = Total liabilities / Total assets = $800,000 / $2,000,000 = 0.40.
Q12. A firm has earnings per share (EPS) of $5.00 and a market price per share of $75.00. What is the
price-to-earnings (P/E) ratio?
A. 10.0
B. 12.5
C. 15.0 [CORRECT]
D. 20.0
Correct Answer: C
Rationale: P/E ratio = Market price per share / Earnings per share = $75.00 / $5.00 = 15.0.
Q13. A company pays an annual dividend of $2.00 per share and has earnings per share of $5.00. What
is the dividend payout ratio?
A. 25.0%
B. 40.0% [CORRECT]
C. 50.0%
D. 60.0%
Correct Answer: B
Rationale: Dividend payout ratio = Dividends per share / Earnings per share = $2.00 / $5.00 = 0.40 =
40.0%.
Actual Exam 2026/2027 – Complete
Exam-Style Questions | 100% Verified –
Pass Guaranteed – A+ Graded
SECTION 1: FINANCIAL STATEMENT ANALYSIS (Q1–Q25)
Q1. A company reports net income of $500,000, interest expense of $50,000, and taxes of $150,000.
What is the company's operating income (EBIT)?
A. $300,000
B. $400,000
C. $700,000 [CORRECT]
D. $600,000
Correct Answer: C
Rationale: Operating income (EBIT) = Net income + Interest expense + Taxes = $500,000 + $50,000 +
$150,000 = $700,000.
Q2. A firm has current assets of $800,000 and current liabilities of $400,000. What is the current ratio?
A. 0.5
B. 1.0
C. 2.0 [CORRECT]
D. 3.0
Correct Answer: C
Rationale: Current ratio = Current assets / Current liabilities = $800,000 / $400,000 = 2.0.
Q3. A company has total assets of $2,000,000 and total liabilities of $1,200,000. What is the debt-to-
equity ratio?
,A. 0.6
B. 1.5 [CORRECT]
C. 2.5
D. 0.4
Correct Answer: B
Rationale: Debt-to-equity ratio = Total liabilities / Total equity = $1,200,000 / ($2,000,000 – $1,200,000)
= $1,200,000 / $800,000 = 1.5.
Q4. A firm's net sales are $1,000,000 and its average accounts receivable is $200,000. What is the
accounts receivable turnover ratio?
A. 2.0
B. 4.0
C. 5.0 [CORRECT]
D. 10.0
Correct Answer: C
Rationale: Accounts receivable turnover = Net sales / Average accounts receivable = $1,000,000 /
$200,000 = 5.0.
Q5. A company has cost of goods sold of $600,000 and average inventory of $150,000. What is the
inventory turnover ratio?
A. 2.0
B. 3.0
C. 4.0 [CORRECT]
D. 6.0
Correct Answer: C
Rationale: Inventory turnover = Cost of goods sold / Average inventory = $600,000 / $150,000 = 4.0.
Q6. A firm reports net income of $300,000 and average total assets of $2,000,000. What is the return on
assets (ROA)?
A. 6.0%
B. 10.0%
C. 15.0% [CORRECT]
D. 20.0%
,Correct Answer: C
Rationale: ROA = Net income / Average total assets = $300,000 / $2,000,000 = 0.15 = 15.0%.
Q7. A company has net income of $400,000 and average shareholders' equity of $2,500,000. What is the
return on equity (ROE)?
A. 10.0%
B. 16.0% [CORRECT]
C. 25.0%
D. 6.25%
Correct Answer: B
Rationale: ROE = Net income / Average shareholders' equity = $400,000 / $2,500,000 = 0.16 = 16.0%.
Q8. A firm has earnings before interest and taxes (EBIT) of $500,000, interest expense of $100,000, and
taxes of $120,000. What is the times interest earned ratio?
A. 3.0
B. 4.0
C. 5.0 [CORRECT]
D. 6.0
Correct Answer: C
Rationale: Times interest earned = EBIT / Interest expense = $500,000 / $100,000 = 5.0.
Q9. A company's gross profit is $400,000 and net sales are $1,000,000. What is the gross profit margin?
A. 25.0%
B. 40.0% [CORRECT]
C. 60.0%
D. 50.0%
Correct Answer: B
Rationale: Gross profit margin = Gross profit / Net sales = $400,000 / $1,000,000 = 0.40 = 40.0%.
Q10. A firm has net income of $250,000 and net sales of $1,250,000. What is the net profit margin?
A. 15.0%
B. 20.0% [CORRECT]
, C. 25.0%
D. 10.0%
Correct Answer: B
Rationale: Net profit margin = Net income / Net sales = $250,000 / $1,250,000 = 0.20 = 20.0%.
Q11. A company has total liabilities of $800,000 and total assets of $2,000,000. What is the debt ratio?
A. 0.25
B. 0.40 [CORRECT]
C. 0.60
D. 0.80
Correct Answer: B
Rationale: Debt ratio = Total liabilities / Total assets = $800,000 / $2,000,000 = 0.40.
Q12. A firm has earnings per share (EPS) of $5.00 and a market price per share of $75.00. What is the
price-to-earnings (P/E) ratio?
A. 10.0
B. 12.5
C. 15.0 [CORRECT]
D. 20.0
Correct Answer: C
Rationale: P/E ratio = Market price per share / Earnings per share = $75.00 / $5.00 = 15.0.
Q13. A company pays an annual dividend of $2.00 per share and has earnings per share of $5.00. What
is the dividend payout ratio?
A. 25.0%
B. 40.0% [CORRECT]
C. 50.0%
D. 60.0%
Correct Answer: B
Rationale: Dividend payout ratio = Dividends per share / Earnings per share = $2.00 / $5.00 = 0.40 =
40.0%.
