1|Page
WGU C214 FINANCIAL MANAGEMENT
OA STUDY SET|CERTIFIED QUESTIONS
WITH CORRECT ANSWERS 2026
Why is the depreciation expense taken out of the net income calculation, yet
added back at the end? - correct-answer -Because depreciation expense is tax
deductible.
Why would we reject a project based on NPV? - correct-answer -The NPV is a
negative number
Why would we reject a project based on IRR? - correct-answer -The discount rate
is higher than the IRR
,2|Page
What are two key elements of differential cash flow? - correct-answer -
Depreciation expense and net income
Why is the NPV preferred over the IRR? - correct-answer -It measures the dollar
value and is more reliable.
When a company uses more leverage as evidenced by a higher degree of either
financial or operating leverage, what effect does it have on changes in
profitability? - correct-answer -Higher leverage leads to higher profitability for a
given sale level.
What does the degree of financial leverage indicate? - correct-answer -The
reliance on debt
,3|Page
If a company has a high degree of financial leverage, what does that tell us about
the firms risk profile? - correct-answer -Financial leverage also means that more
financing is done through debt, not equity. Higher profits to shareholders.
What is the cash cycle? - correct-answer -The amount of time to regenerate cash.
Why is float important to understand? - correct-answer -To time cash
expenditures
What should a company do to manage its working capital? - correct-answer -
Collect quickly and pay slowly
Name what characterizes increased collection float? - correct-answer -Increased
float indicates slower processing time.
, 4|Page
In regards to Accounts Payable Balances, what is a good policy? - correct-answer -
Paying off A/P on the last day due is a good policy.
What would be a good source of information to determine replacement cost? -
correct-answer -Building Appraisal
Dodd-Frank Act regulates which segment of the U.S economy? - correct-answer -
Banking industry
What is the regulatory body that overseas the systematic risk in banking? -
correct-answer -Financial stability oversight council
WGU C214 FINANCIAL MANAGEMENT
OA STUDY SET|CERTIFIED QUESTIONS
WITH CORRECT ANSWERS 2026
Why is the depreciation expense taken out of the net income calculation, yet
added back at the end? - correct-answer -Because depreciation expense is tax
deductible.
Why would we reject a project based on NPV? - correct-answer -The NPV is a
negative number
Why would we reject a project based on IRR? - correct-answer -The discount rate
is higher than the IRR
,2|Page
What are two key elements of differential cash flow? - correct-answer -
Depreciation expense and net income
Why is the NPV preferred over the IRR? - correct-answer -It measures the dollar
value and is more reliable.
When a company uses more leverage as evidenced by a higher degree of either
financial or operating leverage, what effect does it have on changes in
profitability? - correct-answer -Higher leverage leads to higher profitability for a
given sale level.
What does the degree of financial leverage indicate? - correct-answer -The
reliance on debt
,3|Page
If a company has a high degree of financial leverage, what does that tell us about
the firms risk profile? - correct-answer -Financial leverage also means that more
financing is done through debt, not equity. Higher profits to shareholders.
What is the cash cycle? - correct-answer -The amount of time to regenerate cash.
Why is float important to understand? - correct-answer -To time cash
expenditures
What should a company do to manage its working capital? - correct-answer -
Collect quickly and pay slowly
Name what characterizes increased collection float? - correct-answer -Increased
float indicates slower processing time.
, 4|Page
In regards to Accounts Payable Balances, what is a good policy? - correct-answer -
Paying off A/P on the last day due is a good policy.
What would be a good source of information to determine replacement cost? -
correct-answer -Building Appraisal
Dodd-Frank Act regulates which segment of the U.S economy? - correct-answer -
Banking industry
What is the regulatory body that overseas the systematic risk in banking? -
correct-answer -Financial stability oversight council
