WGU C214 Financial Management Question and
Answer [2026/2027] | UPDATED ACTUAL Exam |
100% Verified Answers
• Banking or Financial Institutions -✓✓ make money by paying depositors a
smaller interest rate than the interest rate charged to borrowers
• Treasury Securities -✓✓ generally bonds that are issued by the US government
• Corporate Bonds -✓✓ firms borrowing from the public
• Stocks -✓✓ a share of ownership in a company
• Primary financial markets -✓✓ markets where securities are first issued
• Syndicate -✓✓ a group that is temporarily formed to handle a bond or stock
issue: generally large investment bank or institutional investors
• Underwriter -✓✓ responsible for determining the value of the security; may
purchase all the securities & then resale to investors
• Competitive sale -✓✓ underwriters submit bids offering highest price/lowest
interest rate; underwriter resales a slightly higher price
• Negotiated sale -✓✓ underwriters submit bids, go thru interview to be selected
,• Secondary financial markets -✓✓ where securities are traded after the initial
offering (stock market)
• Auction market -✓✓ has a physical location & prices are determined by the
highest price an investor is willing to pay (New York Stock Exchange)
• Dealer market -✓✓ no physical location- securities are bought & sold thru a
network of dealers that trade for themselves; multi dealers per stock (NASDAQ)
• Role of financial markets -✓✓ they reduce the cost of borrowing from the public
or selling ownership to the public
• Role of Specialist (NYSE) or Dealers -✓✓ provide liquidity for a fair & orderly
market; may increase the spread to do so (charge a lower price to seller and a
higher price to buyer)
• Financial market liquidity -✓✓ the ease of trading in the market (high frquency
traders)
• Market orders -✓✓ time sensitive; sales at current bid price/buys at current
asking price when order is placed-immediately
• Limited orders -✓✓ price sensitive; sell occurs when price of stock matches order
price
• Role of price -✓✓ convet information to consumers; affect incentives &affect the
distribution of income
,• Dollar Returns -✓✓ Pt - Pt-1 + CFt (Pt= sold price, Pt-1=bought price, CFt=cash
flow-coupons for bonds/dividians for stocks)
• Percentage Returns -✓✓ Pt - Pt-1/Pt-1 + CFt/Pt-1 x 100 (1.2)
(figure for dollar return and divide into bought price)
• Goal of company/firm -✓✓ to maximize shareholder value or maximize profit
• Agency costs -✓✓ costs that are incurred when management doesn't act in the
best interests of shareholders
• Profit maximizarion -✓✓ the potential effect of focusing soley on profits
• Accounting -✓✓ is backward-looking and risk free
• Finance -✓✓ is forward-looking and involes massive uncertainty
• Income Statement -✓✓ show results of operation over time; revenues - expenses
= net income
• Balance Sheet -✓✓ a "snap shot" of a firm's assests & financing at a paticular
point in time; Assets= Liabilities + Owner's Equity
• Statement of Cash Flows -✓✓ tracks all cash in and out of the firm
, • Cash Accounting -✓✓ cash in =revenue; cash out=expense
• Accrual Accounting -✓✓ revenues are recognized when the earnings process is
complete; expenses are "matched" to recongized revenues
• Cash-based income -✓✓ an informal metric based on cash in & cash out of the
firm
• Income for tax purposes -✓✓ based on the government's definition of income,
this is the amount of income the government will tax
• Accounting income -✓✓ the income calculated using accrual accounting (aka,
GAAP); best & most complicated metric for understanding the operations of the
firm
• On the Income statement -✓✓ Revenues- Cost of goods sold= Gross profit
- Operating expenses= earning before interest & taxes
- interest expenses, - taxes= Net income
• Revenue -✓✓ recognized when "earned"
• Cost of Goods Sold -✓✓ direct costs of materials & labor
• Gross profit -✓✓ revenue - cost of goods sold
Answer [2026/2027] | UPDATED ACTUAL Exam |
100% Verified Answers
• Banking or Financial Institutions -✓✓ make money by paying depositors a
smaller interest rate than the interest rate charged to borrowers
• Treasury Securities -✓✓ generally bonds that are issued by the US government
• Corporate Bonds -✓✓ firms borrowing from the public
• Stocks -✓✓ a share of ownership in a company
• Primary financial markets -✓✓ markets where securities are first issued
• Syndicate -✓✓ a group that is temporarily formed to handle a bond or stock
issue: generally large investment bank or institutional investors
• Underwriter -✓✓ responsible for determining the value of the security; may
purchase all the securities & then resale to investors
• Competitive sale -✓✓ underwriters submit bids offering highest price/lowest
interest rate; underwriter resales a slightly higher price
• Negotiated sale -✓✓ underwriters submit bids, go thru interview to be selected
,• Secondary financial markets -✓✓ where securities are traded after the initial
offering (stock market)
• Auction market -✓✓ has a physical location & prices are determined by the
highest price an investor is willing to pay (New York Stock Exchange)
• Dealer market -✓✓ no physical location- securities are bought & sold thru a
network of dealers that trade for themselves; multi dealers per stock (NASDAQ)
• Role of financial markets -✓✓ they reduce the cost of borrowing from the public
or selling ownership to the public
• Role of Specialist (NYSE) or Dealers -✓✓ provide liquidity for a fair & orderly
market; may increase the spread to do so (charge a lower price to seller and a
higher price to buyer)
• Financial market liquidity -✓✓ the ease of trading in the market (high frquency
traders)
• Market orders -✓✓ time sensitive; sales at current bid price/buys at current
asking price when order is placed-immediately
• Limited orders -✓✓ price sensitive; sell occurs when price of stock matches order
price
• Role of price -✓✓ convet information to consumers; affect incentives &affect the
distribution of income
,• Dollar Returns -✓✓ Pt - Pt-1 + CFt (Pt= sold price, Pt-1=bought price, CFt=cash
flow-coupons for bonds/dividians for stocks)
• Percentage Returns -✓✓ Pt - Pt-1/Pt-1 + CFt/Pt-1 x 100 (1.2)
(figure for dollar return and divide into bought price)
• Goal of company/firm -✓✓ to maximize shareholder value or maximize profit
• Agency costs -✓✓ costs that are incurred when management doesn't act in the
best interests of shareholders
• Profit maximizarion -✓✓ the potential effect of focusing soley on profits
• Accounting -✓✓ is backward-looking and risk free
• Finance -✓✓ is forward-looking and involes massive uncertainty
• Income Statement -✓✓ show results of operation over time; revenues - expenses
= net income
• Balance Sheet -✓✓ a "snap shot" of a firm's assests & financing at a paticular
point in time; Assets= Liabilities + Owner's Equity
• Statement of Cash Flows -✓✓ tracks all cash in and out of the firm
, • Cash Accounting -✓✓ cash in =revenue; cash out=expense
• Accrual Accounting -✓✓ revenues are recognized when the earnings process is
complete; expenses are "matched" to recongized revenues
• Cash-based income -✓✓ an informal metric based on cash in & cash out of the
firm
• Income for tax purposes -✓✓ based on the government's definition of income,
this is the amount of income the government will tax
• Accounting income -✓✓ the income calculated using accrual accounting (aka,
GAAP); best & most complicated metric for understanding the operations of the
firm
• On the Income statement -✓✓ Revenues- Cost of goods sold= Gross profit
- Operating expenses= earning before interest & taxes
- interest expenses, - taxes= Net income
• Revenue -✓✓ recognized when "earned"
• Cost of Goods Sold -✓✓ direct costs of materials & labor
• Gross profit -✓✓ revenue - cost of goods sold
