WGU C214 Financial Management Final
Exam – 50 Authentic Questions with
100% Verified Answers & Expert
Rationales | A+ Graded
1. On the Statement of Cash Flows, Cash Flow from Investing Activities (CFI)
includes:
• A) Cash receipts from customers
• B) Cash paid for purchase of equipment
• C) Cash paid to suppliers
• D) Cash received from issuing stock
Answer: B
Rationale: Cash Flow from Investing Activities (CFI) includes cash flows related to
long-term assets, such as cash receipts from the sale of property and equipment
(inflow) and cash paid for the purchase of equipment (outflow).
2. Which of the following is true with respect to Cash Flow from Operations
(CFO)?
• A) An increase in inventory indicates an increase in CFO
• B) An increase in inventory indicates a reduction in CFO
• C) Depreciation expense increases CFO
• D) Both B and C
,Answer: D
Rationale: An increase in inventory represents a cash outflow, reducing CFO
because cash is used to purchase inventory. Depreciation is a non-cash expense
that is added back to net income when calculating CFO, thus increasing it.
3. The Statement of Cash Flows is not useful when addressing the financial
health of a firm due to the impact of accrual accounting.
• A) True
• B) False
Answer: B
Rationale: This statement is FALSE. The Statement of Cash Flows is actually most
useful in relation to net income because it converts accrual-based accounting to
cash-based accounting, revealing the actual cash generated or used by the firm.
4. Which of the following is NOT a section of the Statement of Cash Flows?
• A) Cash flows from operating activities
• B) Cash flows from investing activities
• C) Cash flows from financing activities
• D) Cash flows from liquidating activities
Answer: D
Rationale: The three sections of the Statement of Cash Flows are Operating,
Investing, and Financing activities. "Cash flows from liquidating activities" is not a
standard category.
, 5. The sum of CFO + CFI + CFF is equal to:
• A) Net income
• B) Total assets
• C) The change in cash during the period
• D) Retained earnings
Answer: C
Rationale: The sum of cash flows from operating, investing, and financing activities
equals the net change in cash during the period.
6. How does an increase in Accounts Receivable impact Cash Flow from
Operations (CFO)?
• A) Increases CFO
• B) Decreases CFO
• C) No impact on CFO
• D) Increases net income
Answer: B
Rationale: An increase in Accounts Receivable indicates that sales were made on
credit and cash has not yet been collected. This represents a use of cash, thereby
decreasing CFO.
Exam – 50 Authentic Questions with
100% Verified Answers & Expert
Rationales | A+ Graded
1. On the Statement of Cash Flows, Cash Flow from Investing Activities (CFI)
includes:
• A) Cash receipts from customers
• B) Cash paid for purchase of equipment
• C) Cash paid to suppliers
• D) Cash received from issuing stock
Answer: B
Rationale: Cash Flow from Investing Activities (CFI) includes cash flows related to
long-term assets, such as cash receipts from the sale of property and equipment
(inflow) and cash paid for the purchase of equipment (outflow).
2. Which of the following is true with respect to Cash Flow from Operations
(CFO)?
• A) An increase in inventory indicates an increase in CFO
• B) An increase in inventory indicates a reduction in CFO
• C) Depreciation expense increases CFO
• D) Both B and C
,Answer: D
Rationale: An increase in inventory represents a cash outflow, reducing CFO
because cash is used to purchase inventory. Depreciation is a non-cash expense
that is added back to net income when calculating CFO, thus increasing it.
3. The Statement of Cash Flows is not useful when addressing the financial
health of a firm due to the impact of accrual accounting.
• A) True
• B) False
Answer: B
Rationale: This statement is FALSE. The Statement of Cash Flows is actually most
useful in relation to net income because it converts accrual-based accounting to
cash-based accounting, revealing the actual cash generated or used by the firm.
4. Which of the following is NOT a section of the Statement of Cash Flows?
• A) Cash flows from operating activities
• B) Cash flows from investing activities
• C) Cash flows from financing activities
• D) Cash flows from liquidating activities
Answer: D
Rationale: The three sections of the Statement of Cash Flows are Operating,
Investing, and Financing activities. "Cash flows from liquidating activities" is not a
standard category.
, 5. The sum of CFO + CFI + CFF is equal to:
• A) Net income
• B) Total assets
• C) The change in cash during the period
• D) Retained earnings
Answer: C
Rationale: The sum of cash flows from operating, investing, and financing activities
equals the net change in cash during the period.
6. How does an increase in Accounts Receivable impact Cash Flow from
Operations (CFO)?
• A) Increases CFO
• B) Decreases CFO
• C) No impact on CFO
• D) Increases net income
Answer: B
Rationale: An increase in Accounts Receivable indicates that sales were made on
credit and cash has not yet been collected. This represents a use of cash, thereby
decreasing CFO.
