C214 COMPREHENSIVE EXAM PREP
QUESTIONS AND SOLUTIONS VERIFIED
STUDY RESOURCE
●● How might a privately held company define shareholder value
differently from a publicly held company?
Answer: Privately held companies may value keeping the business
within the family
●● What effect does a current devaluation have on a country's
international trade?
Answer: it makes a country's exports cheaper internationally
- devaluation reduces the price of a country's goods and services abroad,
making exports more competitive while potentially increasing the
volume of exports
●● How does global financing integration benefit corporations?
Answer: it provides access to wider range of funding sources and
investment opportunities
●● What is an auction market in secondary financial markets?
,Answer: a market that operates where prices are determined by the
highest bidder
●● Why are efficient, well-developed financial markets important for
stock pricing?
Answer: they produce more reliable stock prices
●● Talia is considering purchasing a small, local construction company.
When reviewing the financials, she notices that although the company
produced $200,000 in net income during the last year, the retained
earnings increased only by $50,000.
Which scenario would explain why the change in retained earnings from
the previous year did not increase by the total income earned?
Answer: the remaining earnings were paid out as dividends to
shareholders
- change in retained earnings is calculated as net income - dividends.
This relationship indicates that net income is either distributed as
dividends or contributes to a change in the retained earnings of the
company
●● What does retained earnings represent in the equity section of the
balance sheet?
Answer: The cumulative total of earnings not paid out as dividends to
stockholders
, - RE: the earnings that the company has accumulated and retained over
its entire history to finance the firms asset based
●● In the statement of cash flows, why is depreciation expense added
back to net income when calculating cash flows from operations (CFO)?
Answer: because it is a non-cash expense
- DE is included back in but doesn't represent an actual cash flow
●● An investor is considering putting money into a start up company.
They ask for the company's projected statement of cash flows for the
next period.
How will this help the investor evaluate the start ups projected
performance?
Answer: it will show the cash flows the firm expects from operating,
investing and financing activities.
●● What can be concluded about the firms cash flows during the year?
Answer: the company relied heavily on external financing for cash
during the year
QUESTIONS AND SOLUTIONS VERIFIED
STUDY RESOURCE
●● How might a privately held company define shareholder value
differently from a publicly held company?
Answer: Privately held companies may value keeping the business
within the family
●● What effect does a current devaluation have on a country's
international trade?
Answer: it makes a country's exports cheaper internationally
- devaluation reduces the price of a country's goods and services abroad,
making exports more competitive while potentially increasing the
volume of exports
●● How does global financing integration benefit corporations?
Answer: it provides access to wider range of funding sources and
investment opportunities
●● What is an auction market in secondary financial markets?
,Answer: a market that operates where prices are determined by the
highest bidder
●● Why are efficient, well-developed financial markets important for
stock pricing?
Answer: they produce more reliable stock prices
●● Talia is considering purchasing a small, local construction company.
When reviewing the financials, she notices that although the company
produced $200,000 in net income during the last year, the retained
earnings increased only by $50,000.
Which scenario would explain why the change in retained earnings from
the previous year did not increase by the total income earned?
Answer: the remaining earnings were paid out as dividends to
shareholders
- change in retained earnings is calculated as net income - dividends.
This relationship indicates that net income is either distributed as
dividends or contributes to a change in the retained earnings of the
company
●● What does retained earnings represent in the equity section of the
balance sheet?
Answer: The cumulative total of earnings not paid out as dividends to
stockholders
, - RE: the earnings that the company has accumulated and retained over
its entire history to finance the firms asset based
●● In the statement of cash flows, why is depreciation expense added
back to net income when calculating cash flows from operations (CFO)?
Answer: because it is a non-cash expense
- DE is included back in but doesn't represent an actual cash flow
●● An investor is considering putting money into a start up company.
They ask for the company's projected statement of cash flows for the
next period.
How will this help the investor evaluate the start ups projected
performance?
Answer: it will show the cash flows the firm expects from operating,
investing and financing activities.
●● What can be concluded about the firms cash flows during the year?
Answer: the company relied heavily on external financing for cash
during the year
