WGU C214 FINANCIAL MANAGEMENT OBJECTIVE ASSESSMENT EXAM –
QUESTIONS AND ANSWERS | EXAM TESTBANK WITH VERIFIED AND WELL
DETAILED ANSWERS | PLUS RATIONALES | DOWNLOAD AND PASS | LATEST
EXAM UPDATE 2026/2027
{Core Domains}
• Financial Statement Analysis
• Time Value of Money & Capital Budgeting
• Risk, Return, and the Cost of Capital
• Capital Structure and Dividend Policy
• Working Capital Management
• International Finance
• Business Valuation and Corporate Governance
• Financial Markets and Institutions
• Derivatives and Risk Management
• Ethical and Professional Standards in Finance
{Introduction}
This comprehensive objective assessment is designed to evaluate your mastery of
the core principles and applied practices of financial management. The examination
covers a wide range of topics, from foundational financial theory and regulatory
compliance to sophisticated capital budgeting and risk management techniques.
You will encounter a mix of multiple-choice and scenario-based questions that test
not only your recall of key concepts but also your ability to apply them in complex,
real-world business situations. The focus is on strategic decision-making, ethical
considerations, and the practical financial analysis necessary to succeed in today's
dynamic business environment.
SECTION ONE: QUESTIONS 1 – 50
,1. Which of the following best describes the primary goal of a financial
manager?
A. Minimizing the company's tax liability.
B. Maximizing shareholder wealth.
C. Maximizing current period profits.
D. Increasing the company's market share.
🟢 Correct Answer: B. Maximizing shareholder wealth.
🔴 Explanation: The fundamental objective of financial management is to
maximize the wealth of the shareholders, which is reflected in the market value of
the company's stock. This long-term goal supersedes other objectives like short-
term profit maximization or market share growth.
2. The fundamental principle of the Time Value of Money states that:
A. The value of money is inversely related to the rate of inflation.
B. A dollar received today is worth more than a dollar received in the future.
C. The value of money is determined by the government's monetary policy.
D. A dollar received in the future is worth more than a dollar received today.
🟢 Correct Answer: B. A dollar received today is worth more than a dollar
received in the future.
🔴 Explanation: The TVM principle is based on the concept of opportunity cost
and the ability to earn a return on money. A dollar today can be invested to grow,
making it more valuable than a dollar received later.
3. A company has current assets of $500,000 and current liabilities of $250,000.
What is its current ratio?
A. 0.5
B. 1.0
C. 2.0
D. 2.5
,🟢 Correct Answer: C. 2.0
🔴 Explanation: The current ratio is calculated as Current Assets / Current
Liabilities. $500,000 / $250,000 = 2.0. This indicates the company has twice as
many current assets as current liabilities to cover its short-term obligations.
4. What is the primary purpose of the Sarbanes-Oxley Act (SOX) of 2002?
A. To reduce corporate tax rates.
B. To deregulate the banking industry.
C. To improve the accuracy and reliability of corporate financial disclosures.
D. To establish the Federal Reserve System.
🟢 Correct Answer: C. To improve the accuracy and reliability of corporate
financial disclosures.
🔴 Explanation: Enacted in response to major corporate scandals, SOX aims to
protect investors by enhancing the accuracy and reliability of corporate financial
reporting and disclosures, and by increasing the accountability of corporate
executives and auditors.
5. Which of the following is a use of cash in a statement of cash flows?
A. An increase in accounts payable.
B. A decrease in inventory.
C. An increase in long-term debt.
D. An increase in accounts receivable.
🟢 Correct Answer: D. An increase in accounts receivable.
🔴 Explanation: An increase in accounts receivable means the company has made
sales but not yet collected the cash, effectively using cash to fund those credit
sales. Increases in liabilities (like AP or debt) and decreases in assets (like
inventory) are sources of cash.
, 6. The beta coefficient of a stock measures its:
A. Idiosyncratic risk.
B. Systematic risk.
C. Total risk.
D. Liquidity risk.
🟢 Correct Answer: B. Systematic risk.
🔴 Explanation: Beta measures the volatility of a stock's returns relative to the
overall market. This is known as systematic risk, which is the risk inherent to the
entire market and cannot be diversified away.
7. What is the Net Present Value (NPV) of a project with an initial investment of
$100,000 and expected cash flows of $40,000 for 3 years, assuming a discount
rate of 10%? (PV annuity factor for 10%, 3 years is 2.4869)
A. -$526
B. $526
C. -$4,878
D. $4,878
🟢 Correct Answer: A. -$526
🔴 Explanation: PV of Cash Inflows = $40,000 * 2.4869 = $99,476. NPV = PV of
Inflows - Initial Investment = $99,476 - $100,000 = -$524, which rounds to -$526.
A negative NPV indicates the project should be rejected.
8. The Capital Asset Pricing Model (CAPM) is primarily used to calculate a
company's:
A. Dividend yield.
B. Cost of equity.
C. Cost of debt.
D. Weighted average cost of capital.
QUESTIONS AND ANSWERS | EXAM TESTBANK WITH VERIFIED AND WELL
DETAILED ANSWERS | PLUS RATIONALES | DOWNLOAD AND PASS | LATEST
EXAM UPDATE 2026/2027
{Core Domains}
• Financial Statement Analysis
• Time Value of Money & Capital Budgeting
• Risk, Return, and the Cost of Capital
• Capital Structure and Dividend Policy
• Working Capital Management
• International Finance
• Business Valuation and Corporate Governance
• Financial Markets and Institutions
• Derivatives and Risk Management
• Ethical and Professional Standards in Finance
{Introduction}
This comprehensive objective assessment is designed to evaluate your mastery of
the core principles and applied practices of financial management. The examination
covers a wide range of topics, from foundational financial theory and regulatory
compliance to sophisticated capital budgeting and risk management techniques.
You will encounter a mix of multiple-choice and scenario-based questions that test
not only your recall of key concepts but also your ability to apply them in complex,
real-world business situations. The focus is on strategic decision-making, ethical
considerations, and the practical financial analysis necessary to succeed in today's
dynamic business environment.
SECTION ONE: QUESTIONS 1 – 50
,1. Which of the following best describes the primary goal of a financial
manager?
A. Minimizing the company's tax liability.
B. Maximizing shareholder wealth.
C. Maximizing current period profits.
D. Increasing the company's market share.
🟢 Correct Answer: B. Maximizing shareholder wealth.
🔴 Explanation: The fundamental objective of financial management is to
maximize the wealth of the shareholders, which is reflected in the market value of
the company's stock. This long-term goal supersedes other objectives like short-
term profit maximization or market share growth.
2. The fundamental principle of the Time Value of Money states that:
A. The value of money is inversely related to the rate of inflation.
B. A dollar received today is worth more than a dollar received in the future.
C. The value of money is determined by the government's monetary policy.
D. A dollar received in the future is worth more than a dollar received today.
🟢 Correct Answer: B. A dollar received today is worth more than a dollar
received in the future.
🔴 Explanation: The TVM principle is based on the concept of opportunity cost
and the ability to earn a return on money. A dollar today can be invested to grow,
making it more valuable than a dollar received later.
3. A company has current assets of $500,000 and current liabilities of $250,000.
What is its current ratio?
A. 0.5
B. 1.0
C. 2.0
D. 2.5
,🟢 Correct Answer: C. 2.0
🔴 Explanation: The current ratio is calculated as Current Assets / Current
Liabilities. $500,000 / $250,000 = 2.0. This indicates the company has twice as
many current assets as current liabilities to cover its short-term obligations.
4. What is the primary purpose of the Sarbanes-Oxley Act (SOX) of 2002?
A. To reduce corporate tax rates.
B. To deregulate the banking industry.
C. To improve the accuracy and reliability of corporate financial disclosures.
D. To establish the Federal Reserve System.
🟢 Correct Answer: C. To improve the accuracy and reliability of corporate
financial disclosures.
🔴 Explanation: Enacted in response to major corporate scandals, SOX aims to
protect investors by enhancing the accuracy and reliability of corporate financial
reporting and disclosures, and by increasing the accountability of corporate
executives and auditors.
5. Which of the following is a use of cash in a statement of cash flows?
A. An increase in accounts payable.
B. A decrease in inventory.
C. An increase in long-term debt.
D. An increase in accounts receivable.
🟢 Correct Answer: D. An increase in accounts receivable.
🔴 Explanation: An increase in accounts receivable means the company has made
sales but not yet collected the cash, effectively using cash to fund those credit
sales. Increases in liabilities (like AP or debt) and decreases in assets (like
inventory) are sources of cash.
, 6. The beta coefficient of a stock measures its:
A. Idiosyncratic risk.
B. Systematic risk.
C. Total risk.
D. Liquidity risk.
🟢 Correct Answer: B. Systematic risk.
🔴 Explanation: Beta measures the volatility of a stock's returns relative to the
overall market. This is known as systematic risk, which is the risk inherent to the
entire market and cannot be diversified away.
7. What is the Net Present Value (NPV) of a project with an initial investment of
$100,000 and expected cash flows of $40,000 for 3 years, assuming a discount
rate of 10%? (PV annuity factor for 10%, 3 years is 2.4869)
A. -$526
B. $526
C. -$4,878
D. $4,878
🟢 Correct Answer: A. -$526
🔴 Explanation: PV of Cash Inflows = $40,000 * 2.4869 = $99,476. NPV = PV of
Inflows - Initial Investment = $99,476 - $100,000 = -$524, which rounds to -$526.
A negative NPV indicates the project should be rejected.
8. The Capital Asset Pricing Model (CAPM) is primarily used to calculate a
company's:
A. Dividend yield.
B. Cost of equity.
C. Cost of debt.
D. Weighted average cost of capital.
