WGU C214 OA FINANCIAL MANAGEMENT EXAM
2026 LATEST UPDATE QUESTIONS AND CORRECT
VERIFIED ANSWERS ALREADY GRADED A+
What is dividends/net income called - ANS-dividend payout ratio
NOTE: equation is on the formula sheet
One of the WEAKNESSES of the payback method is that it is - ANS-subjective
NOTE: payback method weakness is subjective (its strength is NOT subjective
One of the STRENGTHS of the payback method is that the cutoff is subjective - ANS-FALSE
NOTE: payback method weakness is subjective
Initial outlay for a capital project is calculated as - ANS-purchase price (or cost of asset) +
shipping & installation + increase investment or in working capital
NOTE: equation is ICF in the formula sheet
The depreciable asset or depreciable base in the initial outlay calculation is - ANS-purchase
price of new asset + shipping costs + installation costs
For capital budgeting analysis, the relevant cash flows from a new project are called - ANS-
incremental cash flows
NOTE: the cash flows for a new project are HUGE; hence INCREMENTAL
Sometimes the amount of the reserve balance is determined by the bank from which - ANS-the
firm has obtained capital
,NOTE: the lender/bank determines reserve balance requirements and all other underwriting
requirements
A commonly used method for shortening the float time is - ANS-electronic check processesing
A discount policy 2/10 net 30 means - ANS-that a discount of 2% is applied if the payment is
received within 10 days and the total bill is due in 30 days
What is the reciprocal of P/E - ANS-earnings yield
NOTE:
earnings yield = earnings per share/stock price
price earnings ratio = stock price/earnings per share
DCF (differential cash flows) typically is best suited for - ANS-established firms for which
forecasting is fairly reliable
The last cash flow in the capital budgeting approach which typically uses the Gordon Growth
Model to estimate all future cash flows beyond a certain point is the - ANS-terminal value of
terminal cash flows (TCF)
NOTE: the question asks for "last" cash flow in the approach; TCF is the last of the 3 cash flow
approaches
The goal of using a financial derivative such as a forward or a future is to - ANS-make no profits
through exchange rate movements
What is the primary motive for tariffs - ANS-to protect domestic industries
, The purpose of currency restriction is what - ANS-to limit the ability of a foreign firm to take
capital outlay out of a country
Accrual accounting is superior because - ANS-cash accounting can be inaccurate since the
receipt and disbursement of cash is frequently not synchronized with operating variables
NOTE: in accrual accounting, revenues and expenses are recorded when they are earned and
project is complete- synchronized
When two rates are given in a word problem - ANS-the coupon rate should be multiplied by FV
A simple interest problem formula is - ANS-simple interest = principle * I/Y * number of years
Sensitivity rates analyze - ANS-the uncertainty of forecasted assumptions regarding investment
projects
NOTE: what makes the rate sensitive is the "uncertainty" & "assumption"
I/Y can be described as - ANS-the rate of return, the yield, or the interest rate
In the CAPM framework, why do investors hold the market portfolio - ANS-any stock with higher
expected returns relative to risk will converge to the market portfolio
If no future value is given in a problem - ANS-assume FV is $1000 or you are solving for FV
Accounts that vary directly with sales are called - ANS-spontaneous accounts
NOTE: sales are almost always spontaneous; very seldom do we buy a new pair of shoes
because we planned to do so
If future value and present value are given in a problem - ANS-use the +/- key for PV
2026 LATEST UPDATE QUESTIONS AND CORRECT
VERIFIED ANSWERS ALREADY GRADED A+
What is dividends/net income called - ANS-dividend payout ratio
NOTE: equation is on the formula sheet
One of the WEAKNESSES of the payback method is that it is - ANS-subjective
NOTE: payback method weakness is subjective (its strength is NOT subjective
One of the STRENGTHS of the payback method is that the cutoff is subjective - ANS-FALSE
NOTE: payback method weakness is subjective
Initial outlay for a capital project is calculated as - ANS-purchase price (or cost of asset) +
shipping & installation + increase investment or in working capital
NOTE: equation is ICF in the formula sheet
The depreciable asset or depreciable base in the initial outlay calculation is - ANS-purchase
price of new asset + shipping costs + installation costs
For capital budgeting analysis, the relevant cash flows from a new project are called - ANS-
incremental cash flows
NOTE: the cash flows for a new project are HUGE; hence INCREMENTAL
Sometimes the amount of the reserve balance is determined by the bank from which - ANS-the
firm has obtained capital
,NOTE: the lender/bank determines reserve balance requirements and all other underwriting
requirements
A commonly used method for shortening the float time is - ANS-electronic check processesing
A discount policy 2/10 net 30 means - ANS-that a discount of 2% is applied if the payment is
received within 10 days and the total bill is due in 30 days
What is the reciprocal of P/E - ANS-earnings yield
NOTE:
earnings yield = earnings per share/stock price
price earnings ratio = stock price/earnings per share
DCF (differential cash flows) typically is best suited for - ANS-established firms for which
forecasting is fairly reliable
The last cash flow in the capital budgeting approach which typically uses the Gordon Growth
Model to estimate all future cash flows beyond a certain point is the - ANS-terminal value of
terminal cash flows (TCF)
NOTE: the question asks for "last" cash flow in the approach; TCF is the last of the 3 cash flow
approaches
The goal of using a financial derivative such as a forward or a future is to - ANS-make no profits
through exchange rate movements
What is the primary motive for tariffs - ANS-to protect domestic industries
, The purpose of currency restriction is what - ANS-to limit the ability of a foreign firm to take
capital outlay out of a country
Accrual accounting is superior because - ANS-cash accounting can be inaccurate since the
receipt and disbursement of cash is frequently not synchronized with operating variables
NOTE: in accrual accounting, revenues and expenses are recorded when they are earned and
project is complete- synchronized
When two rates are given in a word problem - ANS-the coupon rate should be multiplied by FV
A simple interest problem formula is - ANS-simple interest = principle * I/Y * number of years
Sensitivity rates analyze - ANS-the uncertainty of forecasted assumptions regarding investment
projects
NOTE: what makes the rate sensitive is the "uncertainty" & "assumption"
I/Y can be described as - ANS-the rate of return, the yield, or the interest rate
In the CAPM framework, why do investors hold the market portfolio - ANS-any stock with higher
expected returns relative to risk will converge to the market portfolio
If no future value is given in a problem - ANS-assume FV is $1000 or you are solving for FV
Accounts that vary directly with sales are called - ANS-spontaneous accounts
NOTE: sales are almost always spontaneous; very seldom do we buy a new pair of shoes
because we planned to do so
If future value and present value are given in a problem - ANS-use the +/- key for PV
