C214 FINAL EXAM QUESTIONS WITH
CORRECT ANSWERS 2026
Coupon Rate,The interest rate that a company promises to pay on bonds
Market Rate,The interest rate on other comparable bonds
Par Value,The amount payable on maturity of the bond
Market rate,Same as YTM - Yield to Maturity
Gordon Growth Model,Assumes stable growth rates and does not incorporate risk
CAPM Model,Allows to determine expected return on stocks and incorporates risk
How do public companies maximize shareholder value?,By maximizing Earnings Per Share
How do private companies maximize shareholder value?,By keeping control within the company
Positive credit rating has what effect on capital?,Lowers cost of capital
What is cash flow from operating activities?,It is cash flow generated for sale of products and services
What is the formula for retained earnings?,Ending retained earnings=Beginning retained earnings + Net
Income = Dividends
Is depreciation and salvage value on an asset precise or is it an estimate?,It is an estimate
What is an example of accounting difference,Companies using different accounting methods
, What is an example of a timing difference?,Companies using different fiscal years
Do stock holders or bond holders have voting rights?,Stock holders have voting rights
What factors are considered for the initial outlay of a new investment?,Purchase price of new equipme
nt, shipping costs, and investment in working capital
What is the risk associated with debt financing?,Too much debt can lead to bankruptcy
What are inventory related costs?,Product costs, storage costs, and opportunity costs
What statements are required to be filed with the SEC,Annual audited financial statements
What are the issues with understanding foreign financial statements?,Foreign financial statements use i
nternational financial reporting standards and they are different from US accounting standards
What does cash flow from investing activities measure?,It measure investments in long term assets suc
h as building, equipment, and machinery
What does the efficient frontier measure?,It maximizes expected return for a given level of risk
What is the objective of portfolio diversification?,The objective is to reduce risk
What is the definition of a current asset and current liability?,A current asset is cash or any other asset
that can be converted to cash within 12 months and a current liability is any liability that has to be paid
within 12 months
What is a differential cash flow?,It is the amount of net cash flow generated a new asset on a yearly ba
sis
CORRECT ANSWERS 2026
Coupon Rate,The interest rate that a company promises to pay on bonds
Market Rate,The interest rate on other comparable bonds
Par Value,The amount payable on maturity of the bond
Market rate,Same as YTM - Yield to Maturity
Gordon Growth Model,Assumes stable growth rates and does not incorporate risk
CAPM Model,Allows to determine expected return on stocks and incorporates risk
How do public companies maximize shareholder value?,By maximizing Earnings Per Share
How do private companies maximize shareholder value?,By keeping control within the company
Positive credit rating has what effect on capital?,Lowers cost of capital
What is cash flow from operating activities?,It is cash flow generated for sale of products and services
What is the formula for retained earnings?,Ending retained earnings=Beginning retained earnings + Net
Income = Dividends
Is depreciation and salvage value on an asset precise or is it an estimate?,It is an estimate
What is an example of accounting difference,Companies using different accounting methods
, What is an example of a timing difference?,Companies using different fiscal years
Do stock holders or bond holders have voting rights?,Stock holders have voting rights
What factors are considered for the initial outlay of a new investment?,Purchase price of new equipme
nt, shipping costs, and investment in working capital
What is the risk associated with debt financing?,Too much debt can lead to bankruptcy
What are inventory related costs?,Product costs, storage costs, and opportunity costs
What statements are required to be filed with the SEC,Annual audited financial statements
What are the issues with understanding foreign financial statements?,Foreign financial statements use i
nternational financial reporting standards and they are different from US accounting standards
What does cash flow from investing activities measure?,It measure investments in long term assets suc
h as building, equipment, and machinery
What does the efficient frontier measure?,It maximizes expected return for a given level of risk
What is the objective of portfolio diversification?,The objective is to reduce risk
What is the definition of a current asset and current liability?,A current asset is cash or any other asset
that can be converted to cash within 12 months and a current liability is any liability that has to be paid
within 12 months
What is a differential cash flow?,It is the amount of net cash flow generated a new asset on a yearly ba
sis
