WGU C214 Final Exam Questions With Accurate Answers

Coupon Rate - answerThe interest rate that a company promises to pay on bonds Market Rate - answerThe interest rate on other comparable bonds Par Value - answerThe amount payable on maturity of the bond Market rate - answerSame as YTM - Yield to Maturity Gordon Growth Model - answerAssumes stable growth rates and does not incorporate risk CAPM Model - answerAllows to determine expected return on stocks and incorporates risk How do public companies maximize shareholder value? - answerBy maximizing Earnings Per Share How do private companies maximize shareholder value? - answerBy keeping control within the company Positive credit rating has what effect on capital? - answerLowers cost of capital What is cash flow from operating activities? - answerIt is cash flow generated for sale of products and services What is the formula for retained earnings? - answerEnding retained earnings=Beginning retained earnings + Net Income = Dividends Is depreciation and salvage value on an asset precise or is it an estimate? - answerIt is an estimate What is an example of accounting difference - answerCompanies using different accounting methods What is an example of a timing difference? - answerCompanies using different fiscal years Do stock holders or bond holders have voting rights? - answerStock holders have voting rights What factors are considered for the initial outlay of a new investment? - answerPurchase price of new equipment, shipping costs, and investment in working capital What is the risk associated with debt financing? - answerToo much debt can lead to bankruptcy What are inventory related costs? - answerProduct costs, storage costs, and opportunity costs What statements are required to be filed with the SEC - answerAnnual audited financial statements What are the issues with understanding foreign financial statements? - answerForeign financial statements use international financial reporting standards and they are different from US accounting standards What does cash flow from investing activities measure? - answerIt measure investments in long term assets such as building, equipment, and machinery What does the efficient frontier measure? - answerIt maximizes expected return for a given level of risk What is the objective of portfolio diversification? - answerThe objective is to reduce risk What is the definition of a current asset and current liability? - answerA 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? - answerIt is the amount of net cash flow generated a new asset on a yearly basis