WGU C214 OA Financial Management Final Exam Questions and Answers (Verified Answers) 2024

What does the Foreign Corrupt Practice Act forbid companies to do? - The Foreign Corrupt Practices Act 1977, as amended, 15 U.S.C. was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. What are two basic types of financial instruments? - Stocks and bonds What are secondary markets? - A secondary market is when you buy and sell stock in the stock exchange. What do cash flows from operating activities report? - Cash flow from operating activities, cash generated from day to day business operations. CFO= Net Income = Depreciation Expense- (Change in Current Assets- Change in Current Liabilities) What does the statement of cash flows report? - The statement of cash flows shows the change in cash balance over a period of time. The statement of cash flows describes how a balance increases or decreases. The 3 components CFO, CFF, CFI help describe changes in cash. Write the equation that links the income to the balance sheet? - Retained Earnings Equation. Ending Retained Earnings= Beginning Retained Earnings+ Net Income-Dividends Paid. What is the firm's cash flow from financing activities? - Cash flow from financing activities shows you the cash that is generated from financing a business. CFF= Increase in LT Debt (bonds) + Increase in Stock - Dividends Paid. Describe an income statement? - Revenues expenses and income (R.E.I) What item is included in the income statement and not included in the statement of cash flows? - Depreciation Expense A company sold goods in 2016 for $30,000 and collected the cash in 2017. In 2016, the company incurred and paid $20,000 in expenses related to the goods sold. How much income should the company report in 2016 under the accrual basis of accounting? - $30,000-$20,000= $10,000 EBIT: $1,000,000 Depreciation: $30,000 Change in working capital: ($5,000) Net capital expenditures: $10,000 Tax rate: 40% What is the company's free cash flow? - FCFF=EBIT * (1-Tax Rate)+ Depreciation- Cap Exp- Increase in NWC 1,000,000* (1-.40)+ 30,000-10,000- (5,000) = 600,000+ 30,000-10,000+ 5,000 = $625,000