WGU C214 Financial Management Study
Set with Answers Graded A+
Why would we reject a project based on NPV? ✔️✔️The NPV is a negative number
Why would we reject a project based on IRR? ✔️✔️The discount rate is higher than the IRR
What are two key elements of differential cash flow? ✔️✔️Depreciation expense and net
income
Why is the NPV preferred over the IRR? ✔️✔️It measures the dollar value and is more
reliable.
When a company uses more leverage as evidenced by a higher degree of either financial or
operating leverage, what effect does it have on changes in profitability? ✔️✔️Higher leverage
leads to higher profitability for a given sale level.
What does the degree of financial leverage indicate? ✔️✔️The reliance on debt
If a company has a high degree of financial leverage, what does that tell us about the firms risk
profile? ✔️✔️Financial leverage also means that more financing is done through debt, not
equity. Higher profits to shareholders.
,What is the cash cycle? ✔️✔️The amount of time to regenerate cash.
Why is float important to understand? ✔️✔️To time cash expenditures
What should a company do to manage its working capital? ✔️✔️Collect quickly and pay
slowly
Name what characterizes increased collection float? ✔️✔️Increased float indicates slower
processing time.
In regards to Accounts Payable Balances, what is a good policy? ✔️✔️Paying off A/P on the
last day due is a good policy.
What would be a good source of information to determine replacement cost? ✔️✔️Building
Appraisal
Dodd-Frank Act regulates which segment of the U.S economy? ✔️✔️Banking industry
What is the regulatory body that overseas the systematic risk in banking? ✔️✔️Financial
stability oversight council
, The SEC securities and Exchange Commission requires companies to do the following three
things: ✔️✔️Register all public offerings, regulate stock sales and ensure transparency through
uniform reporting.
What does the Sarbanes-Oxley Act require companies to do? ✔️✔️Have internal control
audits, senior management responsible for signing off on statements and places restrictions on
auditors.
Financial Industry Regulatory Authority (FINRA) does the following? ✔️✔️Licenses stock
brokers and audits brokerage firms.
If a product is made 100% domestically, what can affect its domestic market?
✔️✔️International competition
If a company makes a product in a foreign country where labor costs are much lower, what
happens? ✔️✔️Profits go up and domestic employment decreases.
If the value of a dollar increases, the price of imports does what? ✔️✔️Decreases
Why would a farmer buy a hedge when he signs a contract to sell products oversees? ✔️✔️To
reduce currency risk
Set with Answers Graded A+
Why would we reject a project based on NPV? ✔️✔️The NPV is a negative number
Why would we reject a project based on IRR? ✔️✔️The discount rate is higher than the IRR
What are two key elements of differential cash flow? ✔️✔️Depreciation expense and net
income
Why is the NPV preferred over the IRR? ✔️✔️It measures the dollar value and is more
reliable.
When a company uses more leverage as evidenced by a higher degree of either financial or
operating leverage, what effect does it have on changes in profitability? ✔️✔️Higher leverage
leads to higher profitability for a given sale level.
What does the degree of financial leverage indicate? ✔️✔️The reliance on debt
If a company has a high degree of financial leverage, what does that tell us about the firms risk
profile? ✔️✔️Financial leverage also means that more financing is done through debt, not
equity. Higher profits to shareholders.
,What is the cash cycle? ✔️✔️The amount of time to regenerate cash.
Why is float important to understand? ✔️✔️To time cash expenditures
What should a company do to manage its working capital? ✔️✔️Collect quickly and pay
slowly
Name what characterizes increased collection float? ✔️✔️Increased float indicates slower
processing time.
In regards to Accounts Payable Balances, what is a good policy? ✔️✔️Paying off A/P on the
last day due is a good policy.
What would be a good source of information to determine replacement cost? ✔️✔️Building
Appraisal
Dodd-Frank Act regulates which segment of the U.S economy? ✔️✔️Banking industry
What is the regulatory body that overseas the systematic risk in banking? ✔️✔️Financial
stability oversight council
, The SEC securities and Exchange Commission requires companies to do the following three
things: ✔️✔️Register all public offerings, regulate stock sales and ensure transparency through
uniform reporting.
What does the Sarbanes-Oxley Act require companies to do? ✔️✔️Have internal control
audits, senior management responsible for signing off on statements and places restrictions on
auditors.
Financial Industry Regulatory Authority (FINRA) does the following? ✔️✔️Licenses stock
brokers and audits brokerage firms.
If a product is made 100% domestically, what can affect its domestic market?
✔️✔️International competition
If a company makes a product in a foreign country where labor costs are much lower, what
happens? ✔️✔️Profits go up and domestic employment decreases.
If the value of a dollar increases, the price of imports does what? ✔️✔️Decreases
Why would a farmer buy a hedge when he signs a contract to sell products oversees? ✔️✔️To
reduce currency risk
