WGU - C214 FINANCIAL MANAGEMENT – FINAL EXAM 2025
QUESTIONS AND DETAILED ANSWERS
What is the relationship between increases or decreases in sales revenue and increases or
decreases in EBIT? - ANSWER-There is a direct relationship between sales revenue and EBIT. Any
change in sales will magnify EBIT in either direction. If there is an increase in sales revenue EBIT
will go up. If there is a decrease in sales revenue, EBIT will go down.
How do firms manage working capital? - ANSWER-Try to collect funds as quickly from customers
as possible and pay bills as slowly as possible.
What ratios are used to determine effective working capital management? - ANSWER-- Current
Ratio
- Cash Ratio
- Receivables Turnover Ratio
Name two basic types of financial instruments? - ANSWER-Stocks and Bonds
What are Primary Markets? - ANSWER-Where companies sell securities directly to investors
What are Secondary Markets? - ANSWER-Where securities are bought and sold from third
parties like the New York Stock Exchange
Name two types of secondary markets? - ANSWER-New York Stock Exchange (NYSE) and the
NASDAQ
, Define or describe an income statement? - ANSWER-Reports the company's revenues and
expenses during a particular period of time. Also reports net income or net loss. Always
prepared first.
Define Free Cash Flow - ANSWER-Represents the cash a company generates after accounting for
cash outflows to support operations and maintain its capital assets
Give two examples of accounting estimates used in financial accounting? - ANSWER-
Depreciation and Salvage Value
Give an example of an accounting difference? - ANSWER-Companies using different accounting
methods / such as Inventory.
What securities issued by the federal government is taxable? - ANSWER-Treasury Bonds
What is a secured loan? - ANSWER-Means that some type of asset is being used as collateral to
back the loan.
What is an unsecured loan? - ANSWER-loan is one that is not backed by a specific asset. An
example of an unsecured loan is the line of credit offered by credit card companies.
At what price will a bond sell if the required rate of return is equal to the coupon rate? -
ANSWER-The price will be equal to its par value. At a par price, the yield will equal the coupon
rate.
What is the difference in paying dividend on a common stock and preferred stock? - ANSWER-
Preferred stock has priority over common stock in the payment of dividends
QUESTIONS AND DETAILED ANSWERS
What is the relationship between increases or decreases in sales revenue and increases or
decreases in EBIT? - ANSWER-There is a direct relationship between sales revenue and EBIT. Any
change in sales will magnify EBIT in either direction. If there is an increase in sales revenue EBIT
will go up. If there is a decrease in sales revenue, EBIT will go down.
How do firms manage working capital? - ANSWER-Try to collect funds as quickly from customers
as possible and pay bills as slowly as possible.
What ratios are used to determine effective working capital management? - ANSWER-- Current
Ratio
- Cash Ratio
- Receivables Turnover Ratio
Name two basic types of financial instruments? - ANSWER-Stocks and Bonds
What are Primary Markets? - ANSWER-Where companies sell securities directly to investors
What are Secondary Markets? - ANSWER-Where securities are bought and sold from third
parties like the New York Stock Exchange
Name two types of secondary markets? - ANSWER-New York Stock Exchange (NYSE) and the
NASDAQ
, Define or describe an income statement? - ANSWER-Reports the company's revenues and
expenses during a particular period of time. Also reports net income or net loss. Always
prepared first.
Define Free Cash Flow - ANSWER-Represents the cash a company generates after accounting for
cash outflows to support operations and maintain its capital assets
Give two examples of accounting estimates used in financial accounting? - ANSWER-
Depreciation and Salvage Value
Give an example of an accounting difference? - ANSWER-Companies using different accounting
methods / such as Inventory.
What securities issued by the federal government is taxable? - ANSWER-Treasury Bonds
What is a secured loan? - ANSWER-Means that some type of asset is being used as collateral to
back the loan.
What is an unsecured loan? - ANSWER-loan is one that is not backed by a specific asset. An
example of an unsecured loan is the line of credit offered by credit card companies.
At what price will a bond sell if the required rate of return is equal to the coupon rate? -
ANSWER-The price will be equal to its par value. At a par price, the yield will equal the coupon
rate.
What is the difference in paying dividend on a common stock and preferred stock? - ANSWER-
Preferred stock has priority over common stock in the payment of dividends
