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WGU C214 2025 Exam Questions
With Complete Solutions
The goal of the corporation is to: - CORRECT ANSWER maximize stock price
What makes an efficient market? - CORRECT ANSWER Competitive market,
liquidity, transparency
What is the relationship between risk and required return? - CORRECT ANSWER
As risk increases, required return increases.
What are the 3 main financial statements? - CORRECT ANSWER Income
statement, the Balance Sheet., and the statement of cash flows
Which financial statement reflects a POINT in time (not a period in time) - CORRECT
ANSWER Balance sheet
What is Revenue? - CORRECT ANSWER Amount generated by sale of products
and services
What is Expenses - CORRECT ANSWER Amount incurred to manufacture
products
What is Income? - CORRECT ANSWER The difference between Revenue and
Expenses
What are Assets? - CORRECT ANSWER Items that are owned by the company
Land, building, equipment, machinery, supplies, inventory
What's the difference between a long term asset and a short term asset? - CORRECT
ANSWER Short term assets are expected to be converted to cash within one year,
long term assets are typically more valuable but less liquid (projected to keep for more
than a year)
What is Equity? - CORRECT ANSWER Amounts invested in the company by
shareholders/investors. Happens when somebody buys stock in your company.
What is reported on the Income Statement? - CORRECT ANSWER Revenues,
Expenses and Income
(Income statement is the FIRST statement a company has to prepare)
What is reported on the Balance Sheet? - CORRECT ANSWER assets, liabilities,
equity
Assets = Liability + Equity
What equation is the foundation for all of financial accounting? - CORRECT ANSWER
Assets = Liability + Equity
, 2
What are liabilities? - CORRECT ANSWER Amounts owed by the company to
others.
i.e. Accounts payable, salaries payable, income tax payable. If you see the word
"payable" it's a liability.
What are short term vs long term liabilities? - CORRECT ANSWER Short term
liabilities are those debts that are paid off in one year such as accounts payable,
salaries payable and short term loans.
Long term liabilities are due in more than a year, such as long term loans, bonds, and
lease agreements. LTL are used to finance major investments such as purchasing
property, plant and equipment.
What is the Revenue Recognition principle? - CORRECT ANSWER Revenue is
recognized when product or service is delivered to the customer.
*The moment you deliver the product or service, you have earned the revenue and have
to report it in the income statement. You don't have to be paid by the customer to report
the revenue.
What is the expense recognition principle? - CORRECT ANSWER Expenses are
recognized when expenses are incurred by the company.
*You don't have to have paid for it yet. You recognize it when it is incurred (employees
that work today, you owe them today's work and it's recognized as today's expense)
What is the accrual based accounting system? - CORRECT ANSWER It's the
terminology that we use in financial accounting for revenue recognition and expense
recognition principle.
What is included in the income statement and NOT included in the statement of Cash
Flows? - CORRECT ANSWER Depreciation Expense
(the only expense for which cash will never be paid)
What is the Statement of Retained Earnings? - CORRECT ANSWER A company
earns money/earnings every year. Some of those earnings are paid back to the
shareholders (dividends) and the rest is retained by the company to grow the company
and benefit the shareholders.
Net Income Equation if you know the sales revenue and the margin: - CORRECT
ANSWER Sales * Net Margin
List and summarize the 4 financial statements: - CORRECT ANSWER Income
Statement: Prepared for a period of time
Retained Earnings Statement: Prepared for a period of time
, 3
Balance Sheet: Prepared for a POINT in time
Statement of Cash Flows: Prepared for a period of time
Basic Equation for the Balance Sheet: - CORRECT ANSWER Equity = Assets -
Liabilities OR
Assets = Liabilities + Equity
What is the statement of cash flows? - CORRECT ANSWER It shows the change in
cash balance for a period of time.
What are the 3 types of cash flows? - CORRECT ANSWER CFO: Cash flow from
Operations
CFI: Cash flow from Investing
CFF: Cash flow from Financing
What is increase in networking capital? - CORRECT ANSWER Change in current
assets - change in current liabilities
List some current assets - CORRECT ANSWER Accounts receivable, Inventory,
Prepaid Expenses
List some Current Liabilities - CORRECT ANSWER Accounts Payable, Salaries
Payable, Accrued Expenses
What's another word for Current Assets? - CORRECT ANSWER Operating Assets
What's another word for Current Liabilities - CORRECT ANSWER Operating
Liabilities
What is change in current assets (formula) - CORRECT ANSWER Increase in
current assets - Decrease in current assets
What is change in current liability (formula) - CORRECT ANSWER Increase in
current liability - Decrease in current liability
What's the formula for change in Net PPE? - CORRECT ANSWER change in net
PPE = PPE at the END of the year - PPE at the Beginning of the year.
What's the formula for net change in debt or stock? - CORRECT ANSWER
Increase in Debt/stock - Decrease in Debt/stock
Debt is also known as... - CORRECT ANSWER Long Term Liabilities
Stock is also known as... - CORRECT ANSWER Equities
WGU C214 2025 Exam Questions
With Complete Solutions
The goal of the corporation is to: - CORRECT ANSWER maximize stock price
What makes an efficient market? - CORRECT ANSWER Competitive market,
liquidity, transparency
What is the relationship between risk and required return? - CORRECT ANSWER
As risk increases, required return increases.
What are the 3 main financial statements? - CORRECT ANSWER Income
statement, the Balance Sheet., and the statement of cash flows
Which financial statement reflects a POINT in time (not a period in time) - CORRECT
ANSWER Balance sheet
What is Revenue? - CORRECT ANSWER Amount generated by sale of products
and services
What is Expenses - CORRECT ANSWER Amount incurred to manufacture
products
What is Income? - CORRECT ANSWER The difference between Revenue and
Expenses
What are Assets? - CORRECT ANSWER Items that are owned by the company
Land, building, equipment, machinery, supplies, inventory
What's the difference between a long term asset and a short term asset? - CORRECT
ANSWER Short term assets are expected to be converted to cash within one year,
long term assets are typically more valuable but less liquid (projected to keep for more
than a year)
What is Equity? - CORRECT ANSWER Amounts invested in the company by
shareholders/investors. Happens when somebody buys stock in your company.
What is reported on the Income Statement? - CORRECT ANSWER Revenues,
Expenses and Income
(Income statement is the FIRST statement a company has to prepare)
What is reported on the Balance Sheet? - CORRECT ANSWER assets, liabilities,
equity
Assets = Liability + Equity
What equation is the foundation for all of financial accounting? - CORRECT ANSWER
Assets = Liability + Equity
, 2
What are liabilities? - CORRECT ANSWER Amounts owed by the company to
others.
i.e. Accounts payable, salaries payable, income tax payable. If you see the word
"payable" it's a liability.
What are short term vs long term liabilities? - CORRECT ANSWER Short term
liabilities are those debts that are paid off in one year such as accounts payable,
salaries payable and short term loans.
Long term liabilities are due in more than a year, such as long term loans, bonds, and
lease agreements. LTL are used to finance major investments such as purchasing
property, plant and equipment.
What is the Revenue Recognition principle? - CORRECT ANSWER Revenue is
recognized when product or service is delivered to the customer.
*The moment you deliver the product or service, you have earned the revenue and have
to report it in the income statement. You don't have to be paid by the customer to report
the revenue.
What is the expense recognition principle? - CORRECT ANSWER Expenses are
recognized when expenses are incurred by the company.
*You don't have to have paid for it yet. You recognize it when it is incurred (employees
that work today, you owe them today's work and it's recognized as today's expense)
What is the accrual based accounting system? - CORRECT ANSWER It's the
terminology that we use in financial accounting for revenue recognition and expense
recognition principle.
What is included in the income statement and NOT included in the statement of Cash
Flows? - CORRECT ANSWER Depreciation Expense
(the only expense for which cash will never be paid)
What is the Statement of Retained Earnings? - CORRECT ANSWER A company
earns money/earnings every year. Some of those earnings are paid back to the
shareholders (dividends) and the rest is retained by the company to grow the company
and benefit the shareholders.
Net Income Equation if you know the sales revenue and the margin: - CORRECT
ANSWER Sales * Net Margin
List and summarize the 4 financial statements: - CORRECT ANSWER Income
Statement: Prepared for a period of time
Retained Earnings Statement: Prepared for a period of time
, 3
Balance Sheet: Prepared for a POINT in time
Statement of Cash Flows: Prepared for a period of time
Basic Equation for the Balance Sheet: - CORRECT ANSWER Equity = Assets -
Liabilities OR
Assets = Liabilities + Equity
What is the statement of cash flows? - CORRECT ANSWER It shows the change in
cash balance for a period of time.
What are the 3 types of cash flows? - CORRECT ANSWER CFO: Cash flow from
Operations
CFI: Cash flow from Investing
CFF: Cash flow from Financing
What is increase in networking capital? - CORRECT ANSWER Change in current
assets - change in current liabilities
List some current assets - CORRECT ANSWER Accounts receivable, Inventory,
Prepaid Expenses
List some Current Liabilities - CORRECT ANSWER Accounts Payable, Salaries
Payable, Accrued Expenses
What's another word for Current Assets? - CORRECT ANSWER Operating Assets
What's another word for Current Liabilities - CORRECT ANSWER Operating
Liabilities
What is change in current assets (formula) - CORRECT ANSWER Increase in
current assets - Decrease in current assets
What is change in current liability (formula) - CORRECT ANSWER Increase in
current liability - Decrease in current liability
What's the formula for change in Net PPE? - CORRECT ANSWER change in net
PPE = PPE at the END of the year - PPE at the Beginning of the year.
What's the formula for net change in debt or stock? - CORRECT ANSWER
Increase in Debt/stock - Decrease in Debt/stock
Debt is also known as... - CORRECT ANSWER Long Term Liabilities
Stock is also known as... - CORRECT ANSWER Equities
