WGU C214 Financial Management Concepts
Practice Exam 152 Questions with Verified Answers
The matching principle in accrual accounting requires that:
a. Expenses are matched to revenue recognition.
b. Expenses are matched to the year in which they are incurred
c. Revenues are matched to the year in which they are booked
d. Revenues should be large enough to match expenses - CORRECT ANSWER a
The addition to retained earnings each year is:
a. Net Income
b. Net Income minus dividends
c. Net Income plus dividends
d. Net Income times the Payout Ratio - CORRECT ANSWER b
Net working capital equals:
a. Current assets
b. Current liabilities
c. Current assets minus current liabilities
d. None of the above - CORRECT ANSWER c
What does the Sarbanes-Oxley Act require companies to do?
a. Have a board of directors
,b. Register all foreign sales
c. Make estimated tax payments
d. Have transparent, accurate financial statements - CORRECT ANSWER d
If a company produces and sells a product only in the U.S., what international
developments may affect its sales?
a. Fluctuating exchange rates
b. Imports of competing products
c. Immigration policy
d. Inflation in Europe - CORRECT ANSWER b
Which is not a reason to calculate WACC?
a. To measure the overall cost of financing
b. Needed to calculate Cash Flow Financing
c. It is the minimum required return for investment projects
d. Measures investors' required return on firm securities - CORRECT ANSWER b
If a firm's goal is to maximize stockholder wealth, which would the firm avoid?
a. Stock buybacks
b. Risky long-term investments
c. Investments with negative NPV
d. Transparency in financial statements - CORRECT ANSWER c
In which market transaction is the corporation not involved?
,a. Primary Markets
b. Secondary Markets
c. IPO
d. Buy Backs - CORRECT ANSWER b
What does Beta measure?
a. The yield on the S&P 500
b. The relative riskiness of an individual stock
c. Indicates the market value of the stock
d. Stocks to avoid purchasing - CORRECT ANSWER b
Which accounting decision uses estimates?
a. Life of a new asset
b. Accounts payable
c. Amortization schedule for a loan
d. Cost of a new machine - CORRECT ANSWER a
An investment with a term of less than one year is:
a. A current liability
b. A current asset
c. Is in retained earnings
d. Is a long-term liability - CORRECT ANSWER b
, Which does not affect the required yield on a bond?
a. Riskiness of the issuer
b. Collateralization
c. Treasury yields
d. Face Value - CORRECT ANSWER d
If the yield of a bond is higher than the coupon rate, what is the price?
a. Premium price
b. Par price
c. Discount price
d. Secondary market price - CORRECT ANSWER c
Why would a company buy back outstanding stock?
a. To boost the price of the stock
b. To increase financial leverage
c. Lack of investment opportunities
d. All of the above - CORRECT ANSWER d
Which cash flow statement contains income statement items?
a. CFO
b. CFI
c. CFF
d. None of above - CORRECT ANSWER a
Practice Exam 152 Questions with Verified Answers
The matching principle in accrual accounting requires that:
a. Expenses are matched to revenue recognition.
b. Expenses are matched to the year in which they are incurred
c. Revenues are matched to the year in which they are booked
d. Revenues should be large enough to match expenses - CORRECT ANSWER a
The addition to retained earnings each year is:
a. Net Income
b. Net Income minus dividends
c. Net Income plus dividends
d. Net Income times the Payout Ratio - CORRECT ANSWER b
Net working capital equals:
a. Current assets
b. Current liabilities
c. Current assets minus current liabilities
d. None of the above - CORRECT ANSWER c
What does the Sarbanes-Oxley Act require companies to do?
a. Have a board of directors
,b. Register all foreign sales
c. Make estimated tax payments
d. Have transparent, accurate financial statements - CORRECT ANSWER d
If a company produces and sells a product only in the U.S., what international
developments may affect its sales?
a. Fluctuating exchange rates
b. Imports of competing products
c. Immigration policy
d. Inflation in Europe - CORRECT ANSWER b
Which is not a reason to calculate WACC?
a. To measure the overall cost of financing
b. Needed to calculate Cash Flow Financing
c. It is the minimum required return for investment projects
d. Measures investors' required return on firm securities - CORRECT ANSWER b
If a firm's goal is to maximize stockholder wealth, which would the firm avoid?
a. Stock buybacks
b. Risky long-term investments
c. Investments with negative NPV
d. Transparency in financial statements - CORRECT ANSWER c
In which market transaction is the corporation not involved?
,a. Primary Markets
b. Secondary Markets
c. IPO
d. Buy Backs - CORRECT ANSWER b
What does Beta measure?
a. The yield on the S&P 500
b. The relative riskiness of an individual stock
c. Indicates the market value of the stock
d. Stocks to avoid purchasing - CORRECT ANSWER b
Which accounting decision uses estimates?
a. Life of a new asset
b. Accounts payable
c. Amortization schedule for a loan
d. Cost of a new machine - CORRECT ANSWER a
An investment with a term of less than one year is:
a. A current liability
b. A current asset
c. Is in retained earnings
d. Is a long-term liability - CORRECT ANSWER b
, Which does not affect the required yield on a bond?
a. Riskiness of the issuer
b. Collateralization
c. Treasury yields
d. Face Value - CORRECT ANSWER d
If the yield of a bond is higher than the coupon rate, what is the price?
a. Premium price
b. Par price
c. Discount price
d. Secondary market price - CORRECT ANSWER c
Why would a company buy back outstanding stock?
a. To boost the price of the stock
b. To increase financial leverage
c. Lack of investment opportunities
d. All of the above - CORRECT ANSWER d
Which cash flow statement contains income statement items?
a. CFO
b. CFI
c. CFF
d. None of above - CORRECT ANSWER a
