WGU C214 Financial Management Exam (2025 / 2026) – Original Copy, 100% Verified Objective Assessment Answers

WGU C214 Financial Management Exam
() – Original Copy, 100%
Verified Objective Assessment Answers

This exam for WGU C214 Financial Management (2025/2026) includes 100% verified objective
assessment questions covering financial statements, ratio analysis, time value of money, capital
budgeting, cost of capital, risk, and working capital management. Questions are multiple-choice
with four options, correct answer in RED, and concise rationales with key concepts and formulas
for A+ success.



Question 1: What is the primary goal of financial management in a corporation?
A. Maximize short-term profits
B. Maximize shareholder wealth
C. Minimize taxes
D. Increase sales volume
Correct Answer: B. Maximize shareholder wealth
Rationale: Shareholder wealth maximization considers long-term value via stock price,
balancing risk and return per finance theory.



Question 2: The balance sheet equation is:
A. Assets = Liabilities - Equity
B. Assets = Liabilities + Equity
C. Revenue = Expenses + Net Income
D. Cash = Liabilities + Equity
Correct Answer: B. Assets = Liabilities + Equity
Rationale: Fundamental equation; assets financed by debt and equity.



Question 3: What is the current ratio?
A. Current assets / current liabilities
B. Total assets / total liabilities
C. Net income / sales
D. Inventory / current assets
Correct Answer: A. Current assets / current liabilities
Rationale: Measures short-term liquidity; >1 desirable.

,Question 4: The time value of money principle states that a dollar today is worth more than
a dollar in the future due to:
A. Inflation only
B. Opportunity cost and interest
C. Taxes
D. Risk only
Correct Answer: B. Opportunity cost and interest
Rationale: Present value discounts future cash for earning potential.



Question 5: What is the formula for future value of a single sum?
A. FV = PV × (1 + r)^n
B. PV = FV / (1 + r)^n
C. FV = PV + r × n
D. PV = FV - r × n
Correct Answer: A. FV = PV × (1 + r)^n
Rationale: Compounds principal at rate r over n periods.



Question 6: Net present value (NPV) is positive when:
A. IRR < cost of capital
B. IRR > cost of capital
C. Payback < average
D. IRR = 0
Correct Answer: B. IRR > cost of capital
Rationale: NPV >0 accepts project; IRR exceeds hurdle rate.



Question 7: The weighted average cost of capital (WACC) is used to:
A. Calculate taxes
B. Discount future cash flows
C. Measure liquidity
D. Assess inventory turnover
Correct Answer: B. Discount future cash flows
Rationale: WACC = (E/V × Re) + (D/V × Rd × (1-Tc)); project hurdle rate.



Question 8: What is the payback period?
A. Time to recover initial investment
B. NPV calculation

,C. IRR percentage
D. Profit margin
Correct Answer: A. Time to recover initial investment
Rationale: Simple metric; ignores time value.



Question 9: Internal rate of return (IRR) is the discount rate where:
A. NPV = 0
B. Payback = 0
C. WACC = 0
D. Profit = 0
Correct Answer: A. NPV = 0
Rationale: IRR = rate making NPV zero; accept if >WACC.



Question 10: The DuPont formula breaks ROE into:
A. Profit margin × asset turnover × equity multiplier
B. Current ratio × debt ratio
C. Gross profit / sales
D. Net income / assets
Correct Answer: A. Profit margin × asset turnover × equity multiplier
Rationale: ROE = (NI/Sales) × (Sales/Assets) × (Assets/Equity); analyzes components.



Question 11: What is working capital?
A. Current assets - current liabilities
B. Total assets - total liabilities
C. Fixed assets - long-term debt
D. Cash - accounts payable
Correct Answer: A. Current assets - current liabilities
Rationale: Measures short-term liquidity; positive needed for operations.



Question 12: The cash conversion cycle is:
A. Days inventory + days receivables - days payables
B. Inventory turnover only
C. Receivables turnover
D. Payables period
Correct Answer: A. Days inventory + days receivables - days payables
Rationale: Time to convert inventory to cash; shorter is better.

, Question 13: What is the quick ratio?
A. (Cash + receivables) / current liabilities
B. Current assets / current liabilities
C. Inventory / current liabilities
D. Total assets / liabilities
Correct Answer: A. (Cash + receivables) / current liabilities
Rationale: Strict liquidity; excludes inventory.



Question 14: In capital budgeting, the profitability index is:
A. NPV / initial investment
B. IRR / WACC
C. Payback / NPV
D. Profit / sales
Correct Answer: A. NPV / initial investment
Rationale: >1 accepts project; ranks by efficiency.



Question 15: Beta measures:
A. Total risk
B. Systematic risk
C. Unsystematic risk
D. Historical return
Correct Answer: B. Systematic risk
Rationale: Beta >1 more volatile than market; CAPM uses for expected return.



Question 16: The capital asset pricing model (CAPM) formula is:
A. Re = Rf + Beta × (Rm - Rf)
B. Re = Rf + (Rm / Beta)
C. Re = WACC + risk
D. Re = IRR
Correct Answer: A. Re = Rf + Beta × (Rm - Rf)
Rationale: Expected return = risk-free rate + risk premium.



Question 17: What is the dividend discount model?
A. Stock price = D1 / (r - g)
B. Price = historical dividend
C. Price = EPS × P/E
D. Price = book value