WGU C214 Financial Management Exam
() – Original Copy, 100%
Verified Objective Assessment Answers
Question 1
How can a private firm appropriately maximize shareholder value?
A. By minimizing short-term profits
B. By making decisions that keep the control of the business with the owners
C. By avoiding all debt financing
D. By distributing all earnings as dividends
B. By making decisions that keep the control of the business with the owners
Rationale: Private firms prioritize owner control and long-term value creation over public
metrics like stock price, aligning with agency theory where owners/managers focus on
sustainable equity value.
Question 2
Why are American regulators focused on international investing in a global marketplace?
A. To limit domestic market growth
B. To ensure fair disclosure and prevent fraud across borders
C. To promote only U.S. investments
D. To increase tariffs on foreign goods
B. To ensure fair disclosure and prevent fraud across borders
Rationale: Regulators (e.g., SEC) enforce SOX/FCPA for transparency and anti-corruption in
global markets, protecting investors from fraud and ensuring fair practices.
Question 3
What is one of the two basic types of financial instruments?
A. Equity and derivatives
B. Debt and equity
C. Commodities and currencies
D. Real estate and bonds
, B. Debt and equity
Rationale: Debt (bonds, loans) and equity (stocks) are core financial instruments, representing
fixed or residual claims central to corporate financing.
Question 4
The matching principle in accrual accounting requires that:
A. Revenues are recorded before expenses
B. Expenses are matched with the revenues they help generate
C. All cash flows are reported annually
D. Assets are valued at historical cost only
B. Expenses are matched with the revenues they help generate
Rationale: GAAP’s matching principle aligns expenses (e.g., COGS) with related revenues in
the same period for accurate profit reporting.
Question 5
On the income statement, Cost of Goods Sold (COGS) includes:
A. Selling and administrative expenses
B. Direct materials and direct labor associated with production
C. Interest expense
D. Dividend payments
B. Direct materials and direct labor associated with production
Rationale: COGS includes variable production costs (materials, labor) for goods sold, excluding
indirect costs like SG&A or financing.
Question 6
What does free cash flow represent?
A. Total cash from operations
B. Cash available for distribution after funding required reinvestment
C. Net income adjusted for non-cash items
D. Cash from financing activities only
B. Cash available for distribution after funding required reinvestment
Rationale: FCF = CFO - CapEx; cash after asset maintenance for dividends, debt repayment, or
growth, key for valuation.
() – Original Copy, 100%
Verified Objective Assessment Answers
Question 1
How can a private firm appropriately maximize shareholder value?
A. By minimizing short-term profits
B. By making decisions that keep the control of the business with the owners
C. By avoiding all debt financing
D. By distributing all earnings as dividends
B. By making decisions that keep the control of the business with the owners
Rationale: Private firms prioritize owner control and long-term value creation over public
metrics like stock price, aligning with agency theory where owners/managers focus on
sustainable equity value.
Question 2
Why are American regulators focused on international investing in a global marketplace?
A. To limit domestic market growth
B. To ensure fair disclosure and prevent fraud across borders
C. To promote only U.S. investments
D. To increase tariffs on foreign goods
B. To ensure fair disclosure and prevent fraud across borders
Rationale: Regulators (e.g., SEC) enforce SOX/FCPA for transparency and anti-corruption in
global markets, protecting investors from fraud and ensuring fair practices.
Question 3
What is one of the two basic types of financial instruments?
A. Equity and derivatives
B. Debt and equity
C. Commodities and currencies
D. Real estate and bonds
, B. Debt and equity
Rationale: Debt (bonds, loans) and equity (stocks) are core financial instruments, representing
fixed or residual claims central to corporate financing.
Question 4
The matching principle in accrual accounting requires that:
A. Revenues are recorded before expenses
B. Expenses are matched with the revenues they help generate
C. All cash flows are reported annually
D. Assets are valued at historical cost only
B. Expenses are matched with the revenues they help generate
Rationale: GAAP’s matching principle aligns expenses (e.g., COGS) with related revenues in
the same period for accurate profit reporting.
Question 5
On the income statement, Cost of Goods Sold (COGS) includes:
A. Selling and administrative expenses
B. Direct materials and direct labor associated with production
C. Interest expense
D. Dividend payments
B. Direct materials and direct labor associated with production
Rationale: COGS includes variable production costs (materials, labor) for goods sold, excluding
indirect costs like SG&A or financing.
Question 6
What does free cash flow represent?
A. Total cash from operations
B. Cash available for distribution after funding required reinvestment
C. Net income adjusted for non-cash items
D. Cash from financing activities only
B. Cash available for distribution after funding required reinvestment
Rationale: FCF = CFO - CapEx; cash after asset maintenance for dividends, debt repayment, or
growth, key for valuation.
