WGU C214
WGU C214 FINANCIAL
MANAGEMENT OA STAGE STUDY
WITH CORRECT ANSWERS EXAM
2025
Trading on the NYSE is executed without a specialist (i.e. a market maker). True or
False? - -False
Stocks and Bonds are two types of financial instruments. True or False? - -True
When revenue is matched with cost of sales in an Income statement it is called? - -
Matching principle
Basic balance sheet equation is what? - -Equity = Assets - Liabilities
Why is the balance sheet known as the permanent statement? - -Because the other
statements are reset at the end of the fiscal year.
How do you calculate the change in retained earnings? - -Net income-dividends
Sales - Cost of Sales - other expenses = - -Operating Income or EBiT
Name four accounts that are part of total assets? - -Cash, Accounts receivable,
inventory, long term assets
Name three accounts that are part of total liabilities? - -Bonds, accounts payable and
mortgage
Name four accounts that are part of current assets? - -Inventory, cash, accounts
receivable and short term investments.
Name three accounts that are only included in cash flow from financing? - -Common
stock, dividends paid and bonds payable
Define the statement of cash flows? - -Calculated for the same period of time as the
incomes statement is calculated based on the income statement and changes in the
balance sheet is one of the three basic accounting statements.
When fixed assets increase what happens to cash? - -Cash will decrease
WGU C214
, WGU C214
What is the purpose of the statement of cash flows? - -Explains the change in cash over
the course of the specified time frame.
Suppose the inventory turnover of a company is higher than the industry. Based on this
observation, which of the following is most likely? - -The firm has too little inventory
resulting in lost sales or stock-outs.
If a company wishes to obtain a bank loan, will it want to have a higher current ratio or a
lower current ratio? - -Higher
The Operating Income Return on Investment (OIROI) uses what elements on the
income statement? - -EBIT and total assets
Why would a company be interested in the Total Asset Turnover (TAT) ratio? - -To see
how efficient are at producing sales
What annual interest will be paid for a zero coupon bond? - -0%
What is the most significant characteristic of subordinated debt? - -Senior debt is paid
off first
If a company wants to increase its debt capital, how will they raise the funds? - -Sell
bonds
What is the lowest level investment bond - -BBB
What can cause the bond price to fluctuate? - -A change in the bond rating, a change in
the financial condition, general change in interest rates.
What does a company use as security for a bond? - -Credit worthiness
Under the efficient market hypothesis, what will companies endeavor to do? - -Maximize
profits for a given level of risk
What does the beta coefficient represent? - -It is a statistically derived measure of
volatility.
If an investor knows the idiosyncratic risk, the investor knows the? - -Beta Coefficient
Why is the depreciation expense taken out of the net income calculation, yet added
back at the end? - -Because depreciation expense is tax deductible.
Why would we reject a project based on NPV? - -The NPV is a negative number
Why would we reject a project based on IRR? - -The discount rate is higher than the
IRR
WGU C214
WGU C214 FINANCIAL
MANAGEMENT OA STAGE STUDY
WITH CORRECT ANSWERS EXAM
2025
Trading on the NYSE is executed without a specialist (i.e. a market maker). True or
False? - -False
Stocks and Bonds are two types of financial instruments. True or False? - -True
When revenue is matched with cost of sales in an Income statement it is called? - -
Matching principle
Basic balance sheet equation is what? - -Equity = Assets - Liabilities
Why is the balance sheet known as the permanent statement? - -Because the other
statements are reset at the end of the fiscal year.
How do you calculate the change in retained earnings? - -Net income-dividends
Sales - Cost of Sales - other expenses = - -Operating Income or EBiT
Name four accounts that are part of total assets? - -Cash, Accounts receivable,
inventory, long term assets
Name three accounts that are part of total liabilities? - -Bonds, accounts payable and
mortgage
Name four accounts that are part of current assets? - -Inventory, cash, accounts
receivable and short term investments.
Name three accounts that are only included in cash flow from financing? - -Common
stock, dividends paid and bonds payable
Define the statement of cash flows? - -Calculated for the same period of time as the
incomes statement is calculated based on the income statement and changes in the
balance sheet is one of the three basic accounting statements.
When fixed assets increase what happens to cash? - -Cash will decrease
WGU C214
, WGU C214
What is the purpose of the statement of cash flows? - -Explains the change in cash over
the course of the specified time frame.
Suppose the inventory turnover of a company is higher than the industry. Based on this
observation, which of the following is most likely? - -The firm has too little inventory
resulting in lost sales or stock-outs.
If a company wishes to obtain a bank loan, will it want to have a higher current ratio or a
lower current ratio? - -Higher
The Operating Income Return on Investment (OIROI) uses what elements on the
income statement? - -EBIT and total assets
Why would a company be interested in the Total Asset Turnover (TAT) ratio? - -To see
how efficient are at producing sales
What annual interest will be paid for a zero coupon bond? - -0%
What is the most significant characteristic of subordinated debt? - -Senior debt is paid
off first
If a company wants to increase its debt capital, how will they raise the funds? - -Sell
bonds
What is the lowest level investment bond - -BBB
What can cause the bond price to fluctuate? - -A change in the bond rating, a change in
the financial condition, general change in interest rates.
What does a company use as security for a bond? - -Credit worthiness
Under the efficient market hypothesis, what will companies endeavor to do? - -Maximize
profits for a given level of risk
What does the beta coefficient represent? - -It is a statistically derived measure of
volatility.
If an investor knows the idiosyncratic risk, the investor knows the? - -Beta Coefficient
Why is the depreciation expense taken out of the net income calculation, yet added
back at the end? - -Because depreciation expense is tax deductible.
Why would we reject a project based on NPV? - -The NPV is a negative number
Why would we reject a project based on IRR? - -The discount rate is higher than the
IRR
WGU C214
