WGU C214 PRACTICE QUESTIONS
AND ANSWERS
How bcan ba bprivate bfirm bappropriately bmaximize bshareholder bvalue? b- bcorrect
banswer✔✔By bmaking bdecisions bthat bkeep bthe bcontrol bof bthe bbusiness bwith bthe
bowners.
Why bare bAmerican bregulators bfocused bon binternational binvesting bin ba bglobal
bmarketplace? b- bcorrect banswer✔✔Because binternational binvesting bin ba bglobal
bmarketplace bis bthe bconcern bof bAmerican binvestors.
What bis bone bof bthe btwo bbasic btypes bof bfinancial binstruments? b- bcorrect
banswer✔✔Bonds
What bare bthe blikeliest boutcomes bif ba bcompany boutsources bthe bmanufacturing bof
bits bproducts bto ba bforeign bcountry? b- bcorrect banswer✔✔Consumer bprices bwill
bdecrease band bDomestic bemployment bwill bdecrease.
What bdo bthe bcontent band bstructure bof ba bbalance bsheet breport? b- bcorrect
banswer✔✔The bassets, bliabilities, band bequity bat ba bpoint bin btime
A bcompany breported ban bincrease bin baccounts breceivable bof b$5,000 bduring bthe
brecent bperiod. bHalf bof bthis bamount bis bexpected bto bbe bcollected bnext bperiod.How
bwill bthis bchange bin baccounts breceivable baffect bthe bcash bflows bfrom bthe boperating
bactivities bsection? b- bcorrect banswer✔✔The bchange bwill bdecrease bcash bflows bfrom
boperations bby b$5,000.
Which bstatement baccurately bexplains bthe brecognition bof brevenues band bexpenses
bunder baccounting bincome band bincome bfor btax bpurposes? b- bcorrect
banswer✔✔Revenues band bexpenses bmay bbe brecognized bin bone bperiod bfor
baccounting bincome bpurposes band bin ba bdifferent bperiod bfor bincome btax bpurposes.
Selected bData bfor b20x2 bfor bABD bInc.
Net bIncome b$ b1,000
Depreciation bExpense b$ b300
Change bin bOperating bAssets b$ b600
Change bin bNet bProperty, bPlant, band bEquipment b$ b5,000
Changes bin bLong-Term bLiabilities b$ b1,000
, Dividends bPaid$ b200
What bis bthis bfirm's bcash bflow bfrom binvestments, busing bthe bdata babove band
bassuming bno basset bdisposals? b- bcorrect banswer✔✔$5,300 boutflow
What bis bthe bbasic bequation bfor ba bbalance bsheet? b- bcorrect banswer✔✔Assets b=
bLiabilities b+ bEquity
What bdo bcash bflows bfrom binvesting bactivities bgenerally brelate bto? b- bcorrect
banswer✔✔A bfirm's bpurchase band bsale bof blong-term bassets
Which btransaction bis breflected bin bcash bflow bfrom boperating bactivities? b- bcorrect
banswer✔✔Cash bsales bto bcustomers
What bdoes bfree bcash bflow brepresent? b- bcorrect banswer✔✔Cash bavailable bfor
bdistribution bafter bfunding brequired breinvestment
An banalyst bis bcomparing bthe bratios bof btwo bfirms band bneeds bto baddress btiming
bdifferences.What bis ban bexample bof ba btiming bdifference bbetween bthese btwo bfirms?
b- bcorrect banswer✔✔The bfirms bhave bdifferent bfiscal byears.
A bcompany's byear-end bbalance bsheet bfor b2013 bshows bthe bfollowing:
Accounts bReceivable: b$900
Inventory: b$1,200
Fixed bAssets: b$1,000
Accounts bPayable: b$1,300
Sales: b$4,000
Salaries bExpense: b$275
What bis bits bfixed basset bturnover bratio? b- bcorrect banswer✔✔4.0
A bfirm bhas ba bROE b(return bon bequity) bof b0.27, band bthe bindustry baverage bROE bis
b0.24.Which bconclusion bshould ban banalyst bdraw bwhen bcomparing bthis bfirm bto bthe
bindustry? b- bcorrect banswer✔✔The bfirm bis bgenerating bhigher breturns bto bowners
bthan bthe bindustry.
What bmust bhave btaken bplace bfor ba bfirm bto brecognize brevenue, bin border bfor bthe
bfirm bto bcomply bwith bthe baccrual baccounting brules? b- bcorrect banswer✔✔The
bproduct bmust bhave bbeen bdelivered.
A bteacher bwon b$100,000 band binvests bthis bmoney bfor bfive byears bat ban binterest
brate bof b4% b(compounded bannually).How bmuch bwill bthis bteacher bhave bin bprincipal
band binterest bat bthe bend bof bthe bfive byears? b- bcorrect banswer✔✔$121,665
An baccountant bis b40 byears bold band bhas ban banticipated bretirement bage bof b70
byears bold. bThe baccountant bplans bto bsave b$6,000 bper byear bat bthe bend bof bthe
bnext b30 byears bto bfund bretirement. bHow bmuch bwill bthis baccountant bhave bupon
AND ANSWERS
How bcan ba bprivate bfirm bappropriately bmaximize bshareholder bvalue? b- bcorrect
banswer✔✔By bmaking bdecisions bthat bkeep bthe bcontrol bof bthe bbusiness bwith bthe
bowners.
Why bare bAmerican bregulators bfocused bon binternational binvesting bin ba bglobal
bmarketplace? b- bcorrect banswer✔✔Because binternational binvesting bin ba bglobal
bmarketplace bis bthe bconcern bof bAmerican binvestors.
What bis bone bof bthe btwo bbasic btypes bof bfinancial binstruments? b- bcorrect
banswer✔✔Bonds
What bare bthe blikeliest boutcomes bif ba bcompany boutsources bthe bmanufacturing bof
bits bproducts bto ba bforeign bcountry? b- bcorrect banswer✔✔Consumer bprices bwill
bdecrease band bDomestic bemployment bwill bdecrease.
What bdo bthe bcontent band bstructure bof ba bbalance bsheet breport? b- bcorrect
banswer✔✔The bassets, bliabilities, band bequity bat ba bpoint bin btime
A bcompany breported ban bincrease bin baccounts breceivable bof b$5,000 bduring bthe
brecent bperiod. bHalf bof bthis bamount bis bexpected bto bbe bcollected bnext bperiod.How
bwill bthis bchange bin baccounts breceivable baffect bthe bcash bflows bfrom bthe boperating
bactivities bsection? b- bcorrect banswer✔✔The bchange bwill bdecrease bcash bflows bfrom
boperations bby b$5,000.
Which bstatement baccurately bexplains bthe brecognition bof brevenues band bexpenses
bunder baccounting bincome band bincome bfor btax bpurposes? b- bcorrect
banswer✔✔Revenues band bexpenses bmay bbe brecognized bin bone bperiod bfor
baccounting bincome bpurposes band bin ba bdifferent bperiod bfor bincome btax bpurposes.
Selected bData bfor b20x2 bfor bABD bInc.
Net bIncome b$ b1,000
Depreciation bExpense b$ b300
Change bin bOperating bAssets b$ b600
Change bin bNet bProperty, bPlant, band bEquipment b$ b5,000
Changes bin bLong-Term bLiabilities b$ b1,000
, Dividends bPaid$ b200
What bis bthis bfirm's bcash bflow bfrom binvestments, busing bthe bdata babove band
bassuming bno basset bdisposals? b- bcorrect banswer✔✔$5,300 boutflow
What bis bthe bbasic bequation bfor ba bbalance bsheet? b- bcorrect banswer✔✔Assets b=
bLiabilities b+ bEquity
What bdo bcash bflows bfrom binvesting bactivities bgenerally brelate bto? b- bcorrect
banswer✔✔A bfirm's bpurchase band bsale bof blong-term bassets
Which btransaction bis breflected bin bcash bflow bfrom boperating bactivities? b- bcorrect
banswer✔✔Cash bsales bto bcustomers
What bdoes bfree bcash bflow brepresent? b- bcorrect banswer✔✔Cash bavailable bfor
bdistribution bafter bfunding brequired breinvestment
An banalyst bis bcomparing bthe bratios bof btwo bfirms band bneeds bto baddress btiming
bdifferences.What bis ban bexample bof ba btiming bdifference bbetween bthese btwo bfirms?
b- bcorrect banswer✔✔The bfirms bhave bdifferent bfiscal byears.
A bcompany's byear-end bbalance bsheet bfor b2013 bshows bthe bfollowing:
Accounts bReceivable: b$900
Inventory: b$1,200
Fixed bAssets: b$1,000
Accounts bPayable: b$1,300
Sales: b$4,000
Salaries bExpense: b$275
What bis bits bfixed basset bturnover bratio? b- bcorrect banswer✔✔4.0
A bfirm bhas ba bROE b(return bon bequity) bof b0.27, band bthe bindustry baverage bROE bis
b0.24.Which bconclusion bshould ban banalyst bdraw bwhen bcomparing bthis bfirm bto bthe
bindustry? b- bcorrect banswer✔✔The bfirm bis bgenerating bhigher breturns bto bowners
bthan bthe bindustry.
What bmust bhave btaken bplace bfor ba bfirm bto brecognize brevenue, bin border bfor bthe
bfirm bto bcomply bwith bthe baccrual baccounting brules? b- bcorrect banswer✔✔The
bproduct bmust bhave bbeen bdelivered.
A bteacher bwon b$100,000 band binvests bthis bmoney bfor bfive byears bat ban binterest
brate bof b4% b(compounded bannually).How bmuch bwill bthis bteacher bhave bin bprincipal
band binterest bat bthe bend bof bthe bfive byears? b- bcorrect banswer✔✔$121,665
An baccountant bis b40 byears bold band bhas ban banticipated bretirement bage bof b70
byears bold. bThe baccountant bplans bto bsave b$6,000 bper byear bat bthe bend bof bthe
bnext b30 byears bto bfund bretirement. bHow bmuch bwill bthis baccountant bhave bupon
