2026 WGU C214 Financial Management
Exam Bank | Comprehensive Exam Guide
C214 Newest Version & Finance Study
Guide Complete And Verified 100%
Characteristics of preferred stock includes - ANSWER--dividends in arrears
-dividends are cumulative
-higher payoff claim in a BK (has first dibs in a BK)
-considered "hybrid" (part stock/part bond)
-no fixed maturity date
-no voting rights
-can skip dividend payments
-dividends don't change year-after-year
-used in start ups (IPO)
Preferred stock dividends - ANSWER-can go without payment and pay in arrears the
following year
Characteristics of common stock are - ANSWER--voting rights
-no maturity date
-corporate governance
-lower payoff claim in BK
-variable returns
-unlimited earnings potential
-earnings are in dividends & the increase in price of stock
New start up ventures often issue - ANSWER-preferred stock (in an IPO)
What stock is considered a hybrid - ANSWER-preferred stock
One thing common stock and preferred stock have in common is - ANSWER-both have
no maturity date
Which type of security has voting rights - ANSWER-common stock
Debt covenants and restrictions help to ensure that - ANSWER-management is meeting
bond and shareholder expectations
NOTE: covenants are promises meant to be kept
,What is true regarding bonds - ANSWER--when bond matures, bondholder gets lump
sum back
-coupon rate doesn't change
-maturity is in years
-PAR value is typically $1000
-Future value (same as PAR) is typically $1000
Bond sells at face value when - ANSWER-required rate of return is equal to the coupon
rate
Why are bonds the primary method for raising capital - ANSWER-because bonds
remove the intermediary costs
NOTE: IPO's require an intermediary known as a syndicate - a group of banks
underwriting the security issue
What type of bond can be traded for stock - ANSWER-convertible bonds
What is the interest rate for annual payments of a bond known as - ANSWER-the
coupon rate
NOTE: coupon rate is the established interest rate for the life of the bond and will
remain unchanged
Coupon rate is the established rate of the bond and should - ANSWER-never change
Debentures are - ANSWER-secured bonds
NOTE: debentures are a debt instrument (bond) issued to raise cash, secured against a
company's assets and backed by credit, transferable by the holder, and may also be
unsecured
Secured loan - ANSWER-has collateral like a mortgage
The amount repaid at the expiration date of a bond is - ANSWER-PAR value
NOTE: expiration date is also known as maturity date PAR (or Face Value) is typically
$1000
Duration measures - ANSWER-the market risk of a bond and is the percentage drop in
price caused by a 1% increase in yield (rate)
NOTE: measurement of the drop in price after a rate increase
Maturity of bonds is calculated in - ANSWER-years
A bond premium occurs when - ANSWER-bonds are issued for an amount greater than
their face or maturity amount; caused by the bonds having a stated interest rate that is
higher than the market interest rate for similar bonds
Junk Bonds are - ANSWER-high yield bonds without any stability
,"Leveraged" results in - ANSWER-having more debt (bonds) than equity (stock) and
lower stock prices
NOTE: recall that debt is safer and levels out risk in a portfolio
In current assets, inventory is the - ANSWER-LEAST liquid of current assets
NOTE: current assets take less than 12 months to make liquid
Net fixed assets are - ANSWER-long term assets such as buildings, land, equipment,
machinery
NOTE: assets that are not current
A/P represents money paid to - ANSWER-suppliers for what is bought on credit and
amount owed by a business to suppliers by agreement
NOTE: A/P is supplies, inventory, or PP&E
Notes payable involves - ANSWER-an explicit interest bearing arrangement with the
lender at interest cost
NOTE: notes payable is a long-term liability
Current liabilities are listed in order of - ANSWER-maturity
NOTE: current liabilities are to be paid within 12 months
Two things you can do with net income - ANSWER-pay out as dividends or retain (plow
back into the firm)
On the Statement of Cash Flows, CFO's include - ANSWER--cash receipts from
customers (inflow)
-cash paid for inventory (outflow)
-cash paid for wages (outflow)
NOTE: receipts of cash is inflow & what is paid out is outflow
Which is NOT considered an operating expense - ANSWER-interest expense is NOT
considered an operating expense
On the Statement of Cash Flows, CFI includes - ANSWER-cash receipts from sale of
property and equipment (inflow), cash paid for purchase of equipment (outflow)
NOTE: receipts of cash is inflow & what is paid out is outflow
Which of the following is true with respect to CFO - ANSWER-an increase in inventory
indicates a reduction in CFO
NOTE: there is a cost (reduction) to purchasing (increasing) inventory
The Statement of Cash Flows is not useful when addressing the financial health of a
firm due to the impact of accrual accounting - ANSWER-FALSE - the impact of accrual
accounting is seen as MOST useful in relation to net income
, Which is true with respect to CFF - ANSWER-an increase in notes payable indicates an
increase in CFF
Which is not a part of the Statement of Cash Flows - ANSWER-cash flows from
liquidating activities
NOTE: cash flows are operating, investing, and financing
The sum of CFO + CFI + CFF is equal to - ANSWER-the change in cash during the
period
Depreciation expense is a significant source of difference between net income and CFO
because - ANSWER-depreciation is a non-cash expense on the Income Statement
associated with the acquisition of long-term assets
Subordinated bonds - ANSWER-are bonds not backed by collateral
For visualization purposes, CFI accounts are generally non-current assets on the
bottom of the asset side of the Balance Sheet - ANSWER-TRUE
NOTE: CFI is investing in PP&E and is considered long-term assets shown as assets
on the Balance Sheet
Increases in operating assets and decreases in operating liabilities will - ANSWER-
decrease CFO
NOTE: an increase in PP&E (assets) consumes operating cash; decreases in
equipment (liabilities) also consumes operating cash (CFO)
Unsecured loan - ANSWER-has no collateral
NOTE: a credit card is an example
Assuming no asset disposals, CFI is - ANSWER-the change in Gross PP&E -or- CFI is
the change in NET PP&E plus depreciation expense
Assuming no asset disposals, depreciation expense is equal to - ANSWER-the change
in ACCUMULATED depreciation
Assets are financed by - ANSWER-other people's money or equity
Dividends are considered - ANSWER-CFF (financing section)
A firm with positive CFO should be considered healthy - ANSWER-FALSE
NOTE: a positive CFO can still be detrimental to the firm depending on other factors
The increase in yield (rate) causes - ANSWER-the bond prices to decrease (and vice-
versa)
NOTE: when interest rates increase, bond prices decrease
Exam Bank | Comprehensive Exam Guide
C214 Newest Version & Finance Study
Guide Complete And Verified 100%
Characteristics of preferred stock includes - ANSWER--dividends in arrears
-dividends are cumulative
-higher payoff claim in a BK (has first dibs in a BK)
-considered "hybrid" (part stock/part bond)
-no fixed maturity date
-no voting rights
-can skip dividend payments
-dividends don't change year-after-year
-used in start ups (IPO)
Preferred stock dividends - ANSWER-can go without payment and pay in arrears the
following year
Characteristics of common stock are - ANSWER--voting rights
-no maturity date
-corporate governance
-lower payoff claim in BK
-variable returns
-unlimited earnings potential
-earnings are in dividends & the increase in price of stock
New start up ventures often issue - ANSWER-preferred stock (in an IPO)
What stock is considered a hybrid - ANSWER-preferred stock
One thing common stock and preferred stock have in common is - ANSWER-both have
no maturity date
Which type of security has voting rights - ANSWER-common stock
Debt covenants and restrictions help to ensure that - ANSWER-management is meeting
bond and shareholder expectations
NOTE: covenants are promises meant to be kept
,What is true regarding bonds - ANSWER--when bond matures, bondholder gets lump
sum back
-coupon rate doesn't change
-maturity is in years
-PAR value is typically $1000
-Future value (same as PAR) is typically $1000
Bond sells at face value when - ANSWER-required rate of return is equal to the coupon
rate
Why are bonds the primary method for raising capital - ANSWER-because bonds
remove the intermediary costs
NOTE: IPO's require an intermediary known as a syndicate - a group of banks
underwriting the security issue
What type of bond can be traded for stock - ANSWER-convertible bonds
What is the interest rate for annual payments of a bond known as - ANSWER-the
coupon rate
NOTE: coupon rate is the established interest rate for the life of the bond and will
remain unchanged
Coupon rate is the established rate of the bond and should - ANSWER-never change
Debentures are - ANSWER-secured bonds
NOTE: debentures are a debt instrument (bond) issued to raise cash, secured against a
company's assets and backed by credit, transferable by the holder, and may also be
unsecured
Secured loan - ANSWER-has collateral like a mortgage
The amount repaid at the expiration date of a bond is - ANSWER-PAR value
NOTE: expiration date is also known as maturity date PAR (or Face Value) is typically
$1000
Duration measures - ANSWER-the market risk of a bond and is the percentage drop in
price caused by a 1% increase in yield (rate)
NOTE: measurement of the drop in price after a rate increase
Maturity of bonds is calculated in - ANSWER-years
A bond premium occurs when - ANSWER-bonds are issued for an amount greater than
their face or maturity amount; caused by the bonds having a stated interest rate that is
higher than the market interest rate for similar bonds
Junk Bonds are - ANSWER-high yield bonds without any stability
,"Leveraged" results in - ANSWER-having more debt (bonds) than equity (stock) and
lower stock prices
NOTE: recall that debt is safer and levels out risk in a portfolio
In current assets, inventory is the - ANSWER-LEAST liquid of current assets
NOTE: current assets take less than 12 months to make liquid
Net fixed assets are - ANSWER-long term assets such as buildings, land, equipment,
machinery
NOTE: assets that are not current
A/P represents money paid to - ANSWER-suppliers for what is bought on credit and
amount owed by a business to suppliers by agreement
NOTE: A/P is supplies, inventory, or PP&E
Notes payable involves - ANSWER-an explicit interest bearing arrangement with the
lender at interest cost
NOTE: notes payable is a long-term liability
Current liabilities are listed in order of - ANSWER-maturity
NOTE: current liabilities are to be paid within 12 months
Two things you can do with net income - ANSWER-pay out as dividends or retain (plow
back into the firm)
On the Statement of Cash Flows, CFO's include - ANSWER--cash receipts from
customers (inflow)
-cash paid for inventory (outflow)
-cash paid for wages (outflow)
NOTE: receipts of cash is inflow & what is paid out is outflow
Which is NOT considered an operating expense - ANSWER-interest expense is NOT
considered an operating expense
On the Statement of Cash Flows, CFI includes - ANSWER-cash receipts from sale of
property and equipment (inflow), cash paid for purchase of equipment (outflow)
NOTE: receipts of cash is inflow & what is paid out is outflow
Which of the following is true with respect to CFO - ANSWER-an increase in inventory
indicates a reduction in CFO
NOTE: there is a cost (reduction) to purchasing (increasing) inventory
The Statement of Cash Flows is not useful when addressing the financial health of a
firm due to the impact of accrual accounting - ANSWER-FALSE - the impact of accrual
accounting is seen as MOST useful in relation to net income
, Which is true with respect to CFF - ANSWER-an increase in notes payable indicates an
increase in CFF
Which is not a part of the Statement of Cash Flows - ANSWER-cash flows from
liquidating activities
NOTE: cash flows are operating, investing, and financing
The sum of CFO + CFI + CFF is equal to - ANSWER-the change in cash during the
period
Depreciation expense is a significant source of difference between net income and CFO
because - ANSWER-depreciation is a non-cash expense on the Income Statement
associated with the acquisition of long-term assets
Subordinated bonds - ANSWER-are bonds not backed by collateral
For visualization purposes, CFI accounts are generally non-current assets on the
bottom of the asset side of the Balance Sheet - ANSWER-TRUE
NOTE: CFI is investing in PP&E and is considered long-term assets shown as assets
on the Balance Sheet
Increases in operating assets and decreases in operating liabilities will - ANSWER-
decrease CFO
NOTE: an increase in PP&E (assets) consumes operating cash; decreases in
equipment (liabilities) also consumes operating cash (CFO)
Unsecured loan - ANSWER-has no collateral
NOTE: a credit card is an example
Assuming no asset disposals, CFI is - ANSWER-the change in Gross PP&E -or- CFI is
the change in NET PP&E plus depreciation expense
Assuming no asset disposals, depreciation expense is equal to - ANSWER-the change
in ACCUMULATED depreciation
Assets are financed by - ANSWER-other people's money or equity
Dividends are considered - ANSWER-CFF (financing section)
A firm with positive CFO should be considered healthy - ANSWER-FALSE
NOTE: a positive CFO can still be detrimental to the firm depending on other factors
The increase in yield (rate) causes - ANSWER-the bond prices to decrease (and vice-
versa)
NOTE: when interest rates increase, bond prices decrease
