WGU C214 OA Financial Management Exam | Pass Questions & Answers Updated 2025–2026

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Characteristics of preferred stock includes
- correct 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
- correct answer -
can go without payment and pay in arrears the following year


Characteristics of common stock are
- correct 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




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New start up ventures often issue
- correct answer -
preferred stock (in an IPO)


What stock is considered a hybrid
- correct answer -
preferred stock


One thing common stock and preferred stock have in common is
- correct answer -
both have no maturity date


Which type of security has voting rights
- correct answer -
common stock


Debt covenants and restrictions help to ensure that
- correct answer -
management is meeting bond and shareholder expectations NOTE:
covenants are promises meant to be kept


What is true regarding bonds
- correct 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
- correct answer -
required rate of return is equal to the coupon rate




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Why are bonds the primary method for raising capital
- correct 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
- correct answer -
convertible bonds


What is the interest rate for annual payments of a bond known as
- correct 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
- correct answer -
never change


Debentures are
- correct 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
- correct answer -
has collateral like a mortgage


The amount repaid at the expiration date of a bond is




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- correct answer -
PAR value NOTE: expiration date is also known as maturity date PAR (or Face
Value) is typically $1000


Duration measures
- correct 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
- correct answer -
years


A bond premium occurs when
- correct 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
- correct answer -
high yield bonds without any stability


"Leveraged" results in
- correct 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
- correct answer -




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