WGU C214 Financial Management
COMPLETE EXAM QUESTIONS WITH
CORRECT SOLUTIONS||100%
GUARANTEED PASS||ALREADY
GRADED A+||UPDATED 2026/2027
SYLLABUS||<<LATEST VERSION>>
Which type of firm would the replacement cost method be most appropriate for -
ANSWER ✓ A holding company that primarily holds real estate assets
FCF is generated cash - ANSWER ✓ after spending the money required to
maintain or expand asset base
In the DCF approach, we use some kind of FCF measure in the - ANSWER ✓
numerator
The matching principle requires that - ANSWER ✓ revenues matched to expenses
incurred to generate the revenues
Suppose the inventory turnover of the company is higher than the industry. Which
is likely - ANSWER ✓ selling out of product means that more is needed to be
produced; inventory will be less and can result in less sold
Free cash flow (FCF) is - ANSWER ✓ - distributable cash
- cash that can be distributed after funding required reinvestment in PP&E
- increase working capital
FCF is different from CFO because - ANSWER ✓ FCF represents cash flow after
required investment
Which is NOT a characteristic of ordinary annuities - ANSWER ✓ payments are
made at the BEGINNING of each period
,NOTE: remember annuities are payments and ordinary annuities are payments
made at the END of the payment cycles (in arrears)
The control issues involved in running a firm are known as - ANSWER ✓
corporate governance
According to CAPM, if a firm has idiosyncratic risk the return required by
shareholders will be higher - ANSWER ✓ FALSE
NOTE: CAPM model assumes idiosyncratic risk is diversified away
Which of the following is usually NOT a spontaneous account - ANSWER ✓
long-term debt is not spontaneous
NOTE: buying a machinery is not a spontaneous purchase, it is planned
On what financial statement is retained earnings found - ANSWER ✓ the Balance
Sheet
Suppose returns over the last 4 years were 15%, 12%, 27%, and 21%. If the mean
return over the past 5 years was 20, what was the return 5 years ago? - ANSWER
✓ 25
NOTE: .15 + .12 + .27 + .21 + n \ 5 = 20 so n = 25
What is dividends/net income called - ANSWER ✓ dividend payout ratio
NOTE: equation is on the formula sheet
One of the WEAKNESSES of the payback method is that it is - ANSWER ✓
subjective
NOTE: payback method weakness is subjective (its strength is NOT subjective
One of the STRENGTHS of the payback method is that the cutoff is subjective -
ANSWER ✓ FALSE
NOTE: payback method weakness is subjective
Initial outlay for a capital project is calculated as - ANSWER ✓ purchase price (or
cost of asset) + shipping & installation + increase investment or in working capital
NOTE: equation is ICF in the formula sheet
, The depreciable asset or depreciable base in the initial outlay calculation is -
ANSWER ✓ purchase price of new asset + shipping costs + installation costs
For capital budgeting analysis, the relevant cash flows from a new project are
called - ANSWER ✓ incremental cash flows
NOTE: the cash flows for a new project are HUGE; hence INCREMENTAL
Sometimes the amount of the reserve balance is determined by the bank from
which - ANSWER ✓ the firm has obtained capital
NOTE: the lender/bank determines reserve balance requirements and all other
underwriting requirements
A commonly used method for shortening the float time is - ANSWER ✓
electronic check processesing
A discount policy 2/10 net 30 means - ANSWER ✓ that a discount of 2% is
applied if the payment is received within 10 days and the total bill is due in 30 days
What is the reciprocal of P/E - ANSWER ✓ earnings yield
NOTE:
earnings yield = earnings per share/stock price
price earnings ratio = stock price/earnings per share
DCF (differential cash flows) typically is best suited for - ANSWER ✓ established
firms for which forecasting is fairly reliable
The last cash flow in the capital budgeting approach which typically uses the
Gordon Growth Model to estimate all future cash flows beyond a certain point is
the - ANSWER ✓ terminal value of terminal cash flows (TCF)
NOTE: the question asks for "last" cash flow in the approach; TCF is the last of the
3 cash flow approaches
The goal of using a financial derivative such as a forward or a future is to -
ANSWER ✓ make no profits through exchange rate movements
What is the primary motive for tariffs - ANSWER ✓ to protect domestic industries
COMPLETE EXAM QUESTIONS WITH
CORRECT SOLUTIONS||100%
GUARANTEED PASS||ALREADY
GRADED A+||UPDATED 2026/2027
SYLLABUS||<<LATEST VERSION>>
Which type of firm would the replacement cost method be most appropriate for -
ANSWER ✓ A holding company that primarily holds real estate assets
FCF is generated cash - ANSWER ✓ after spending the money required to
maintain or expand asset base
In the DCF approach, we use some kind of FCF measure in the - ANSWER ✓
numerator
The matching principle requires that - ANSWER ✓ revenues matched to expenses
incurred to generate the revenues
Suppose the inventory turnover of the company is higher than the industry. Which
is likely - ANSWER ✓ selling out of product means that more is needed to be
produced; inventory will be less and can result in less sold
Free cash flow (FCF) is - ANSWER ✓ - distributable cash
- cash that can be distributed after funding required reinvestment in PP&E
- increase working capital
FCF is different from CFO because - ANSWER ✓ FCF represents cash flow after
required investment
Which is NOT a characteristic of ordinary annuities - ANSWER ✓ payments are
made at the BEGINNING of each period
,NOTE: remember annuities are payments and ordinary annuities are payments
made at the END of the payment cycles (in arrears)
The control issues involved in running a firm are known as - ANSWER ✓
corporate governance
According to CAPM, if a firm has idiosyncratic risk the return required by
shareholders will be higher - ANSWER ✓ FALSE
NOTE: CAPM model assumes idiosyncratic risk is diversified away
Which of the following is usually NOT a spontaneous account - ANSWER ✓
long-term debt is not spontaneous
NOTE: buying a machinery is not a spontaneous purchase, it is planned
On what financial statement is retained earnings found - ANSWER ✓ the Balance
Sheet
Suppose returns over the last 4 years were 15%, 12%, 27%, and 21%. If the mean
return over the past 5 years was 20, what was the return 5 years ago? - ANSWER
✓ 25
NOTE: .15 + .12 + .27 + .21 + n \ 5 = 20 so n = 25
What is dividends/net income called - ANSWER ✓ dividend payout ratio
NOTE: equation is on the formula sheet
One of the WEAKNESSES of the payback method is that it is - ANSWER ✓
subjective
NOTE: payback method weakness is subjective (its strength is NOT subjective
One of the STRENGTHS of the payback method is that the cutoff is subjective -
ANSWER ✓ FALSE
NOTE: payback method weakness is subjective
Initial outlay for a capital project is calculated as - ANSWER ✓ purchase price (or
cost of asset) + shipping & installation + increase investment or in working capital
NOTE: equation is ICF in the formula sheet
, The depreciable asset or depreciable base in the initial outlay calculation is -
ANSWER ✓ purchase price of new asset + shipping costs + installation costs
For capital budgeting analysis, the relevant cash flows from a new project are
called - ANSWER ✓ incremental cash flows
NOTE: the cash flows for a new project are HUGE; hence INCREMENTAL
Sometimes the amount of the reserve balance is determined by the bank from
which - ANSWER ✓ the firm has obtained capital
NOTE: the lender/bank determines reserve balance requirements and all other
underwriting requirements
A commonly used method for shortening the float time is - ANSWER ✓
electronic check processesing
A discount policy 2/10 net 30 means - ANSWER ✓ that a discount of 2% is
applied if the payment is received within 10 days and the total bill is due in 30 days
What is the reciprocal of P/E - ANSWER ✓ earnings yield
NOTE:
earnings yield = earnings per share/stock price
price earnings ratio = stock price/earnings per share
DCF (differential cash flows) typically is best suited for - ANSWER ✓ established
firms for which forecasting is fairly reliable
The last cash flow in the capital budgeting approach which typically uses the
Gordon Growth Model to estimate all future cash flows beyond a certain point is
the - ANSWER ✓ terminal value of terminal cash flows (TCF)
NOTE: the question asks for "last" cash flow in the approach; TCF is the last of the
3 cash flow approaches
The goal of using a financial derivative such as a forward or a future is to -
ANSWER ✓ make no profits through exchange rate movements
What is the primary motive for tariffs - ANSWER ✓ to protect domestic industries
