WGU C214 OA Financial Management Retake
Exam Latest Questions and Answers (2025 /
2026) (Verified Answers)
Which type of firm would the replacement cost method be most appropriate for - correct
answer A holding company that primarily holds real estate assets
FCF is generated cash - correct 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 - correct answer
numerator
The matching principle requires that - correct 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 - correct 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 - correct answer - distributable cash
- cash that can be distributed after funding required reinvestment in PP&E
- increase working capital
FCF is different from CFO because - correct answer FCF represents cash flow after
required investment
Which is NOT a characteristic of ordinary annuities - correct 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 - correct answer corporate
governance
According to CAPM, if a firm has idiosyncratic risk the return required by shareholders
will be higher - correct answer FALSE
NOTE: CAPM model assumes idiosyncratic risk is diversified away
, Which of the following is usually NOT a spontaneous account - correct 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 - correct 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? - correct
answer 25
NOTE: .15 + .12 + .27 + .21 + n \ 5 = 20 so n = 25
What is dividends/net income called - correct answer dividend payout ratio
NOTE: equation is on the formula sheet
One of the WEAKNESSES of the payback method is that it is - correct 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 - correct
answer FALSE
NOTE: payback method weakness is subjective
Initial outlay for a capital project is calculated as - correct 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 - correct
answer purchase price of new asset + shipping costs + installation costs
For capital budgeting analysis, the relevant cash flows from a new project are called -
correct 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 -
correct 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 - correct answer electronic
check processesing
A discount policy 2/10 net 30 means - correct 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
Exam Latest Questions and Answers (2025 /
2026) (Verified Answers)
Which type of firm would the replacement cost method be most appropriate for - correct
answer A holding company that primarily holds real estate assets
FCF is generated cash - correct 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 - correct answer
numerator
The matching principle requires that - correct 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 - correct 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 - correct answer - distributable cash
- cash that can be distributed after funding required reinvestment in PP&E
- increase working capital
FCF is different from CFO because - correct answer FCF represents cash flow after
required investment
Which is NOT a characteristic of ordinary annuities - correct 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 - correct answer corporate
governance
According to CAPM, if a firm has idiosyncratic risk the return required by shareholders
will be higher - correct answer FALSE
NOTE: CAPM model assumes idiosyncratic risk is diversified away
, Which of the following is usually NOT a spontaneous account - correct 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 - correct 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? - correct
answer 25
NOTE: .15 + .12 + .27 + .21 + n \ 5 = 20 so n = 25
What is dividends/net income called - correct answer dividend payout ratio
NOTE: equation is on the formula sheet
One of the WEAKNESSES of the payback method is that it is - correct 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 - correct
answer FALSE
NOTE: payback method weakness is subjective
Initial outlay for a capital project is calculated as - correct 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 - correct
answer purchase price of new asset + shipping costs + installation costs
For capital budgeting analysis, the relevant cash flows from a new project are called -
correct 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 -
correct 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 - correct answer electronic
check processesing
A discount policy 2/10 net 30 means - correct 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
