C214 FINAL PRACTICE PACK 2026
TESTED QUESTIONS AND ANSWERS
◉ Cash Flow from Operating Activities (CFO)
Answer: Cash flow that a company generates as a result of day-to-day
business operations. Deals with Current Assets and Current Liabilities.
◉ Cash Flow from Investing Activities (CFI)
Answer: Cash flow that is generated from investments in long term
assets.
◉ Cash Flow from Financing Activities (CFF)
Answer: Cash flow that is used to fund the company. Cash flow that is
generated from financing the business. Includes Debt & Equity.
◉ How does an increase in Accounts receivable impact CFO?
Answer: An Increase in Accounts receivable will decrease CFO
◉ How does an increase in Accounts payable impact CFO?
Answer: An Increase in Accounts Payable will increase CFO
◉ What financial statement is prepared at a point in time
Answer: Balance Sheet
, ◉ What financial statements are prepared for a period of time?
Answer: · Income Statement
· Retained Earnings Statement
· Statement of Cash Flows
◉ Define Efficient Frontier
Answer: Maximizes expected return for a given level of risk
◉ Where would a risk averse investor fall on the efficient frontier?
Answer: 100% Bonds
◉ Where would a risk-taking investor fall on the efficient frontier?
Answer: 100% Stocks
◉ What is a Beta?
Answer: A Measure of Risk - A Beta 1 is the average risk of all stocks.
Anytime a beta is below 1, it is less risk. If it is more than 1, it is high
risk.
◉ Define efficient market hypothesis as it relates to a firm?
Answer: For any company to survive, they need to make profitable
decisions. Otherwise, investors will shun their business. The firm needs
to invest where the return is more than the cost.
TESTED QUESTIONS AND ANSWERS
◉ Cash Flow from Operating Activities (CFO)
Answer: Cash flow that a company generates as a result of day-to-day
business operations. Deals with Current Assets and Current Liabilities.
◉ Cash Flow from Investing Activities (CFI)
Answer: Cash flow that is generated from investments in long term
assets.
◉ Cash Flow from Financing Activities (CFF)
Answer: Cash flow that is used to fund the company. Cash flow that is
generated from financing the business. Includes Debt & Equity.
◉ How does an increase in Accounts receivable impact CFO?
Answer: An Increase in Accounts receivable will decrease CFO
◉ How does an increase in Accounts payable impact CFO?
Answer: An Increase in Accounts Payable will increase CFO
◉ What financial statement is prepared at a point in time
Answer: Balance Sheet
, ◉ What financial statements are prepared for a period of time?
Answer: · Income Statement
· Retained Earnings Statement
· Statement of Cash Flows
◉ Define Efficient Frontier
Answer: Maximizes expected return for a given level of risk
◉ Where would a risk averse investor fall on the efficient frontier?
Answer: 100% Bonds
◉ Where would a risk-taking investor fall on the efficient frontier?
Answer: 100% Stocks
◉ What is a Beta?
Answer: A Measure of Risk - A Beta 1 is the average risk of all stocks.
Anytime a beta is below 1, it is less risk. If it is more than 1, it is high
risk.
◉ Define efficient market hypothesis as it relates to a firm?
Answer: For any company to survive, they need to make profitable
decisions. Otherwise, investors will shun their business. The firm needs
to invest where the return is more than the cost.
