WGU C214 Financial Management –
2026/2027 Academic Year – 70 Questions
with Verified Correct Answers
Financial Environment & Statement Basics
Question 1
What is the primary purpose of the Foreign Corrupt Practices Act (FCPA)?
A. To limit corporate taxes on foreign income
B. To prevent companies from bribing foreign officials for business
C. To regulate international trade tariffs
D. To protect domestic industries from foreign competition
Correct Answer: B
Rationale: The FCPA makes it unlawful for U.S. companies and their agents to offer or
pay bribes to foreign officials to obtain or retain business. It also requires accurate
recordkeeping and internal controls to prevent corrupt payments.
Question 2
What are the two basic categories of financial instruments?
A. Deposits and withdrawals
B. Stocks and bonds
,C. Cash and inventory
D. Receivables and payables
Correct Answer: B
Rationale: Financial instruments are contracts that represent financial value. Stocks
represent equity ownership, while bonds represent debt owed by the issuer.
Question 3
A secondary market is best described as:
A. A market where new securities are issued
B. A market where previously issued securities are traded
C. A market for commodities only
D. A market restricted to institutional investors
Correct Answer: B
Rationale: Secondary markets are where investors buy and sell securities that have
already been issued, such as on the NYSE or NASDAQ. Primary markets are where new
securities are first issued.
Question 4
Cash flows from operating activities include:
A. Issuing new bonds
B. Cash paid for equipment
,C. Cash received from customers
D. Purchasing treasury stock
Correct Answer: C
Rationale: Operating cash flows reflect day-to-day business activities, like cash received
from sales and cash paid to suppliers and employees. Issuing bonds (A) and purchasing
treasury stock (D) are financing activities, while cash paid for equipment (B) is an
investing activity.
Question 5
An income statement shows:
A. Cash balances at year end
B. Revenues minus expenses over a period
C. Asset historical cost details
D. Changes in retained earnings only
Correct Answer: B
Rationale: The income statement reports financial performance — revenues earned and
expenses incurred — to determine net income over a specific period.
Question 6
Which item appears on the income statement but not on the statement of cash
flows?
, A. Cash received from customers
B. Depreciation expense
C. Dividends paid
D. Cash paid for wages
Correct Answer: B
Rationale: Depreciation affects reported net income but is a non-cash expense and is
added back to cash flows. Dividends paid (C) appear in financing activities.
Question 7
Working capital is defined as:
A. Total assets
B. Current assets minus current liabilities
C. Long-term debt
D. Retained earnings
Correct Answer: B
Rationale: Net working capital measures liquidity and the ability to meet short-term
obligations. It is calculated as Current Assets - Current Liabilities.
Question 8
The primary goal of financial management is to:
2026/2027 Academic Year – 70 Questions
with Verified Correct Answers
Financial Environment & Statement Basics
Question 1
What is the primary purpose of the Foreign Corrupt Practices Act (FCPA)?
A. To limit corporate taxes on foreign income
B. To prevent companies from bribing foreign officials for business
C. To regulate international trade tariffs
D. To protect domestic industries from foreign competition
Correct Answer: B
Rationale: The FCPA makes it unlawful for U.S. companies and their agents to offer or
pay bribes to foreign officials to obtain or retain business. It also requires accurate
recordkeeping and internal controls to prevent corrupt payments.
Question 2
What are the two basic categories of financial instruments?
A. Deposits and withdrawals
B. Stocks and bonds
,C. Cash and inventory
D. Receivables and payables
Correct Answer: B
Rationale: Financial instruments are contracts that represent financial value. Stocks
represent equity ownership, while bonds represent debt owed by the issuer.
Question 3
A secondary market is best described as:
A. A market where new securities are issued
B. A market where previously issued securities are traded
C. A market for commodities only
D. A market restricted to institutional investors
Correct Answer: B
Rationale: Secondary markets are where investors buy and sell securities that have
already been issued, such as on the NYSE or NASDAQ. Primary markets are where new
securities are first issued.
Question 4
Cash flows from operating activities include:
A. Issuing new bonds
B. Cash paid for equipment
,C. Cash received from customers
D. Purchasing treasury stock
Correct Answer: C
Rationale: Operating cash flows reflect day-to-day business activities, like cash received
from sales and cash paid to suppliers and employees. Issuing bonds (A) and purchasing
treasury stock (D) are financing activities, while cash paid for equipment (B) is an
investing activity.
Question 5
An income statement shows:
A. Cash balances at year end
B. Revenues minus expenses over a period
C. Asset historical cost details
D. Changes in retained earnings only
Correct Answer: B
Rationale: The income statement reports financial performance — revenues earned and
expenses incurred — to determine net income over a specific period.
Question 6
Which item appears on the income statement but not on the statement of cash
flows?
, A. Cash received from customers
B. Depreciation expense
C. Dividends paid
D. Cash paid for wages
Correct Answer: B
Rationale: Depreciation affects reported net income but is a non-cash expense and is
added back to cash flows. Dividends paid (C) appear in financing activities.
Question 7
Working capital is defined as:
A. Total assets
B. Current assets minus current liabilities
C. Long-term debt
D. Retained earnings
Correct Answer: B
Rationale: Net working capital measures liquidity and the ability to meet short-term
obligations. It is calculated as Current Assets - Current Liabilities.
Question 8
The primary goal of financial management is to:
