WGU C216 MBA CAPSTONE TASK 2
COMPREHENSIVE QUESTIONS AND
COMPLETE SOLUTIONS
◉ Bad debt.
Answer: Accounts receivable a company doesn't expect to collect.
Know: Recorded as an expense (bad debt expense) and reduces
receivables via an allowance account, following the matching
principle.
◉ Income tax expense.
Answer: The tax obligation recorded on the income statement based
on taxable income. Know: Often differs from cash taxes actually paid,
due to timing differences between book and tax accounting.
◉ Fiscal year.
Answer: A company's chosen 12-month accounting period. Know:
Doesn't have to align with the calendar year (e.g., many retailers end
their fiscal year Jan 31).
◉ Accrual accounting.
Answer: Recording revenue when earned and expenses when
incurred, regardless of cash timing. Know: The opposite is cash-basis
,accounting (record only when cash moves). GAAP requires accrual
accounting for most companies.
◉ Internal control.
Answer: Processes and procedures designed to safeguard assets and
ensure accurate financial reporting. Know: Examples include
separation of duties, approval requirements, and reconciliations.
◉ GAAP (Generally Accepted Accounting Principles).
Answer: The standard accounting framework used by U.S.
companies. Know: Ensures consistency and comparability across
financial statements.
◉ Profitability.
Answer: A company's ability to generate earnings relative to
revenue, assets, or equity. Measures: Assessed via margin ratios
(gross margin, net margin) and return ratios (ROA, ROE).
◉ Recovery of investment (Payback Period).
Answer: How long it takes for a project's cash inflows to equal its
initial cost. Measures: Time (usually in years). Know: Doesn't
account for the time value of money, unlike NPV.
◉ Capital investment proposals.
,Answer: Formal evaluations of whether a long-term investment
(equipment, expansion, etc.) is worth pursuing. Know: Evaluated
using NPV, IRR, and payback period together, not just one method.
◉ Net Present Value (NPV).
Answer: The present value of a project's future cash inflows minus
its initial cost. Measures: Dollar value added (or destroyed) by a
project in today's dollars. Know: Positive NPV = accept the project;
negative NPV = reject it.
◉ Debits and credits.
Answer: The two-sided entries required for every transaction in
double-entry accounting. Know: Debits increase assets and
expenses; credits increase liabilities, equity, and revenue. Total
debits must always equal total credits.
◉ Owners' equity.
Answer: The residual value of a business after liabilities are
subtracted from assets. Measures: Assets − Liabilities = Equity.
Know: Also called shareholders' equity or net worth.
◉ Paid-in capital.
Answer: The amount of money shareholders invested directly in the
company in exchange for stock. Know: Distinct from retained
, earnings (profits kept in the business over time); paid-in capital =
par value + additional paid-in capital.
◉ Social reputation.
Answer: How stakeholders (customers, investors, the public)
perceive a company's character and trustworthiness. Know: Directly
affects customer loyalty, talent recruitment, and stock valuation.
◉ Corporate philanthropy.
Answer: Voluntary charitable giving or community investment by a
company. Know: One component of CSR, distinct from legally
required actions.
◉ Human rights (in business ethics).
Answer: The ethical obligation of companies to avoid contributing to
human rights abuses, especially in global supply chains. Know:
Frequently tested in the context of overseas labor practices.
◉ Power (in ethics).
Answer: The capacity to influence outcomes or other people's
behavior. Know: Can be used ethically (socialized) or unethically
(personalized/self-interested) — see also "Power and Legitimacy" in
Leadership.
COMPREHENSIVE QUESTIONS AND
COMPLETE SOLUTIONS
◉ Bad debt.
Answer: Accounts receivable a company doesn't expect to collect.
Know: Recorded as an expense (bad debt expense) and reduces
receivables via an allowance account, following the matching
principle.
◉ Income tax expense.
Answer: The tax obligation recorded on the income statement based
on taxable income. Know: Often differs from cash taxes actually paid,
due to timing differences between book and tax accounting.
◉ Fiscal year.
Answer: A company's chosen 12-month accounting period. Know:
Doesn't have to align with the calendar year (e.g., many retailers end
their fiscal year Jan 31).
◉ Accrual accounting.
Answer: Recording revenue when earned and expenses when
incurred, regardless of cash timing. Know: The opposite is cash-basis
,accounting (record only when cash moves). GAAP requires accrual
accounting for most companies.
◉ Internal control.
Answer: Processes and procedures designed to safeguard assets and
ensure accurate financial reporting. Know: Examples include
separation of duties, approval requirements, and reconciliations.
◉ GAAP (Generally Accepted Accounting Principles).
Answer: The standard accounting framework used by U.S.
companies. Know: Ensures consistency and comparability across
financial statements.
◉ Profitability.
Answer: A company's ability to generate earnings relative to
revenue, assets, or equity. Measures: Assessed via margin ratios
(gross margin, net margin) and return ratios (ROA, ROE).
◉ Recovery of investment (Payback Period).
Answer: How long it takes for a project's cash inflows to equal its
initial cost. Measures: Time (usually in years). Know: Doesn't
account for the time value of money, unlike NPV.
◉ Capital investment proposals.
,Answer: Formal evaluations of whether a long-term investment
(equipment, expansion, etc.) is worth pursuing. Know: Evaluated
using NPV, IRR, and payback period together, not just one method.
◉ Net Present Value (NPV).
Answer: The present value of a project's future cash inflows minus
its initial cost. Measures: Dollar value added (or destroyed) by a
project in today's dollars. Know: Positive NPV = accept the project;
negative NPV = reject it.
◉ Debits and credits.
Answer: The two-sided entries required for every transaction in
double-entry accounting. Know: Debits increase assets and
expenses; credits increase liabilities, equity, and revenue. Total
debits must always equal total credits.
◉ Owners' equity.
Answer: The residual value of a business after liabilities are
subtracted from assets. Measures: Assets − Liabilities = Equity.
Know: Also called shareholders' equity or net worth.
◉ Paid-in capital.
Answer: The amount of money shareholders invested directly in the
company in exchange for stock. Know: Distinct from retained
, earnings (profits kept in the business over time); paid-in capital =
par value + additional paid-in capital.
◉ Social reputation.
Answer: How stakeholders (customers, investors, the public)
perceive a company's character and trustworthiness. Know: Directly
affects customer loyalty, talent recruitment, and stock valuation.
◉ Corporate philanthropy.
Answer: Voluntary charitable giving or community investment by a
company. Know: One component of CSR, distinct from legally
required actions.
◉ Human rights (in business ethics).
Answer: The ethical obligation of companies to avoid contributing to
human rights abuses, especially in global supply chains. Know:
Frequently tested in the context of overseas labor practices.
◉ Power (in ethics).
Answer: The capacity to influence outcomes or other people's
behavior. Know: Can be used ethically (socialized) or unethically
(personalized/self-interested) — see also "Power and Legitimacy" in
Leadership.
