WGU C214 – FINANCIAL MANAGEMENT
250-Question Original Practice & Retake-Preparation Exam • 2026/2027 Study
Edition
Important: These are original practice questions aligned to publicly described C214 Financial Management topics. They are not leaked,
copied, or represented as actual WGU OA questions, and no score/pass guarantee is implied.
WGU C214 Financial Management — Original Practice Edition Page 1
, 1. Which objective best reflects the traditional primary goal of financial management in a
corporation?
• Maximize accounting revenue regardless of risk
☐✓ Maximize shareholder wealth while considering risk and timing
• Minimize all borrowing
• Maximize the number of employees
Answer: Maximize shareholder wealth while considering risk and timing Rationale: Shareholder wealth focuses on value, risk, and timing
rather than accounting revenue alone.
2. Why is maximizing profit alone an incomplete financial-management objective?
☐✓ Profit ignores the timing and risk of cash flows
• Profit always equals cash flow
• Profit cannot be measured
• Profit automatically accounts for inflation
Answer: Profit ignores the timing and risk of cash flows Rationale: Profit can be affected by accounting choices and does not fully capture
timing and risk.
3. An agency problem most directly occurs when:
☐✓ Managers' interests differ from shareholders' interests
• Customers buy on credit
• A firm issues common stock
• Interest rates fall
Answer: Managers' interests differ from shareholders' interests Rationale: Agency conflicts arise when managers may pursue goals that
differ from owners' interests.
4. A CFO intentionally delays recognizing a material expense to make quarterly results look
better. This is best described as:
• Sound working-capital management
• Ethical financial reporting
☐✓ A potential ethical and reporting violation
• Capital budgeting
Answer: A potential ethical and reporting violation Rationale: Deliberately distorting financial results undermines reliable reporting and
ethical decision-making.
5. Which market primarily facilitates trading of previously issued securities?
• Primary market
☐✓ Secondary market
• Labor market
• Commodity production market
Answer: Secondary market Rationale: The secondary market trades securities after their original issuance.
6. A corporation selling newly issued common shares to investors is using the:
☐✓ Primary market
• Secondary market
• Foreign-exchange market
• Derivatives clearing market
Answer: Primary market Rationale: New securities are issued and sold in the primary market.
7. Which statement reports assets, liabilities, and equity at a specific date?
• Income statement
☐✓ Balance sheet
• Statement of retained earnings only
• Cash budget
Answer: Balance sheet Rationale: The balance sheet is a point-in-time statement of financial position.
8. Which statement primarily reports revenues and expenses over a period?
☐✓ Income statement
• Balance sheet
• Statement of financial position
• Inventory ledger
Answer: Income statement Rationale: The income statement summarizes operating results over a period.
WGU C214 Financial Management — Original Practice Edition Page 2
, 9. Which cash-flow category generally includes purchases of long-term productive assets?
• Operating
☐✓ Investing
• Financing
• Noncash
Answer: Investing Rationale: Purchases of property, plant, and equipment are investing cash flows.
10. Issuing common stock for cash is generally classified as:
• Operating cash flow
• Investing cash flow
☐✓ Financing cash flow
• Noncash operating flow
Answer: Financing cash flow
Rationale: Equity issuance is a financing activity.
11. The current ratio is calculated as:
☐✓ Current assets ÷ current liabilities
• Current liabilities ÷ current assets
• Total debt ÷ total assets
• Sales ÷ fixed assets
Answer: Current assets ÷ current liabilities Rationale: The current ratio measures short-term liquidity using current assets relative to
current liabilities.
12. A current ratio of 2.0 generally means:
• Current liabilities are twice current assets
☐✓ Current assets are twice current liabilities
• Debt is twice equity
• Profit is twice sales
Answer: Current assets are twice current liabilities Rationale: A ratio of 2 means two dollars of current assets per dollar of current
liabilities.
13. Which item is normally excluded from the quick ratio numerator?
• Cash
• Accounts receivable
☐✓ Inventory
• Marketable Rationale:
Answer: Inventory
securities
Inventory is less liquid and is excluded from the quick-assets numerator.
14. The debt ratio is commonly expressed as:
☐✓ Total liabilities ÷ total assets
• Net income ÷ sales
• Sales ÷ assets
• Current assets ÷ current liabilities
Answer: Total liabilities ÷ total assets Rationale: Debt ratio measures the proportion of assets financed by liabilities.
15. Return on assets is generally:
☐✓ Net income ÷ average total assets
• Sales ÷ current liabilities
• Debt ÷ equity
• Gross profit ÷ inventory
Answer: Net income ÷ average total assets Rationale: ROA relates earnings to the assets employed to generate them.
16. If net income is $40,000 and average assets are $500,000, ROA is:
• 4%
☐✓ 8%
• 12.5%
• 80%
Answer: 8% Rationale: $40,000 ÷ $500,000 = 0.08, or 8%.
17. Net working capital equals:
☐✓ Current assets − current liabilities
WGU C214 Financial Management — Original Practice Edition Page 3
, • Total assets − total debt
• Sales − expenses
• Cash − inventory
Answer: Current assets − current liabilities Rationale: Net working capital measures the excess of current assets over current liabilities.
18. A company increases its inventory substantially while sales remain unchanged. All else equal,
this is most likely to:
• Improve liquidity automatically
☐✓ Tie up additional working capital
• Eliminate carrying costs
• Reduce the operating cycle
Answer: Tie up additional working capital Rationale: Inventory consumes cash and can increase the working-capital investment.
19. Tightening credit standards would most likely:
• Increase bad-debt risk
☐✓ Reduce accounts receivable and potentially sales
• Increase average collection period
• Increase credit sales automatically
Answer: Reduce accounts receivable and potentially sales Rationale: Tighter standards can reduce receivables and bad debts but may
also reduce sales.
20. A key purpose of inventory management is to:
• Eliminate all inventory
☐✓ Balance availability against the cost of holding inventory
• Maximize storage costs
• Avoid forecasting
Answer: Balance availability against the cost of holding inventory Rationale: Inventory policy seeks an efficient tradeoff between stock
availability and carrying costs.
21. A cash budget is primarily used to:
☐✓ Forecast cash inflows, outflows, and financing needs
• Calculate depreciation only
• Determine stock price directly
• Replace the income statement
Answer: Forecast cash inflows, outflows, and financing needs Rationale: Cash budgets help anticipate liquidity surpluses and shortfalls.
22. The time value of money means:
☐✓ A dollar today is generally worth more than a dollar received later
• Future dollars are always worth more
• Inflation never matters
• Interest has no economic effect
Answer: A dollar today is generally worth more than a dollar received later Rationale: A current dollar can be invested to earn a return, so
timing matters.
23. What is the future value of $1,000 invested for one year at 10%?
• $900
• $1,010
☐✓ $1,100
• $1,210
Answer: $1,100 Rationale: FV = 1,000 × 1.10 = $1,100.
24. What is the present value of $1,100 received one year from now at 10%?
• $909.09
☐✓ $1,000
• $1,100
• $1,210
Answer: $1,000 Rationale: PV = 1,100 ÷ 1.10 = $1,000.
25. Compared with annual compounding, more frequent compounding generally:
• Reduces the effective annual rate
☐✓ Increases the effective annual rate for the same nominal rate
WGU C214 Financial Management — Original Practice Edition Page 4
250-Question Original Practice & Retake-Preparation Exam • 2026/2027 Study
Edition
Important: These are original practice questions aligned to publicly described C214 Financial Management topics. They are not leaked,
copied, or represented as actual WGU OA questions, and no score/pass guarantee is implied.
WGU C214 Financial Management — Original Practice Edition Page 1
, 1. Which objective best reflects the traditional primary goal of financial management in a
corporation?
• Maximize accounting revenue regardless of risk
☐✓ Maximize shareholder wealth while considering risk and timing
• Minimize all borrowing
• Maximize the number of employees
Answer: Maximize shareholder wealth while considering risk and timing Rationale: Shareholder wealth focuses on value, risk, and timing
rather than accounting revenue alone.
2. Why is maximizing profit alone an incomplete financial-management objective?
☐✓ Profit ignores the timing and risk of cash flows
• Profit always equals cash flow
• Profit cannot be measured
• Profit automatically accounts for inflation
Answer: Profit ignores the timing and risk of cash flows Rationale: Profit can be affected by accounting choices and does not fully capture
timing and risk.
3. An agency problem most directly occurs when:
☐✓ Managers' interests differ from shareholders' interests
• Customers buy on credit
• A firm issues common stock
• Interest rates fall
Answer: Managers' interests differ from shareholders' interests Rationale: Agency conflicts arise when managers may pursue goals that
differ from owners' interests.
4. A CFO intentionally delays recognizing a material expense to make quarterly results look
better. This is best described as:
• Sound working-capital management
• Ethical financial reporting
☐✓ A potential ethical and reporting violation
• Capital budgeting
Answer: A potential ethical and reporting violation Rationale: Deliberately distorting financial results undermines reliable reporting and
ethical decision-making.
5. Which market primarily facilitates trading of previously issued securities?
• Primary market
☐✓ Secondary market
• Labor market
• Commodity production market
Answer: Secondary market Rationale: The secondary market trades securities after their original issuance.
6. A corporation selling newly issued common shares to investors is using the:
☐✓ Primary market
• Secondary market
• Foreign-exchange market
• Derivatives clearing market
Answer: Primary market Rationale: New securities are issued and sold in the primary market.
7. Which statement reports assets, liabilities, and equity at a specific date?
• Income statement
☐✓ Balance sheet
• Statement of retained earnings only
• Cash budget
Answer: Balance sheet Rationale: The balance sheet is a point-in-time statement of financial position.
8. Which statement primarily reports revenues and expenses over a period?
☐✓ Income statement
• Balance sheet
• Statement of financial position
• Inventory ledger
Answer: Income statement Rationale: The income statement summarizes operating results over a period.
WGU C214 Financial Management — Original Practice Edition Page 2
, 9. Which cash-flow category generally includes purchases of long-term productive assets?
• Operating
☐✓ Investing
• Financing
• Noncash
Answer: Investing Rationale: Purchases of property, plant, and equipment are investing cash flows.
10. Issuing common stock for cash is generally classified as:
• Operating cash flow
• Investing cash flow
☐✓ Financing cash flow
• Noncash operating flow
Answer: Financing cash flow
Rationale: Equity issuance is a financing activity.
11. The current ratio is calculated as:
☐✓ Current assets ÷ current liabilities
• Current liabilities ÷ current assets
• Total debt ÷ total assets
• Sales ÷ fixed assets
Answer: Current assets ÷ current liabilities Rationale: The current ratio measures short-term liquidity using current assets relative to
current liabilities.
12. A current ratio of 2.0 generally means:
• Current liabilities are twice current assets
☐✓ Current assets are twice current liabilities
• Debt is twice equity
• Profit is twice sales
Answer: Current assets are twice current liabilities Rationale: A ratio of 2 means two dollars of current assets per dollar of current
liabilities.
13. Which item is normally excluded from the quick ratio numerator?
• Cash
• Accounts receivable
☐✓ Inventory
• Marketable Rationale:
Answer: Inventory
securities
Inventory is less liquid and is excluded from the quick-assets numerator.
14. The debt ratio is commonly expressed as:
☐✓ Total liabilities ÷ total assets
• Net income ÷ sales
• Sales ÷ assets
• Current assets ÷ current liabilities
Answer: Total liabilities ÷ total assets Rationale: Debt ratio measures the proportion of assets financed by liabilities.
15. Return on assets is generally:
☐✓ Net income ÷ average total assets
• Sales ÷ current liabilities
• Debt ÷ equity
• Gross profit ÷ inventory
Answer: Net income ÷ average total assets Rationale: ROA relates earnings to the assets employed to generate them.
16. If net income is $40,000 and average assets are $500,000, ROA is:
• 4%
☐✓ 8%
• 12.5%
• 80%
Answer: 8% Rationale: $40,000 ÷ $500,000 = 0.08, or 8%.
17. Net working capital equals:
☐✓ Current assets − current liabilities
WGU C214 Financial Management — Original Practice Edition Page 3
, • Total assets − total debt
• Sales − expenses
• Cash − inventory
Answer: Current assets − current liabilities Rationale: Net working capital measures the excess of current assets over current liabilities.
18. A company increases its inventory substantially while sales remain unchanged. All else equal,
this is most likely to:
• Improve liquidity automatically
☐✓ Tie up additional working capital
• Eliminate carrying costs
• Reduce the operating cycle
Answer: Tie up additional working capital Rationale: Inventory consumes cash and can increase the working-capital investment.
19. Tightening credit standards would most likely:
• Increase bad-debt risk
☐✓ Reduce accounts receivable and potentially sales
• Increase average collection period
• Increase credit sales automatically
Answer: Reduce accounts receivable and potentially sales Rationale: Tighter standards can reduce receivables and bad debts but may
also reduce sales.
20. A key purpose of inventory management is to:
• Eliminate all inventory
☐✓ Balance availability against the cost of holding inventory
• Maximize storage costs
• Avoid forecasting
Answer: Balance availability against the cost of holding inventory Rationale: Inventory policy seeks an efficient tradeoff between stock
availability and carrying costs.
21. A cash budget is primarily used to:
☐✓ Forecast cash inflows, outflows, and financing needs
• Calculate depreciation only
• Determine stock price directly
• Replace the income statement
Answer: Forecast cash inflows, outflows, and financing needs Rationale: Cash budgets help anticipate liquidity surpluses and shortfalls.
22. The time value of money means:
☐✓ A dollar today is generally worth more than a dollar received later
• Future dollars are always worth more
• Inflation never matters
• Interest has no economic effect
Answer: A dollar today is generally worth more than a dollar received later Rationale: A current dollar can be invested to earn a return, so
timing matters.
23. What is the future value of $1,000 invested for one year at 10%?
• $900
• $1,010
☐✓ $1,100
• $1,210
Answer: $1,100 Rationale: FV = 1,000 × 1.10 = $1,100.
24. What is the present value of $1,100 received one year from now at 10%?
• $909.09
☐✓ $1,000
• $1,100
• $1,210
Answer: $1,000 Rationale: PV = 1,100 ÷ 1.10 = $1,000.
25. Compared with annual compounding, more frequent compounding generally:
• Reduces the effective annual rate
☐✓ Increases the effective annual rate for the same nominal rate
WGU C214 Financial Management — Original Practice Edition Page 4
