WGU - C214: Financial Management Final
UPDATED ACTUAL Exam Questions and
CORRECT Answers
Statement of Cash Flows - CORRECT ANSWER Shows the change in cash balance for a
period of time. Focuses only on items where cash is received, or cash is paid.
Cash Flow from Operating Activities (CFO) - CORRECT 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) - CORRECT ANSWER Cash flow that is
generated from investments in long term assets.
Cash Flow from Financing Activities (CFF) - CORRECT 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? - CORRECT ANSWER An
Increase in Accounts receivable will decrease CFO
How does an increase in Accounts payable impact CFO? - CORRECT ANSWER An Increase
in Accounts Payable will increase CFO
What financial statement is prepared at a point in time - CORRECT ANSWER Balance Sheet
What financial statements are prepared for a period of time? - CORRECT ANSWER · Income
Statement
· Retained Earnings Statement
· Statement of Cash Flows
, Define Efficient Frontier - CORRECT ANSWER Maximizes expected return for a given level
of risk
Where would a risk averse investor fall on the efficient frontier? - CORRECT
ANSWER 100% Bonds
Where would a risk-taking investor fall on the efficient frontier? - CORRECT
ANSWER 100% Stocks
What is a Beta? - CORRECT 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? - CORRECT 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.
What is the intrinsic value of a stock under efficient market hypothesis? - CORRECT
ANSWER The intrinsic value of stock is the present value of the stock's after tax net cash
flows.
Whenever the question states that dividend was paid recently or was just paid, what must be
calculated first? - CORRECT ANSWER Expected Dividend
For every Bond question, what must be entered? - CORRECT ANSWER FV must be entered
as 1000
PMT must be entered as 1000 x Coupon Rate
What is Capital Budgeting? - CORRECT ANSWER Refers to long term investment decision
making.
UPDATED ACTUAL Exam Questions and
CORRECT Answers
Statement of Cash Flows - CORRECT ANSWER Shows the change in cash balance for a
period of time. Focuses only on items where cash is received, or cash is paid.
Cash Flow from Operating Activities (CFO) - CORRECT 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) - CORRECT ANSWER Cash flow that is
generated from investments in long term assets.
Cash Flow from Financing Activities (CFF) - CORRECT 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? - CORRECT ANSWER An
Increase in Accounts receivable will decrease CFO
How does an increase in Accounts payable impact CFO? - CORRECT ANSWER An Increase
in Accounts Payable will increase CFO
What financial statement is prepared at a point in time - CORRECT ANSWER Balance Sheet
What financial statements are prepared for a period of time? - CORRECT ANSWER · Income
Statement
· Retained Earnings Statement
· Statement of Cash Flows
, Define Efficient Frontier - CORRECT ANSWER Maximizes expected return for a given level
of risk
Where would a risk averse investor fall on the efficient frontier? - CORRECT
ANSWER 100% Bonds
Where would a risk-taking investor fall on the efficient frontier? - CORRECT
ANSWER 100% Stocks
What is a Beta? - CORRECT 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? - CORRECT 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.
What is the intrinsic value of a stock under efficient market hypothesis? - CORRECT
ANSWER The intrinsic value of stock is the present value of the stock's after tax net cash
flows.
Whenever the question states that dividend was paid recently or was just paid, what must be
calculated first? - CORRECT ANSWER Expected Dividend
For every Bond question, what must be entered? - CORRECT ANSWER FV must be entered
as 1000
PMT must be entered as 1000 x Coupon Rate
What is Capital Budgeting? - CORRECT ANSWER Refers to long term investment decision
making.
