WGU C214 OA Financial Management
Exam 2025/2026 – Updated Questions
and Verified Answers
Question 1
Trading on the NYSE is executed without a specialist (i.e., a market maker). True or False?
A. True
B. False
C. Only for bonds
D. Only for preferred stock
Correct Answer: B. False
Explanation/Rationale: Trading on the New York Stock Exchange (NYSE) involves designated
market makers (specialists) who facilitate trades by maintaining liquidity and matching buyers
and sellers. This distinguishes the NYSE from fully automated exchanges. The statement is
false as specialists are integral to NYSE trading. Options C and D are incorrect as specialists
operate across various securities, not just bonds or preferred stock.
Question 2
Which financial statement matches revenue with the cost of sales?
A. Balance Sheet
B. Income Statement
C. Statement of Cash Flows
D. Statement of Retained Earnings
Correct Answer: B. Income Statement
Explanation/Rationale: The income statement matches revenues with the cost of sales (cost
of goods sold) under the matching principle of accrual accounting, reporting net income or loss
for a period. The balance sheet shows assets, liabilities, and equity; the statement of cash flows
,tracks cash movements; and the statement of retained earnings details changes in retained
earnings.
Question 3
The stock price of a company increases in an efficient market. What assumption can be made?
A. A new, patented product was introduced
B. New machinery was purchased with a 20-year life
C. Management hired new employees
D. The company reduced its dividend payout
Correct Answer: A. A new, patented product was introduced
Explanation/Rationale: In an efficient market, stock prices reflect all available information. A
new, patented product signals future revenue potential, likely causing the stock price increase.
New machinery, hiring employees, or reducing dividends do not necessarily imply immediate
positive market reactions without additional context.
Question 4
Which characteristic distinguishes preferred stock from common stock?
A. Voting rights
B. Cumulative dividends
C. Unlimited earnings potential
D. Lower payoff claim in bankruptcy
Correct Answer: B. Cumulative dividends
Explanation/Rationale: Preferred stock often has cumulative dividends, meaning unpaid
dividends accrue and must be paid before common stock dividends. Common stock has voting
rights, unlimited earnings potential via price appreciation, and a lower payoff claim in bankruptcy
compared to preferred stock.
Question 5
What is true about bonds when sold at face value?
A. Coupon rate equals the required rate of return
B. Coupon rate is less than the market rate
C. Bond sells at a premium
D. Bond has no maturity date
, Correct Answer: A. Coupon rate equals the required rate of return
Explanation/Rationale: A bond sells at face value (par value, typically $1,000) when the coupon
rate equals the market’s required rate of return, as the bond’s cash flows are discounted at the
same rate. If the coupon rate is less, the bond sells at a discount; if higher, at a premium. Bonds
always have a maturity date.
Question 6
A company has a high-quality customer purchase $500,000 of product, with $300,000 paid today
and $200,000 in 60 days. Expenses are $300,000, with $100,000 unpaid. Under accrual
accounting, what is reported?
A. Revenues: $500,000; Expenses: $300,000
B. Revenues: $300,000; Expenses: $200,000
C. Revenues: $500,000; Expenses: $200,000
D. Revenues: $300,000; Expenses: $300,000
Correct Answer: A. Revenues: $500,000; Expenses: $300,000
Explanation/Rationale: Under accrual accounting, revenues are recognized when earned
($500,000 upon delivery) and expenses when incurred ($300,000 for the product), regardless of
cash payment timing. Thus, $500,000 revenue and $300,000 expenses are reported, yielding a
$200,000 profit.
Question 7
Which statement is true about how global markets affect the U.S.?
A. A bad derivatives trade by a foreign subsidiary affects U.S. layoffs
B. Foreign investors make decisions based on U.S. financial reporting standards
C. U.S. investors rely on foreign financial reporting standards
D. Global markets have no impact on U.S. financial decisions
Correct Answer: B. Foreign investors make decisions based on U.S. financial reporting
standards
Explanation/Rationale: Foreign investors and fund managers rely on U.S. financial reporting
standards (e.g., GAAP) when investing in U.S. companies, impacting capital flows. Derivatives
trades may affect global markets but not necessarily U.S. layoffs directly. U.S. investors use U.S.
standards, and global markets do influence U.S. decisions.
Question 8
Exam 2025/2026 – Updated Questions
and Verified Answers
Question 1
Trading on the NYSE is executed without a specialist (i.e., a market maker). True or False?
A. True
B. False
C. Only for bonds
D. Only for preferred stock
Correct Answer: B. False
Explanation/Rationale: Trading on the New York Stock Exchange (NYSE) involves designated
market makers (specialists) who facilitate trades by maintaining liquidity and matching buyers
and sellers. This distinguishes the NYSE from fully automated exchanges. The statement is
false as specialists are integral to NYSE trading. Options C and D are incorrect as specialists
operate across various securities, not just bonds or preferred stock.
Question 2
Which financial statement matches revenue with the cost of sales?
A. Balance Sheet
B. Income Statement
C. Statement of Cash Flows
D. Statement of Retained Earnings
Correct Answer: B. Income Statement
Explanation/Rationale: The income statement matches revenues with the cost of sales (cost
of goods sold) under the matching principle of accrual accounting, reporting net income or loss
for a period. The balance sheet shows assets, liabilities, and equity; the statement of cash flows
,tracks cash movements; and the statement of retained earnings details changes in retained
earnings.
Question 3
The stock price of a company increases in an efficient market. What assumption can be made?
A. A new, patented product was introduced
B. New machinery was purchased with a 20-year life
C. Management hired new employees
D. The company reduced its dividend payout
Correct Answer: A. A new, patented product was introduced
Explanation/Rationale: In an efficient market, stock prices reflect all available information. A
new, patented product signals future revenue potential, likely causing the stock price increase.
New machinery, hiring employees, or reducing dividends do not necessarily imply immediate
positive market reactions without additional context.
Question 4
Which characteristic distinguishes preferred stock from common stock?
A. Voting rights
B. Cumulative dividends
C. Unlimited earnings potential
D. Lower payoff claim in bankruptcy
Correct Answer: B. Cumulative dividends
Explanation/Rationale: Preferred stock often has cumulative dividends, meaning unpaid
dividends accrue and must be paid before common stock dividends. Common stock has voting
rights, unlimited earnings potential via price appreciation, and a lower payoff claim in bankruptcy
compared to preferred stock.
Question 5
What is true about bonds when sold at face value?
A. Coupon rate equals the required rate of return
B. Coupon rate is less than the market rate
C. Bond sells at a premium
D. Bond has no maturity date
, Correct Answer: A. Coupon rate equals the required rate of return
Explanation/Rationale: A bond sells at face value (par value, typically $1,000) when the coupon
rate equals the market’s required rate of return, as the bond’s cash flows are discounted at the
same rate. If the coupon rate is less, the bond sells at a discount; if higher, at a premium. Bonds
always have a maturity date.
Question 6
A company has a high-quality customer purchase $500,000 of product, with $300,000 paid today
and $200,000 in 60 days. Expenses are $300,000, with $100,000 unpaid. Under accrual
accounting, what is reported?
A. Revenues: $500,000; Expenses: $300,000
B. Revenues: $300,000; Expenses: $200,000
C. Revenues: $500,000; Expenses: $200,000
D. Revenues: $300,000; Expenses: $300,000
Correct Answer: A. Revenues: $500,000; Expenses: $300,000
Explanation/Rationale: Under accrual accounting, revenues are recognized when earned
($500,000 upon delivery) and expenses when incurred ($300,000 for the product), regardless of
cash payment timing. Thus, $500,000 revenue and $300,000 expenses are reported, yielding a
$200,000 profit.
Question 7
Which statement is true about how global markets affect the U.S.?
A. A bad derivatives trade by a foreign subsidiary affects U.S. layoffs
B. Foreign investors make decisions based on U.S. financial reporting standards
C. U.S. investors rely on foreign financial reporting standards
D. Global markets have no impact on U.S. financial decisions
Correct Answer: B. Foreign investors make decisions based on U.S. financial reporting
standards
Explanation/Rationale: Foreign investors and fund managers rely on U.S. financial reporting
standards (e.g., GAAP) when investing in U.S. companies, impacting capital flows. Derivatives
trades may affect global markets but not necessarily U.S. layoffs directly. U.S. investors use U.S.
standards, and global markets do influence U.S. decisions.
Question 8
