WGU C214 Concepts Only Multi Choice
Version
1. Trading on the NYSE is executed without a specialist F
(i.e. a market maker). (T/F)
2. Stocks and bonds are two types of financial instru- T
ments (T/F)
3. The matching principle in accrual accounting re- a
quires that:
a. venues be recognized when the earnings
Re
process is complete and matches expenses to rev-
enues recognized.
b. Expenses are matched to the year in which they
are incurred
c. Revenues are matched to the year in which they
are booked
d. Revenues should be large enough to match
ex- penses
4. A basic equation for the balance sheet is: a
a. Equity = Assets -
b. Liabilities = Equity + Assets
c. Assets = Liabilities - Equity
d. Assets = Equity - Liabilities
5. Why is the Balance Sheet known as a permanent b
statement?
a. Because the statement is sent to the SEC.
b. Because the other statements are reset at the end
of the fiscal year
c. Because it is printed out and archived
d. Because it persists in the minds of the
sharehold- ers.
6. How do you calculate the change in Retained Earn- d
ings?
a. Ending Retained Earnings - Change in Cash
b. EBIT divided by Total Assets + Dividends
c. EBIT - Change in Cash - Dividends
d. Net Income -
, WGU C214 Concepts Only Multi Choice
Version
7. Which of the following is generally true? c
a. Gross Profit and Operating Income are the same
b. Cost of Goods Sold + Operating Expenses = Net
Income
c. Operating Income and EBIT are the
d. EBIT + Income Taxes = Net income
8. Which components are part of total assets? b
a. Cash, Accounts Receivable, Short Term Debt
b. Cash Accounts Receivable, Inventory, Long Term
Assets
c. Accounts Payable, Long Term Assets, Long Term
Debt
d. Accounts Payable, Net Income, Equity
9. Which components are part of current assets? d
a. Cash, Accounts Receivable, Property Plant
& Equipment
b. Accounts Receivable, Accounts Payable, Inventory
c. Long Term Debt, Property Plant & Equipment,
Com- mon Stock
d. Inventory, Cash, Accounts Receivable, Short Term
Investments
10. Which components are part of Total Liabilities? c
a. Accounts Payable, Accounts Receivable,
Short Term Debt
b. Long Term Debt, Common Stock, Retained
Earn- ings
c. Bonds, Accounts Payable,
d. Common Stock, Long Term Debt, Short Term In-
vestments
11. When Fixed Assets increase what happens to Cash? c
a. Cash stays the same
b. Cash increases
c. Cash
d. Assets decrease
12. c
, WGU C214 Concepts Only Multi Choice
Version
Which is the purpose of the statement of cash flows?
a. serves as the replacement for the income
state- ment and balance sheet
b. explains the change in cash balance at one
point in time
c. explains the change in cash balance for one period
of time
d. both (a) and (b) above
13. The OIROI (Operating Income Return on Investment) b
uses what elements on the income statement?
a. Operating Income, EBIT, Total Liabilities
b. EBIT, Total
c. Sales, Total Assets, Equity
d. Net Margin, Total Current Assets
14. Why would a company be interested in the TAT(Total c
Asset Turnover) ratio?
a. How efficient assets are at producing income
b. What the turnover of sales is to liabilities
c. How efficient assets are at producing
d. How efficient assets are to liabilities and equity
15. Which of the following gives the largest effective rate b
(APY)
a. 18.6% compounded monthly
b. 18.6% compounded
c. 18.6% compounded weekly
d. 18.6% compounded yearly
16. What does the beta coefficient represent? a
a. It is a statistically-derived measure of
b. It is the Expected Return minus the Growth Rate
c. It is the volatility of the Risk Free Return
d. It is the expected return for a basket of
preferred stocks
17. Why is depreciation expense taken out of the net d
income calculation, yet added back at the end?
a. Because fixed assets should remain on the balance
, WGU C214 Concepts Only Multi Choice
Version
sheet
b. Because depreciation is not a current asset
c. Because depreciation is a non-cash liability
d. Because depreciation expense is tax
18. Why is the NPV preferred over the IRR? Pick b, c
Two
a. It has a higher dollar value
b. It measures the dollar value
c. It is more reliable
d. It is harder to calculate
19. What does the Degree of Financial Leverage indi- c
cate?
a. The firms cash balance
b. The cost of financed assets
c. The reliance on
d. The reliance on assets
20. If a company has a high degree of financial leverage, d
what does that tell us about the firm's risk profile?
a. Low Risk
b. Appropriate Risk
c. Higher ability to pay debt
d. Higher profits to
21. What is the cash cycle? d
a. The speed of collecting cash from customers
b. The amount of cash kept in banks
c. The comparison of debt to cash
d.The amount of time to regenerate
22. Why is float important to understand? d
a. To know how to keep the company profitable
b. To know why the company needs cash
c. To determine when to buy fixed assets
d. To time cash
e. None of the above
23. What should a company do to manage its working a
Version
1. Trading on the NYSE is executed without a specialist F
(i.e. a market maker). (T/F)
2. Stocks and bonds are two types of financial instru- T
ments (T/F)
3. The matching principle in accrual accounting re- a
quires that:
a. venues be recognized when the earnings
Re
process is complete and matches expenses to rev-
enues recognized.
b. Expenses are matched to the year in which they
are incurred
c. Revenues are matched to the year in which they
are booked
d. Revenues should be large enough to match
ex- penses
4. A basic equation for the balance sheet is: a
a. Equity = Assets -
b. Liabilities = Equity + Assets
c. Assets = Liabilities - Equity
d. Assets = Equity - Liabilities
5. Why is the Balance Sheet known as a permanent b
statement?
a. Because the statement is sent to the SEC.
b. Because the other statements are reset at the end
of the fiscal year
c. Because it is printed out and archived
d. Because it persists in the minds of the
sharehold- ers.
6. How do you calculate the change in Retained Earn- d
ings?
a. Ending Retained Earnings - Change in Cash
b. EBIT divided by Total Assets + Dividends
c. EBIT - Change in Cash - Dividends
d. Net Income -
, WGU C214 Concepts Only Multi Choice
Version
7. Which of the following is generally true? c
a. Gross Profit and Operating Income are the same
b. Cost of Goods Sold + Operating Expenses = Net
Income
c. Operating Income and EBIT are the
d. EBIT + Income Taxes = Net income
8. Which components are part of total assets? b
a. Cash, Accounts Receivable, Short Term Debt
b. Cash Accounts Receivable, Inventory, Long Term
Assets
c. Accounts Payable, Long Term Assets, Long Term
Debt
d. Accounts Payable, Net Income, Equity
9. Which components are part of current assets? d
a. Cash, Accounts Receivable, Property Plant
& Equipment
b. Accounts Receivable, Accounts Payable, Inventory
c. Long Term Debt, Property Plant & Equipment,
Com- mon Stock
d. Inventory, Cash, Accounts Receivable, Short Term
Investments
10. Which components are part of Total Liabilities? c
a. Accounts Payable, Accounts Receivable,
Short Term Debt
b. Long Term Debt, Common Stock, Retained
Earn- ings
c. Bonds, Accounts Payable,
d. Common Stock, Long Term Debt, Short Term In-
vestments
11. When Fixed Assets increase what happens to Cash? c
a. Cash stays the same
b. Cash increases
c. Cash
d. Assets decrease
12. c
, WGU C214 Concepts Only Multi Choice
Version
Which is the purpose of the statement of cash flows?
a. serves as the replacement for the income
state- ment and balance sheet
b. explains the change in cash balance at one
point in time
c. explains the change in cash balance for one period
of time
d. both (a) and (b) above
13. The OIROI (Operating Income Return on Investment) b
uses what elements on the income statement?
a. Operating Income, EBIT, Total Liabilities
b. EBIT, Total
c. Sales, Total Assets, Equity
d. Net Margin, Total Current Assets
14. Why would a company be interested in the TAT(Total c
Asset Turnover) ratio?
a. How efficient assets are at producing income
b. What the turnover of sales is to liabilities
c. How efficient assets are at producing
d. How efficient assets are to liabilities and equity
15. Which of the following gives the largest effective rate b
(APY)
a. 18.6% compounded monthly
b. 18.6% compounded
c. 18.6% compounded weekly
d. 18.6% compounded yearly
16. What does the beta coefficient represent? a
a. It is a statistically-derived measure of
b. It is the Expected Return minus the Growth Rate
c. It is the volatility of the Risk Free Return
d. It is the expected return for a basket of
preferred stocks
17. Why is depreciation expense taken out of the net d
income calculation, yet added back at the end?
a. Because fixed assets should remain on the balance
, WGU C214 Concepts Only Multi Choice
Version
sheet
b. Because depreciation is not a current asset
c. Because depreciation is a non-cash liability
d. Because depreciation expense is tax
18. Why is the NPV preferred over the IRR? Pick b, c
Two
a. It has a higher dollar value
b. It measures the dollar value
c. It is more reliable
d. It is harder to calculate
19. What does the Degree of Financial Leverage indi- c
cate?
a. The firms cash balance
b. The cost of financed assets
c. The reliance on
d. The reliance on assets
20. If a company has a high degree of financial leverage, d
what does that tell us about the firm's risk profile?
a. Low Risk
b. Appropriate Risk
c. Higher ability to pay debt
d. Higher profits to
21. What is the cash cycle? d
a. The speed of collecting cash from customers
b. The amount of cash kept in banks
c. The comparison of debt to cash
d.The amount of time to regenerate
22. Why is float important to understand? d
a. To know how to keep the company profitable
b. To know why the company needs cash
c. To determine when to buy fixed assets
d. To time cash
e. None of the above
23. What should a company do to manage its working a
