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WGU C708 Principles of Finance Pre-Assessment EXAM
AND STUDY GUIDE 300 QUESTIONS AND VERIFIED
SOLUTIONS LATEST UPDATE THIS YEAR
QUESTION: An analysis of a potential purchase of a new piece of equipment has been completed. The analysis included a review of the initial cost of the equipment, annual operating expenses, and the value of the expected increased production adjusted for the time value of money over the life of the equipment.
Place the investments in the order they should be selected based on their valuation (from highest to lowest value).
Select your answers from the pull-down list.
Total costs of $700,000 and expected income $850,000 Total costs of $500,000 and expected income of $700,000 Total costs of $700,000 and expected income $875,000 Total costs of $500,000 and expected income $600,000 - ANSWER-2) Total costs of $700,000 and expected income $850,000
3) Total costs of $500,000 and expected income of $700,000
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1) Total costs of $700,000 and expected income $875,000
4) Total costs of $500,000 and expected income $600,000
QUESTION: Classify each item as to whether it has or lacks a fundamental influence on valuation.
Answer options may be used more than once or not at all. Select your answers from the pull- down list. - ANSWER-Fundamental influence-Opportunity cost Fundamental influence-Cash flow Not a fundamental influence-Taxable income Not a fundamental influence-Revenue recognition
QUESTION: Which scenario illustrates the strong form of the efficient market hypothesis (EMH)? - ANSWER-An investor is making an investment decision based on public information, as well as private information that is known only to company insiders. This type of information is also known as insider trading.
QUESTION: A company's accounting records include inflated numbers that give the company a higher net income than its actual numbers. This overstatement was agreed upon by the company and its auditors. This collusion between the company and its auditors would be caught rather quickly due to regulations. 2 / 4
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What agency regulates accounting practices between companies and their accounting firms? - ANSWER-Public Company Accounting Oversight Board
QUESTION: In credit unions, boards of directors that hire executives are elected from among volunteering members (whereas in commercial banks, they are hired by the stockholders from among non-member outsiders).
Which agency problem with banks does this structure seek to eliminate? - ANSWER-Between owners and board of directors
QUESTION: Why is transferability of ownership relatively easy in the case of corporations? - ANSWER-Stocks can be bought and sold in the stock market.
QUESTION: Match each account to the pair of financial accounting statements that it appears on.
Answer options may be used more than once or not at all. Select your answers from the pull- down list. - ANSWER-Cash-Balance sheet and statement of cash flows Net income-Income statement and statement of cash flows Retained earnings-Balance sheet and income statement
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QUESTION: How could a company that has a positive accounting income also be in trouble of going bankrupt when looking at its cash balance? - ANSWER-Accounting income does not take into account the cash that is needed to pay salaries and dividends.
QUESTION: Which section of the statement of cash flows includes such transactions as paying dividends to shareholders, repurchasing common stock, and proceeds from the sale of long- term debt? - ANSWER-Cash flows from financing activities
QUESTION: Use the following income statement for the current year. Assume the sales are 35% higher than the last year sales of $800,000.
Calculate the net income. - ANSWER-$604,000 QUESTION: Corporations establish goals in areas including finance, diversity, and social responsibility. Match the corporate goal with the area that it addresses.
Answer options may be used more than once or not at all. Select your answers from the pull- down list.Environmental goal Diversity goal Financial goal
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