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WGU C214 Financial Management Objective Assessment Exam Study Guide Questions and Answers (Verified Answers) 1.Trading on the NYSE is executed without a specialist (i.e. a market maker). True or False ANS False 2.Stocks and Bonds are two types of financial instruments. True or False ANS - True 3.When revenue is matched with cost of sales in an Income statement it is called ANS Matching principle Basic balance sheet equation is what ANS Equity = Assets – Liabilities 4.Why is the balance sheet known as the permanent statement 1 / 3
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ANS Because the other statements are reset at the end of the fiscal year.
5.How do you calculate the change in retained earnings ANS Net income-divi- dends
6.Sales - Cost of Sales - other expenses =: Operating Income or EBiT
7.Name four accounts that are part of total assets ANS Cash, Accounts receivable, inventory, long term assets 8.Name three accounts that are part of total liabilities ANS Bonds, accounts payable and mortgage 9.Name four accounts that are part of current assets ANS Inventory, cash, ac- counts receivable and short term investments.
10.Name three accounts that are only included in cash flow from financing?-
: Common stock, dividends paid and bonds payable
11.Define the statement of cash flows ANS Calculated for the same period of time as the incomes statement is calculated based on the income statement and changes in the balance 2 / 3
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sheet is one of the three basic accounting statements.
12.When fixed assets increase what happens to cash ANS Cash will decrease 13.What is the purpose of the statement of cash flows ANS Explains the change in cash over the course of the specified time frame.
14.Suppose the inventory turnover of a company is higher than the industry. Based on this observation, which of the following is most likely ANS The firm has too little inventory resulting in lost sales or stock-outs.
15.If a company wishes to obtain a bank loan, will it want to have a higher current ratio or a lower current ratio ANS Higher 16.The Operating Income Return on Investment (OIROI) uses what elements on the income statement ANS EBIT and total assets 17.Why would a company be interested in the Total Asset Turnover (TAT) ratio ANS To see how efficient are at producing sales