pg. 1 WGU C214 Exam/ WGU C214 Actual Final Exam/ Updated Questions with Correct Verified Answers – Latest Version 2024.
Trading on the NYSE is executed without a specialist (i.e. a market maker). (T/F) - Correct Answer - F
Stocks and bonds are two types of financial instruments (T/F) - Correct Answer - T
The matching principle in accrual accounting requires that:
- Revenues be recognized when the earnings process is complete and matches expenses to revenues
- Expenses are matched to the year in which they are incurred
- Revenues are matched to the year in which they are booked
- Revenues should be large enough to match expenses - Correct Answer - a
recognized.
A basic equation for the balance sheet is:
- Equity = Assets - Liabilities
- Liabilities = Equity + Assets
- Assets = Liabilities - Equity
- Assets = Equity - Liabilities - Correct Answer - a
Why is the Balance Sheet known as a permanent statement?
- Because the statement is sent to the SEC.
- Because the other statements are reset at the end of the fiscal year
- Because it is printed out and archived
- Because it persists in the minds of the shareholders. - Correct Answer - b
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pg. 2 How do you calculate the change in Retained Earnings?
- Ending Retained Earnings - Change in Cash
- EBIT divided by Total Assets + Dividends
- EBIT - Change in Cash - Dividends
- Net Income - Dividends - Correct Answer - d
Which of the following is generally true?
- Gross Profit and Operating Income are the same
- Cost of Goods Sold + Operating Expenses = Net Income
- Operating Income and EBIT are the same
- EBIT + Income Taxes = Net income - Correct Answer - c
Which components are part of total assets?
- Cash, Accounts Receivable, Short Term Debt
- Cash Accounts Receivable, Inventory, Long Term Assets
- Accounts Payable, Long Term Assets, Long Term Debt
- Accounts Payable, Net Income, Equity - Correct Answer - b
Which components are part of current assets?
- Cash, Accounts Receivable, Property Plant & Equipment
- Accounts Receivable, Accounts Payable, Inventory
- Long Term Debt, Property Plant & Equipment, Common Stock
- Inventory, Cash, Accounts Receivable, Short Term Investments - Correct Answer - d
Which components are part of Total Liabilities?
- Accounts Payable, Accounts Receivable, Short Term Debt
- Long Term Debt, Common Stock, Retained Earnings
- Bonds, Accounts Payable, Mortgage
- Common Stock, Long Term Debt, Short Term Investments - Correct Answer - c 2 / 4
pg. 3
When Fixed Assets increase what happens to Cash?
- Cash stays the same
- Cash increases
- Cash decreases
- Assets decrease - Correct Answer - c
Which is the purpose of the statement of cash flows?
- serves as the replacement for the income statement and balance sheet
- explains the change in cash balance at one point in time
- explains the change in cash balance for one period of time
- both (a) and (b) above - Correct Answer - c
The OIROI (Operating Income Return on Investment) uses what elements on the income statement?
- Operating Income, EBIT, Total Liabilities
- EBIT, Total Assets
- Sales, Total Assets, Equity
- Net Margin, Total Current Assets - Correct Answer - b
Why would a company be interested in the TAT(Total Asset Turnover) ratio?
- How efficient assets are at producing income
- What the turnover of sales is to liabilities
- How efficient assets are at producing sales
- How efficient assets are to liabilities and equity - Correct Answer - c
Which of the following gives the largest effective rate (APY)
- 18.6% compounded monthly
- 18.6% compounded daily
- 18.6% compounded weekly 3 / 4
pg. 4
- 18.6% compounded yearly - Correct Answer - b
What does the beta coefficient represent?
- It is a statistically-derived measure of volatility
- It is the Expected Return minus the Growth Rate
- It is the volatility of the Risk Free Return
- It is the expected return for a basket of preferred stocks - Correct Answer - a
Why is depreciation expense taken out of the net income calculation, yet added back at the end?
- Because fixed assets should remain on the balance sheet
- Because depreciation is not a current asset
- Because depreciation is a non-cash liability
- Because depreciation expense is tax deductible - Correct Answer - d
Why is the NPV preferred over the IRR? Pick Two
- It has a higher dollar value
- It measures the dollar value
- It is more reliable
- It is harder to calculate - Correct Answer - b, c
What does the Degree of Financial Leverage indicate?
- The firms cash balance
- The cost of financed assets
- The reliance on debt
- The reliance on assets - Correct Answer - c
If a company has a high degree of financial leverage, what does that tell us about the firm's risk profile?
- Low Risk
- Appropriate Risk
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