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