WGU C214 Financial Management
Concepts Practice Exam
The matching principle in accrual accounting requires that:
a. Expenses are matched to revenue recognition.
b. Expenses are matched to the year in which they are i
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WGU C214 Financial Management
Concepts Practice Exam
The matching principle in accrual accounting requires that:
a. Expenses are matched to revenue recognition.
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 expenses ✔✔a
The addition to retained earnings each year is:
a. Net Income
b. Net Income minus dividends
c. Net Income plus dividends
d. Net Income times the Payout Ratio ✔✔b
Net working capital equals:
a. Current assets
b. Current liabilities
c. Current assets minus current liabilities
d. None of the above ✔✔c
What does the Sarbanes-Oxley Act require companies to do?
a. Have a board of directors
b. Register all foreign sales
c. Make estimated tax payments
d. Have transparent, accurate financial statements ✔✔d
If a company produces and sells a product only in the U.S., what international developments may
affect its sales?
a. Fluctuating exchange rates
b. Imports of competing products
c. Immigration policy
d. Inflation in Europe ✔✔b
Which is not a reason to calculate WACC?
a. To measure the overall cost of financing
b. Needed to calculate Cash Flow Financing
c. It is the minimum required return for investment projects
d. Measures investors' required return on firm securities ✔✔b
If a firm's goal is to maximize stockholder wealth, which would the firm avoid?
a. Stock buybacks
b. Risky long-term investments
c. Investments with negative NPV
d. Transparency in financial statements ✔✔c
In which market transaction is the corporation not involved?
a. Primary Markets
b. Secondary Markets
c. IPO
d. Buy Backs ✔✔b
What does Beta measure?
a. The yield on the S&P 500
b. The relative riskiness of an individual stock
c. Indicates the market value of the stock
d. Stocks to avoid purchasing ✔✔b
Which accounting decision uses estimates?
a. Life of a new asset
b. Accounts payable
c. Amortization schedule for a loan
d. Cost of a new machine ✔✔a
An investment with a term of less than one year is:
a. A current liability
b. A current asset
c. Is in retained earnings
d. Is a long-term liability ✔✔b
Which does not affect the required yield on a bond?
a. Riskiness of the issuer
b. Collateralization
c. Treasury yields
d. Face Value ✔✔d
If the yield of a bond is higher than the coupon rate, what is the price?
a. Premium price
b. Par price
c. Discount price
d. Secondary market price ✔✔c
Why would a company buy back outstanding stock?
a. To boost the price of the stock
b. To increase financial leverage
c. Lack of investment opportunities
d. All of the above ✔✔d
Which cash flow statement contains income statement items?
a. CFO
b. CFI
c. CFF
d. None of above ✔✔a
Why are accurate sales forecasts impor
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