WGU C214 Questions and Answers 100% Pass

WGU C214 Questions and Answers 100% Pass Corporate Finance ✔✔focuses on financial decision making by a firms management Investments ✔✔various types of financial instruments (stocks, bonds, etc) Banking or Financial I ...

WGU C214 Questions and Answers 100% Pass Corporate Finance ✔✔focuses on financial decision making by a firms management Investments ✔✔various types of financial instruments (stocks, bonds, etc) Banking or Financial Institutions ✔✔make money by paying depositors a smaller interest rate than the interest rate charged to borrowers Treasury Securities ✔✔generally bonds that are issued by the US government Corporate Bonds ✔✔firms borrowing from the public Stocks ✔✔a share of ownership in a company Primary financial markets ✔✔markets where securities are first issued Syndicate ✔✔a group that is temporarily formed to handle a bond or stock issue: generally large investment bank or institutional investors Underwriter ✔✔responsible for determining the value of the security; may purchase all the securities & then resale to investors Competitive sale ✔✔underwriters submit bids offering highest price/lowest interest rate; underwriter resales a slightly higher price Negotiated sale ✔✔underwriters submit bids, go thru interview to be selected Secondary financial markets ✔✔where securities are traded after the initial offering (stock market) Auction market ✔✔has a physical location & prices are determined by the highest price an investor is willing to pay (New York Stock Exchange) Dealer market ✔✔no physical location- securities are bought & sold thru a network of dealers that trade for themselves; multi dealers per stock (NASDAQ) Role of financial markets ✔✔they reduce the cost of borrowing from the public or selling ownership to the public Role of Specialist (NYSE) or Dealers ✔✔provide liquidity for a fair & orderly market; may increase the spread to do so (charge a lower price to seller and a higher price to buyer) Financial market liquidity ✔✔the ease of trading in the market (high frquency traders) Market orders ✔✔time sensitive; sales at current bid price/buys at current asking price when order is placed-immediately Limited orders ✔✔price sensitive; sell occurs when price of stock matches order price Role of price ✔✔convet information to consumers; affect incentives &affect the distribution of income Dollar Returns ✔✔Pt - Pt-1 + CFt (Pt= sold price, Pt-1=bought price, CFt=cash flow-coupons for bonds/dividians for stocks) Percentage Returns ✔✔Pt - Pt-1/Pt-1 + CFt/Pt-1 x 100 (1.2) (figure for dollar return and divide into bought price) Goal of company/firm ✔✔to maximize shareholder value or maximize profit Agency costs ✔✔costs that are incurred when management doesn't act in the best interests of shareholders Profit maximizarion ✔✔the potential effect of focusing soley on profits Accounting ✔✔is backward-looking and risk free Finance ✔✔is forward-looking and involes massive uncertainty Income Statement ✔✔show results of operation over time; revenues - expenses = net income Balance Sheet ✔✔a "snap shot" of a firm's assests & financing at a paticular point in time; Assets= Liabilities + Owner's Equity Statement of Cash Flows ✔✔tracks all cash in and out of the firm Cash Accounting ✔✔cash in =revenue; cash out=expense Accrual Accounting ✔✔revenues are recognized when the earnings process is complete; expenses are "matched" to recongized revenues Cash-based income ✔✔an informal metric based on cash in & cash out of the firm Income for tax purposes ✔✔based on the government's definition of income, this is the amount of income the government will tax Accounting income ✔✔the income calculated using accrual accounting (aka, GAAP); best & most complicated metric for understanding the operations of the firm On the Income statement ✔✔Revenues- Cost of goods sold= Gross profit - Operating expenses= earning before interest & taxes - interest expenses, - taxes= Net income Revenue ✔✔recognized when "earned" Cost of Goods Sold ✔✔direct costs of materials & labor Gross profit ✔✔revenue - cost of goods sold Operating Expenses ✔✔expenses not directly associated with production (office expenses, administrative expenses, depreciation, research & development) EBIT ✔✔Earnings before interest & tax; Gross profit - operating expenses (also known as operating income) Net Income on balance sheet ✔✔EBIT - interest - taxes Current Assets ✔✔cash marketable securities, A/R, inventory Fixed Assests ✔✔gross fixed assets- accumulated depreciation Current Liabilities ✔✔A/P, accruals, not