WGU C214 Financial Management Objective Assessment Exam Study Guide Questions and Answers (Verified Answers) 1.The Statement of Cash Flows is not useful when addressing the financial
health of a firm due to the impact of accrual accounting: FALSE - the
impact of accrual accounting is seen as MOST useful in relation to net income
2.Which is true with respect to CFF: an increase in notes payable
indicates an increase in CFF
3.Which is not a part of the Statement of Cash Flows: cash flows from
liquidat- ing activities
NOTE: cash flows are operating, investing, and financing
4.The sum of CFO + CFI + CFF is equal to: the change in cash during the
period 5.Depreciation expense is a significant source of difference between net income and CFO because: depreciation is a non-cash expense on the 1 / 3
Income Statement associated with the acquisition of long-term assets 6.For visualization purposes, CFI accounts are generally non-current
assets on the bottom of the asset side of the Balance Sheet: TRUE
NOTE: CFI is investing in PP&E and is considered long-term assets shown
as assets on the Balance Sheet
7.Increases in operating assets and decreases in operating liabilities will: -
decrease CFO
NOTE: an increase in PP&E (assets) consumes operating cash;
decreases in equipment (liabilities) also consumes operating cash (CFO)
8.Assuming no asset disposals, CFI is: the change in Gross PP&E -or-
CFI is the change in NET PP&E plus depreciation expense
9.Assuming no asset disposals, depreciation expense is equal to: the
change in ACCUMULATED depreciation
10.Characteristics of preferred stock includes: -dividends in arrears
-dividends are cumulative 2 / 3
-higher payoff claim in a BK (has first dibs in a BK) -considered "hybrid" (part stock/part bond) -no fixed maturity date -no voting rights -can skip dividend payments -dividends don't change year-after-year -used in start ups (IPO)
11.Preferred stock dividends: can go without payment and pay in
arrears the following year
12.Characteristics of common stock are: -voting rights
-no maturity date -corporate governance -lower payoff claim in BK -variable returns -unlimited earnings potential -earnings are in dividends & the increase in price of stock
13.New start up ventures often issue: preferred stock (in an IPO)
14.What stock is considered a hybrid: preferred stock
15.One thing common stock and preferred stock have in common is: both
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