WGU C213 EXAM QUESTIONS AND
ANSWERS UPDATED (2024/2025)
(VERIFIED ANSWERS)
Assets - ANS ✓Probable future economic benefits obtained or controlled by a
company as a result of past transactions or events.
Liabilities - ANS ✓1. Probable future sacrifices of economic benefits arising from
present obligations of a company to transfer assets.
2. Or provide services in the future as a result of past transaction or events.
Owners' Equity - ANS ✓The residual interest in the assets of a company that
remains after deducting its liabilities.
Revenues - ANS ✓The amount of assets generated in the normal course of
business.
Expenses - ANS ✓Are the amount of assets consumed in doing business.
Revenue Recognition - ANS ✓The accounting process used to determine when
revenue should be reported in the income statement.
Operating Activities - ANS ✓Those activities that comprise the day-to-day
operations of a business.
Investing Activities - ANS ✓The purchase and sale of long-term assets such as
land and equipment.
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Financing Activities - ANS ✓Those activities through which cash is obtained
from, or repaid to, creditors and investors.
Relevant Information - ANS ✓Information that is provided on a timely basis
and can be used to assess the past and to project the future for decision making.
Reliable Information - ANS ✓Information that represents what it is supposed
to represent.
Comparability - ANS ✓Allows a company's financial statements to be analyzed
in light of the company's own performance in prior years or other companies'
performance.
Conservatism - ANS ✓The practice of recognizing all losses but not recognizing
gains until they are certain.
Articulation - ANS ✓The idea that the three primary financial statements are
interrelated.
Purpose of Financial Statement Analysis - ANS ✓1. Can be used to diagnose
existing problems
2. To forecast how a company will perform in the future
Debt Ratio - ANS ✓Percentage of company funding that is borrowed
Current Ratio - ANS ✓Indication of a company's ability to pay its short-term
debts.
Return on Sales - ANS ✓Pennies in profit on each dollar of sales.
Asset Turnover - ANS ✓Measure of efficiency; number of sales dollars
generated by each dollar of assets.
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Return on Equity - ANS ✓Pennies in profit for each dollar invested by
stockholders.
Price-earnings Ratio - ANS ✓Number of dollars an investor must pay to "buy"
the future rights to each dollar of current earnings.
Common-size Financial Statements - ANS ✓1. Allows comparison of financial
statements across years and between companies.
2. Are prepared by dividing all financial statement numbers by sales for the year.
Profitability - ANS ✓The number of pennies in profit generated from each dollar
of sales.
Efficiency - ANS ✓The number of dollars in sales generated by each dollar of
assets.
Leverage - ANS ✓The number of dollars of assets a company is able to acquire
using each dollar invested by stockholders.
Margin - ANS ✓The profitability of each dollar in sales.
Turnover - ANS ✓The degree to which assets are used to generate sales.
Cash-flow Ratio - ANS ✓1. Useful when net income is impacted by large non-
cash expenses.
2. Useful when rapid growth causes cash from operations to be much less than
reported net income.
3. Useful when company management has a strong incentive to bias reported net
income.
WGU C213
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