WGU C214 Financial Mgmt Pass the OA UPDATED ACTUAL Exam Questions and CORRECT Answers
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Course
WGU C214 Financial Mgmt
Institution
WGU C214 Financial Mgmt
WGU C214 Financial Mgmt Pass the OA
UPDATED ACTUAL Exam Questions and
CORRECT Answers
Characteristics of preferred stock includes - CORRECT ANSWER- -dividends in arrears
-dividends are cumulative
-higher payoff claim in a BK (has first dibs in a BK)
-considered "hybrid" (part stock/part bond...
WGU C214 Financial Mgmt Pass the OA
UPDATED ACTUAL Exam Questions and
CORRECT Answers
Characteristics of preferred stock includes - CORRECT ANSWER✔✔- -dividends in arrears
-dividends are cumulative
-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)
Preferred stock dividends - CORRECT ANSWER✔✔- can go without payment and pay in
arrears the following year
Characteristics of common stock are - CORRECT ANSWER✔✔- -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
New start up ventures often issue - CORRECT ANSWER✔✔- preferred stock (in an IPO)
What stock is considered a hybrid - CORRECT ANSWER✔✔- preferred stock
,One thing common stock and preferred stock have in common is - CORRECT
ANSWER✔✔- both have no maturity date
Which type of security has voting rights - CORRECT ANSWER✔✔- common stock
Debt covenants and restrictions help to ensure that - CORRECT ANSWER✔✔- management
is meeting bond and shareholder expectations
NOTE: covenants are promises meant to be kept
What is true regarding bonds - CORRECT ANSWER✔✔- -when bond matures, bondholder
gets lump sum back
-coupon rate doesn't change
-maturity is in years
-PAR value is typically $1000
-Future value (same as PAR) is typically $1000
Bond sells at face value when - CORRECT ANSWER✔✔- required rate of return is equal to
the coupon rate
Why are bonds the primary method for raising capital - CORRECT ANSWER✔✔- because
bonds remove the intermediary costs
NOTE: IPO's require an intermediary known as a syndicate - a group of banks underwriting
the security issue
What type of bond can be traded for stock - CORRECT ANSWER✔✔- convertible bonds
What is the interest rate for annual payments of a bond known as - CORRECT
ANSWER✔✔- the coupon rate
NOTE: coupon rate is the established interest rate for the life of the bond and will remain
unchanged
Coupon rate is the established rate of the bond and should - CORRECT ANSWER✔✔- never
change
, Debentures are - CORRECT ANSWER✔✔- secured bonds
NOTE: debentures are a debt instrument (bond) issued to raise cash, secured against a
company's assets and backed by credit, transferable by the holder, and may also be unsecured
Secured loan - CORRECT ANSWER✔✔- has collateral like a mortgage
The amount repaid at the expiration date of a bond is - CORRECT ANSWER✔✔- PAR value
NOTE: expiration date is also known as maturity date PAR (or Face Value) is typically $1000
Duration measures - CORRECT ANSWER✔✔- the market risk of a bond and is the
percentage drop in price caused by a 1% increase in yield (rate)
NOTE: measurement of the drop in price after a rate increase
Maturity of bonds is calculated in - CORRECT ANSWER✔✔- years
A bond premium occurs when - CORRECT ANSWER✔✔- bonds are issued for an amount
greater than their face or maturity amount; caused by the bonds having a stated interest rate
that is higher than the market interest rate for similar bonds
Junk Bonds are - CORRECT ANSWER✔✔- high yield bonds without any stability
"Leveraged" results in - CORRECT ANSWER✔✔- having more debt (bonds) than equity
(stock) and lower stock prices
NOTE: recall that debt is safer and levels out risk in a portfolio
In current assets, inventory is the - CORRECT ANSWER✔✔- LEAST liquid of current
assets
NOTE: current assets take less than 12 months to make liquid
Net fixed assets are - CORRECT ANSWER✔✔- long term assets such as buildings, land,
equipment, machinery
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