Hundreds of candidates want to get the WGU Financial Management VBC1 (Financial-Management) certification exam because it helps them in accelerating their WGU careers. Cracking the Financial-Management exam of this credential is vital when it comes to the up gradation of their resume. The Financial-Management Certification Exam helps students earn from online work and it also benefits them in order to get a job in any good tech company.
| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Risk and Return | 12% | - Beta and Capital Asset Pricing Model - Systematic vs unsystematic risk - Portfolio risk and diversification |
| Topic 2: Capital Structure and Financing | 10% | - Dividend policy and payout decisions - Leverage and cost of capital |
| Topic 3: Financial Statement Analysis | 20% | - Ratio analysis: liquidity, profitability, solvency, efficiency - Income statement, balance sheet, cash flow statement - Common-size and trend analysis |
| Topic 4: Valuation of Securities | 15% | - Bond valuation, yield to maturity, risk characteristics - Cost of capital components - Stock valuation: dividend growth model, CAPM |
| Topic 5: Capital Budgeting | 10% | - NPV, IRR, payback period, profitability index - Cash flow estimation and project evaluation |
| Topic 6: Time Value of Money | 18% | - Present value, future value, annuities, perpetuities - Discounted cash flow valuation - Effective vs nominal interest rates |
| Topic 7: Financial Markets and Corporate Objectives | 15% | - Types of financial markets and instruments - Role of financial institutions - Goal of the firm: shareholder wealth maximization |
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NEW QUESTION # 30
What distinguishes a subordinated debenture from a senior debenture?
Answer: D
Explanation:
A subordinated debenture differs from a senior debenture primarily in the priority of claims. Both are typically unsecured debt instruments, but subordinated debentures rank below senior debentures in the event of liquidation or bankruptcy. This means holders of senior debt are paid before holders of subordinated debt if the firm's assets are distributed. Because subordinated debenture holders face greater default risk, they usually require a higher yield as compensation. This ranking feature is a key concept in capital market theory because the risk level of a security affects investor required return and the issuer's cost of capital. Choice A is the opposite of the correct answer. Choice C is incorrect because a debenture is generally unsecured, and subordination does not mean collateral is provided. Choice D is unrelated to the distinction between the two instruments. Financial managers must understand debt priority because it influences financing choices, covenant design, investor demand, and interest cost. Therefore, B is correct because subordination means a lower claim on assets and cash flows relative to senior debtholders.
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NEW QUESTION # 31
Why should a firm not carry too much cash?
Answer: A
Explanation:
A firm should avoid holding too much cash because excess cash creates opportunity costs. Cash is highly liquid and useful for transactions, precautionary needs, and flexibility, but it normally earns a lower return than productive investments such as equipment, expansion projects, debt reduction, or marketable securities with higher yields. When a company keeps more cash than needed for operations and risk management, it sacrifices the potential return that those funds could have earned elsewhere. Financial management emphasizes balancing liquidity against profitability. Too little cash can create distress and limit the ability to pay obligations on time, while too much cash can weaken overall performance by leaving resources idle.
Choice C is correct because opportunity cost is the most direct financial drawback of excessive cash balances.
Choice A is incorrect because firms do not pay interest simply for holding cash. Choice B is also incorrect because cash itself does not automatically create higher taxes in the way described. Choice D is not a valid financial objective. Therefore, C is the correct answer because unused cash can reduce shareholder value when it is not deployed in higher-return uses.
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NEW QUESTION # 32
What is a consequence of a firm having a longer cash cycle?
Answer: D
Explanation:
A longer cash cycle means that more time passes between when a firm pays cash for inventory or production inputs and when it receives cash from customers. As this cycle lengthens, more funds are tied up in operations for a longer period. This increases the firm's need to hold cash or obtain short-term financing to support day- to-day activities. For example, if inventory sits longer before being sold or if customers take longer to pay, the firm must continue covering payroll, suppliers, and other operating expenses while waiting to recover cash.
Financial management views the cash conversion cycle as a critical working capital measure because it directly affects liquidity needs, financing cost, and operational risk. Choice C is correct because a longer cycle usually requires greater operating cash support. Choice A is incorrect because longer cycles typically reduce liquidity pressure only if financing is abundant, which is not the normal interpretation. Choice B is incorrect because a longer cash cycle does not automatically raise profits. Choice D is the opposite of the correct relationship. Therefore, C is the best answer because longer operating cycles increase the amount of cash a firm must keep available for operations.
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NEW QUESTION # 33
Which characteristic is unique to preferred stock?
Answer: D
Explanation:
Preferred stock is distinguished by its fixed or stated dividend, which is typically paid before any dividends are distributed to common shareholders. This feature makes preferred stock resemble debt in terms of predictable income, while still being classified as equity on the balance sheet. Unlike common stockholders, preferred shareholders generally do not have voting rights and have limited potential for capital appreciation. However, they enjoy priority over common stockholders in dividend payments and, in liquidation, over residual equity claims. From a financial management standpoint, preferred stock provides firms with a flexible financing option that does not increase leverage in the same way as debt while offering investors relatively stable income. Option C correctly identifies the defining characteristic of preferred stock.
NEW QUESTION # 34
What is a primary benefit of maintaining inventory?
Answer: A
Explanation:
A primary benefit of maintaining inventory is that it allows a company to meet customer demand promptly and consistently. Inventory ensures that goods are available when customers want them, which supports sales, customer satisfaction, and competitive performance. Without adequate inventory, firms face stockouts that may lead to lost sales, damaged customer relationships, and reduced market share. Financial management recognizes that although inventory carries costs such as storage, insurance, obsolescence, and tied-up capital, it also provides important operational and strategic benefits. Choice D is correct because inventory exists largely to support uninterrupted operations and customer service. Choice A is incorrect because increasing the cash conversion cycle is generally a cost, not a benefit. Choice B is incorrect because simply holding inventory does not automatically decrease cost of goods sold. Choice C is also incorrect because maintaining inventory usually increases, rather than reduces, storage costs. Therefore, D is the correct answer because the main reason firms hold inventory is to ensure product availability and fulfill customer demand in a timely manner while supporting stable operations.
NEW QUESTION # 35
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