Latest WGU Financial-Management C214 Practice Questions By Clemons

The Gordon growth model values a stock assuming dividends grow at a constant rate indefinitely. The formula is:

Stock Value = D (r g),

where D is the expected dividend next year, r is the required rate of return, and g is the growth rate. Substituting the values:

$2 (0.10 0.05) = $2 0.05 = $40.

This model is widely used in valuation for mature companies with stable dividend growth. It highlights the sensitivity of stock value to growth expectations and required returns. Option C correctly applies the Gordon growth model formula.

Total asset turnover measures how efficiently a firm uses its assets to generate revenue. It is calculated as Sales Total Assets. For Whole Pine Inc., sales for 20X3 are $10,000 and total assets are $8,000. Dividing $10,000 by $8,000 yields a total asset turnover of 1.25. This means the company generates $1.25 in sales for every $1.00 invested in assets. From a financial management perspective, this ratio is a key indicator of operating efficiency and is commonly compared across firms within the same industry or across time. A higher turnover suggests more efficient use of assets, while a lower turnover may indicate underutilized capacity or inefficient asset deployment. Asset turnover is also a component of the DuPont analysis, linking operational efficiency to return on equity. Option B correctly reflects both the calculation and interpretation consistent with standard financial analysis practice.