corporate finance assignment 1

A firm has net working capital of $640. Long-term debt is $4,180, total assets are $6,230, and fixed assets are $3,910. What is the amount of the total liabilities?

$5,860 Current assets = $6,230 - $3,910 = $2,320 Current liabilities = $2,320 - $640 = $1,680 Total liabilities = $1,680 + $4,180 = $5,860

Which one of the following accounts is the most liquid?

accounts receivable

Capital structure decisions include determining:

how much debt should be assumed to fund a project.

The book value of a firm is:

based on historical cost

Which one of the following terms is defined as the management of a firm's long-term investments?

capital budgeting

Four years ago, Velvet Purses purchased a mailing machine at a cost of $176,000. This equipment is currently valued at $64,500 on today's balance sheet but could actually be sold for $58,900. This is the only fixed asset the firm owns. Net working capital is $57,200 and long-term debt is $111,300. What is the book value of shareholders' equity?

$10,400 Book value of shareholders' equity = $64,500 + $57,200 - $111,300 = $10,400

At the beginning of the year, the long-term debt of a firm was $72,918 and total debt was $138,407. At the end of the year, long-term debt was $68,219 and total debt was $145,838. The interest paid was $6,430. What is the amount of the cash flow to creditors?

$11,129 Cash flow to creditors = $6,430 - ($68,219 - $72,918) = $11,129

The Daily News had net income of $121,600 of which 40 percent was distributed to the shareholders as dividends. During the year, the company sold $75,000 worth of common stock. What is the cash flow to stockholders?

-$26,360 Cash flow to stockholders = .40($121,600) - $75,000 = -$26,360

Which of the following parties are considered stakeholders of a firm?

Employees and the government

Which one of the following is a cash flow from a corporation into the financial markets?

Payment of loan interest

Which one of the following statements related to an income statement is correct?

Taxes reduce both net income and operating cash flow

Which one of the following is a working capital management decision?

determining whether to pay cash for a purchase or use the credit offered by the supplier

Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management?

increase in the market value per share

Which one of the following is least likely to be an agency problem?

increasing the market value of the firm's shares

Which one of the following is a means by which shareholders can replace company management?

proxy fight

Which one of the following terms is defined as the mixture of a firm's debt and equity financing?

Capital structure

Which of the following accounts are included in working capital management? I. accounts payable II. accounts receivable III. fixed assets IV. inventory

I, II, and IV only

An increase in the depreciation expense will do which of the following? I. increase net income II. decrease net income III. increase the cash flow from assets IV. decrease the cash flow from assets

II and III only

Which one of the following statements concerning net working capital is correct?

Net working capital increases when inventory is sold for cash at a profit

Which term relates to the cash flow that results from a firm's ongoing, normal business activities?

Operating cash flow