Exam 1- Finance (Franken)

Which one of the following involves a working capital management decision? -How many hours of overtime should manufacturing employees be allowed to work? -What is the most efficient process for producing a product? -When is the appropriate time to replace the delivery fleet? -What is the maximum level of cash to be kept in the firm's bank account? -Should a newly available parcel of land be acquired?

What is the maximum level of cash to be kept in the firm's bank account?

Which one of the following accounts is the most liquid? -Equipment -Inventory -Building -Accounts Receivable -Land

Accounts Receivable

Total income taxes divided by total taxable income equals the ______ tax rate. -residual -marginal -total -average -deductible

Average

Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date? -Creditor's statement -Dividend statement -Statement of cash flows -Income statement -Balance sheet

Balence Sheet

On a common-base year financial statement, inventory for the current year will be expressed relative to which one of the following?

Base-year inventory

______ are personally responsible for 100 percent of the firm's debts.

Both general partners and sole proprietors

A firm's liquidity is measured with which one of the following ratios?

Current ratio

Which one of the following is a use of cash?

Decrease in accounts payable

Which one of the following is a disadvantage of the corporate form of business?

Distributed profits may experience double taxation.

On the statement of cash flows, which one of the following is considered a financing activity?

Dividends paid

Which one of the following accurately lists the three components of the DuPont identity?

Equity multiplier, net profit margin, and total asset turnover

Which one of the following determines the standards and procedures with which audited financial statements are prepared? -Cash flow identity -Financial Accounting Reporting Principles -Standard Accounting Value Guidelines -Generally Accepted Accounting Principles -Matching principle

Generally Accepted Accounting Principles (GAAP)

Which one of the following is an agency cost? -Hiring outside accountants to audit the company's financial statements -Closing a division of the firm that is operating at a loss -Increasing the quarterly dividend -Investing in a new project that creates firm value -Accepting an investment opportunity that will add value to the firm

Hiring outside accountants to audit the company's financial statements

Which one of the following financial statements summarizes a firm's revenue and expenses during a period of time? -Tax reconciliation statement -Market value report -Statement of cash flows -Balance sheet -Income statment

Income statement

The ______ tax rate is the percentage of the last dollar you earned that must be paid in taxes. -marginal -total -average -residual -standard

Marginal

The cash flow that results from a company's ongoing, normal business activities is called: -cash flow to creditor. -operating cash flow. -capital spending. -cash flow from assets. -net working capital.

Operating Cash Flow

Public offerings of debt and equity must be registered with the:

Securities and Exchange Commission. (SEC)

Which one of the following questions involves a capital budgeting decision? -How many shares of stock should the firm issue? -Should the firm borrow money to acquire new equipment? -Should the firm purchase a new machine for the production line? -How much money should be kept in the checking account? -How much inventory should the firm keep on hand?

Should the firm purchase a new machine for the production line?

Which form of business would be the best choice if it were necessary to raise large amounts of capital?

Sole proprietorship

A positive cash flow to stockholders indicates which one of the following with certainty? -No dividends were distributed, but new shares of stock were sold. -The amount of the sale of common stock exceeded the amount of dividends paid. -The dividends paid exceeded the net new equity raised. -Both the cash flow to assets and the cash flow to creditors must be positive. -Both the cash flow to assets and the cash flow to creditors must be negative.

The dividends paid exceeded the net new equity raised.

The book value of a firm is: -equivalent to the firm's market value minus its liabilities. -generally greater than the market value when fixed assets are included. -based on historical transactions. -adjusted to the market value whenever the market value exceeds the stated book value. -a financial, rather than an accounting, valuation.

based on historical transactions.

Determining the number of shares of stock to issue is an example of a ______ decision.

capital structure

Net working capital is defined as: -total assets minus total liabilities. -total liabilities minus shareholders' equity. -current liabilities minus shareholders' equity. -fixed assets minus long-term liabilities. -current assets minus current liabilities.

current assets minus current liabilities.

The articles of incorporation:

describe the purpose of the firm and set forth the number of shares of stock that can be issued.

The cash coverage ratio directly measures the ability of a company to meet its obligation to pay:

interest to a lender.

Decisions made by financial managers should primarily focus on increasing the:

market value per share of outstanding stock.

Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as ______ ratios.

profitability

A common-size income statement is an accounting statement that expresses all of a firm's expenses as a percentage of:

sales

Ratios that measure a firm's liquidity are known as ______ ratios.

short-term solvency

The sources and uses of cash over a stated period of time are reflected on the:

statement of cash flows.