Fin SB Exam 1
When a corporation is formed, it is granted which of the following rights?
* Legal powers to sue * State citizenship for jurisdictional purposes * The ability to issue stock
The possible goal of profit maximization: - avoids maximizing the sales. - would probably be the most commonly cited goal for a business. - should always be a short-term goal. - can be achieved by cost-cutting.
- would probably be the most commonly cited goal for a business. - can be achieved by cost-cutting.
______ are the prime source of information about a firm's financial health.
Financial statements
True or false: Taxes can be a large cash outflow for a corporation.
True
The present value of a series of future cash flows is the amount you would need today to _____.
exactly duplicate those future cash flows
All else equal, when the rate of growth in sales or assets in a financial plan is higher, external financing needs will be
greater
When the future value formula is used to calculate growth rates, the assumption is that _____ growth rate is achieved each year.
the same
Long-term liabilities are not due in the current year (from the date of the balance sheet). True false question. True/False
true
By combining common-size and base year analysis, we eliminate the effect of the _____. Multiple choice question.
overall growth
The ___________ value is the current value of future cash flows discounted at the appropriate discount rate.
present
What are the common elements of a financial planning model?
- Economic assumptions - Sales forecast - Pro forma statements
Which of the following is the formula for the future value of an annuity?
FV = C((1+r)t−1r)
Which of the following are correct spreadsheet functions? Interest rate = DISCOUNT(nper,pmt,pv,fv) Present value = PV(rate,nper,pmt,fv) Future value = FV(rate,nper,pmt,pv) Discount rate = RATE(nper,pmt,pv,fv)
Present value = PV(rate,nper,pmt,fv) Future value = FV(rate,nper,pmt,pv) Discount rate = RATE(nper,pmt,pv,fv)
True or false: Given the same rate of interest, more money can be earned with compound interest than with simple interest.
True
A corporation by another name
- joint stock companies - Public limited companies -limited liability
A firm has a total debt ratio of 0.30 times. This means the firm has ___ in total debt for every $1 in total assets.
$0.30
You will receive a bonus of $5,000 in one year's time, and would like to take a loan against it now. What is the formula that shows how much you can borrow if you plan to use the entire amount to pay back the loan and your interest rate is 3%?
$5,000/1.03
The Tax Cuts and Jobs Act of 2017 set the corporate tax rate to be ______ regardless of the level of taxable income.
21%
Galting Corporation is operating at 80% of capacity. This means that the current sales level is:
80% of the full capacity sales level
What does a balance sheet reflect about a firm? Income over a specified time period Accounting value on a specific date Earnings per share over a specified time period Economic value at a specific point in time
Accounting value on a specific date
Which of the following items are among the items used to compute the current ratio?
Accounts payable Cash
Which of the following are sources of cash?
An increase in notes payable A decrease in accounts receivable
The smaller investment proposals of each operational unit are added up, and the sum is treated as one big project, which is called
aggregation
How is the inventory turnover ratio computed?
Cost of goods sold/Inventory
How frequently does continuous compounding occur?
Every instant
True or false: A deteriorating time trend in a financial ratio is always a bad sign.
F
Which of the following is the correct mathematical formula for calculation of the future value of $100 invested today for 3 years at 10% per year?
FV = $100 × (1.10)3
Growth, by itself, is:
not an appropriate goal
The original loan amount is called the _____.
principal
Which one of the following does not affect ROE according to the DuPont identity?
Investor sentiment
The basic present value equation is:
PV = FVt/(1 + r)t
The short run is a period when there are ______ costs.
The short run is a period when there are both fixed and variable costs.
What is the main goal of financial management?
To maximize current value per share of existing stock
The formula for a present value factor is 1/(1+r)t
True
Liquidity refers to the ease of changing _____. Multiple choice question.
assets to cash
In the long run, ________ are variable.
at all costs
An annuity due is a series of payments that are made ____.
at the beginning of each period
On the balance sheet, assets are listed at their _____ value.
book value
At the most fundamental level, firms generate ______ and spend it.
cash
Future value is the Blank______ value of an investment at some time in the future.
cash
The statement of cash flow explains changes in _____. Multiple choice question.
cash and equivalents
Noncash items do not affect _____.
cash flow
The total of cash flow to creditors and cash flow to stockholders is called _____. - return on equity - debt-to-asset value - cash flow from assets - return on assets
cash flow from assets
A long-term liability represents a(n) _____.
debt that is not due in the coming year
The more debt a firm has, the greater its:
degree of financial leverage The more debt a firm has (as a percentage of assets), the greater is its degree of fin leverage More Debt = More financial leverage = larger potential for gains or losses
The matching principle of GAAP requires revenues be matched with _____.
expenses
A growing annuity has a(n) ____.
finite number of growing cash flows
Fixed costs are costs that will not change ______. Multiple choice question.
in the short run
The information needed to compute the profit margin can be found on the ____.
income statement
A perpetuity is a constant stream of cash flows for a(n) ______ period of time.
infinite
Across firms, the financial planning process _____.
is different for each firm
Capital budgeting is concerned with planning and managing a firm's _____.
long-term investments
When valuing cash flows, you can either value multiple cash flows or a single sum, also known as a(n) _____ sum.
lump
The five categories of financial ratios include short-term solvency, long-term solvency, asset management, profitability, and _____________value ratios.
market
Whenever__________ information is available, it should be used instead of accounting data.
market
The goal of a for-profit business is to Blank______ existing owners' equity.
max
The goal of a for-profit business is to _____ existing owners' equity.
maximize
The concept of the time value of money is based on the principle that a dollar today is worth __________ a dollar promised at some time in the future. Multiple choice question.
more than
The basic present value equation underlies many of the _____. Multiple choice question.
most important ideas in corporate finance
Most investments involve _____ cash flows.
multiple
The aggregation process determines the total _____.
needed investment
Most equity shares of large firms in the U.S. trade on:
organized auction markets
Weston's financial planning model shows assets are projected to increase by $2.7 million while liabilities and equity increase by $1.5 million. What is the external financing need (EFN)?
$1.2 million $2.7m - 1.5m = $1.2m
A pro forma balance sheet indicates that total assets will increase by $300,000. If a debt-equity ratio of 0.5 is maintained, then debt must increase by:
$100,000. Reason: If D/E =0.5, an increase of $300k in assets will be financed with $100k of debt and $200k of equity.
Which formula shows the present value of an ordinary annuity that pays $100 per year for three years if the interest rate is 10 percent per year? Multiple choice question. $1,100{[1 − (1/(1.10)3)]/0.20} $100{[1 − (1/(1.10)3)]/1.20} $1,000/{[1 − (1/(1.10)3)]/0.10} $100{[1 − (1/(1.10)3)]/0.10}
$100{[1 − (1/(1.10)3)]/0.10}
What is the present value of an ordinary annuity that pays $100 per year for 20 years if the interest rate is 10 percent per year?
$100{[1 - (1/(1.10)20)]/0.10}
What is the future value of $100 compounded for 50 years at 10 percent annual interest?
$11,739.09
APR
The interest rate per period multiplied by the number of periods in the year.
The cash flow identity reflects the fact that:
cash is either used to produce the product or service, pay creditors or pay out to the owners of the firm. a firm generates cash through its various activities. cash flow from the firm's assets equals the total of cash flow to creditors and cash flow to stockholders.
Financial planning is a(n) _____ process. Multiple choice question.
iterative
______ income is money earned after interest and taxes. Multiple choice question.
net
Noncash items are expenses that directly affect _____ but do not directly affect ______.
net income; cash flow
Assume Zoe Corporation's plant capacity will allow for sales of $250 million and last year's sales were $180 million. Zoe's current gross plant and equipment total is $340 million. You project sales growth of 20% in the upcoming year.What total should you forecast for Zoe's plant and equipment on your pro forma balance sheet?
$340 million With $216 million in sales (180 X 1.2), Zoe is not at plant capacity, so it will not need to increase its plant and equipment amount to accommodate its new level of sales.
Dot's financial planning model shows assets are projected to increase by $800,000 but liabilities and equity increase by $395,000. What is the external financing need (EFN)?
$405,000 Reason: EFN = $800,000 - $395,000 = $405,000
You invest $500 at 10 percent interest. At the end of 2 years with simple interest you will have ____ and with compound interest you will have ____. Multiple choice question.
$605; $600 Reason: With simple interest you will earn $500 X 0.10 = $50 each year. Your total will be $500+100=$600. With compound interest, you will have $500(1.10)2 = $605 at the end of the two years. Given the same rate of interest, the FV will always be higher with compound interest.
Which one of the following represents what a firm owns at a given point in time? - its stockholders' equity - its current liabilities - its long-term debt - its assets
- its assets
What are the most important questions to ask when starting a business
1. What long-term investment should be made 2. Where will long-term fin be obtained to pay for investments 3. how will everyday fin act be handled
A typical investment has a large cash (inflow/outflow) at the beginning and then a cash (inflows/outflows) for many years.
1. outflow 2. inflow
Which formula below represents a present value factor? Multiple choice question. 1/(1 + N)r (1 + r)/t 1/(1 + r)t 1/N + 1/r
1/(1 + r)t
If your tax bill is $200 and your taxable income is $2,000, then your average tax rate is _____ percent. Multiple choice question.
10% Average tax rate = $200/$2,000 = 0.1, or 10%
Alpha Omega's percentage of sales model forecasts sales growth of 20 percent next year. If cost of good sold are proportionate at 80 percent of sales, then cost of good sold will increase by:
20%
Alpha Omega's percentage of sales model forecasts sales growth of 20 percent next year. If cost of good sold are proportionate at 80 percent of sales, then cost of good sold will increase by: Multiple choice question.
20%
Suppose you want to save $10,000 to buy a car. You have $6,000 to deposit today and you can earn 6% on your investments. You want to know when you'll have enough to buy the car. Which of the following spreadsheet functions will solve the problem?
=NPER(0.06,0,−6000,10000)
Which formula will you enter into a spreadsheet cell to determine how long it will take $40 to grow to $240 at an interest rate of 6.53% compounded annually? Multiple choice question.
=NPER(0.0653,0,−40,240)
Which of the following should be valued using a perpetuity formula? An amortized loan with a set amount over a period of time A consol (bond that pays interest only and does not mature) Preferred stock Cash flows from a product whose sales are expected to remain constant forever
A consol (bond that pays interest only and does not mature) Preferred stock Cash flows from a product whose sales are expected to remain constant forever
Which of the following are sources of cash? (Check all that apply.) Multiple select question. A decrease in notes payable Purchasing an asset A decrease in accounts receivable An increase in notes payable
A decrease in accounts receivable An increase in notes payable
In a financial plan using the percentage of sales approach, why is it assumed that assets increase with sales?
Additional working capital and fixed assets are needed to support growth
Which compounding interval will result in the lowest future value assuming everything else is held constant?
Annual
Which of the following are likely to be accomplished with financial planning?
Avoiding surprises Exploring options
Which of the following investments would result in a higher future value?Investment A - 12% APR for 10 year Investment B - 12% APR for 12 years
B
explain the organizational chart that highlights the fin activity
Board of Directors I Chair of the board and chief executive officer (CEO) I President and chief operations officer (COO) I Vice pre. Marketing, Vice pre. Fin (CFO), Vice pre production I The vice pre of fin (CFO) I to treasure and controller
Under GAAP, U.S. firms must carry assets at:
Book value - at what the firm paid for them reason: Under GAAP, U.S. firms must carry assets at book value (historical cost − accumulated depreciation).
Which of the following processes can be used to calculate future value for multiple cash flows?
Calculate the future value of each cash flow first and then add them up Compound the accumulated balance forward one year at a time pg. 158
In large firms, financial activity is usually associated with which top officer?
Chief financial officer
EAR
Choice The interest rate stated as though it were compounded once per year.
Which of the following positions generally report to the chief financial officer (CFO)? - Director of marketing - Chief executive officer (CEO) - Controller - Treasurer
Controller and Treasurer
All other things staying the same, the lower the rate of growth in sales or assets, the greater will be the need for external financing. True or False?
False
True or false: Financial planning addresses all the basic elements of firm value. True false question.
False
True or false: Given external financing needs in a financial plan, the firm must borrow both long- and short-term funds.
False
True or false: The financial planning process will not change from firm to firm.
False
True or false: Operating cash flow includes capital spending and working capital requirements.
False Reason: Operating cash flow is the cash flow generated by business activities, excluding financing, capital spending, or changes in net working capital.
True or false: All other things staying the same, the lower the rate of growth in sales or assets, the greater will be the need for external financing.
False Reason: All other things staying the same, the higher the rate of growth in sales or assets, the greater will be the need for external financing.
True or false: The multi-period formula for future value using compounding is FV = (1 + r)t.
False Reason: FV = PV × (1 + r)t
It is sometimes argued that, left to themselves, managers tend to minimize the amount of resources over which they have control. True or false?
False, they maximize
The present value of a series of _____________ cash flows is the amount you would need today to exactly duplicate those future cash flows.
Future
Which of the following are considered stakeholders in a company?
Government Employees Suppliers customers
What are the two factors that impact whether managers will act in the best interest of stockholders?
How closely management goals align with stockholder goals and the way managers are compensated
The use of financial leverage can: - Decrease the noncash expenses incurred by the firm. - Increase the chance of financial distress and business failure. - Greatly magnify both gains and losses. - Increase the potential reward for investors.
Increase the chance of financial distress and business failure. Greatly magnify both gains and losses. Increase the potential reward for investors.
Which of the following are uses of cash? (Check all that apply.) Increases in property, plant and equipment Decreases in accounts payable Increases in inventory Decreases in property, plant and equipment Decreases in accounts receivable
Increases in property, plant and equipment Decreases in accounts payable Increases in inventory
Which of the following are annuities? Multiple select question. Tips to a waiter Monthly grocery bill Installment loan payments Monthly rent payments in a lease
Installment loan payments Monthly rent payments in a lease
Which of the following payment methods amortizes a loan?
Interest plus fixed amount Fixed payments that result in a zero loan balance
Which of the following is true about the sustainable growth rate?
It is the maximum rate of growth a firm can maintain without increasing its financial leverage
______ refers to the speed and ease with which an asset can be converted to cash.
Liquidity
Which of the following can be used to encourage managers to act in the best interests of shareholders?
Managerial compensation tied to performance Better prospects of promotion
How is the price-earnings (PE) ratio computed?
Market price per share/Earnings per share
Which of the following are real-world examples of annuities?
Mortgages Pensions
Which of the following is a variable cost in the short run?
Raw materials used in production.
If $100 earns compound interest for 2 years at 10 percent per year, the future value will be ____.
Reason: FV = $100 × 1.10 2 = $121 121
The aim of the act known as Blank______ is to protect investors from corporate abuse. Multiple choice question.
SOX
In addition to the importance of finance for marketing, accounting, and management careers, finance is also now considered a ______ discipline, especially at the graduate level. - PLANT - STEM - GRET - MeGa
STEM
Which of the following can be determined using the future value approach to compound growth developed in this chapter?
Sales growth Dividend growth
Which of the following can be determined using the future value approach to compound growth developed in this chapter? Multiple select question.
Sales growth Dividend growth
________ financial statements provide for comparison of firms that differ in currency type. Multiple choice question.
Standardized
________ financial statements provide for comparison of firms that differ in size.
Standardized
Which of the following, according to the textbook, are possible financial goals for a company?
Survival Maximize profits Minimize costs
True or false: Given the same rate of interest, more money can be earned with compound interest than with simple interest.
T
True or false: In one way or another, the basic problem with financial statement analysis is that there is no underlying theory to help us identify which quantities to look at and to use in establishing benchmarks.
T
what does a balance sheet help with
The balance sheet is a snapshot of what the firm owes and what it owns. A = L + OE
Which of the following is true about a growing annuity?
The cash flows grow at a constant rate. The cash flows grow for a finite period.
what does a income statement help with
The income statement reports the firm's accrual-based accounting revenues and expenses. R - E = Net income
Which is true of taxes? They are not mandatory for most small firms due to low earnings. They are typically a very small expenditure for the firm. Firms can select to pay them in advance or in arrears, with no penalties or benefits. They can be one of the largest cash outflows a firm experiences.
They can be one of the largest cash outflows a firm experiences.
Which one of the following is one way in which financial managers use a common-size balance sheet?
To track changes in a firm's capital structure
Why is a dollar received today worth more than a dollar received in the future?
Today's dollar can be reinvested, yielding a greater amount in the future.
How is the average income tax rate computed? Multiple choice question.
Total tax bill/Total taxable income
______ costs change as the output of the firm changes.
Variable
The present value interest factor for an annuity with an interest rate of 8 percent per year over 20 years is ____.
[1 − (1/1.0820)]/.08
The formula for the annuity present value factor for a 30-year annuity with an interest rate of 10 percent per year is ______.
[1 − (1/1.1030)]/.10]
Assets can be described as items that _____. - provide market value to the firm - are always the same amount as a firm's liabilities - a firm owns - generate revenue
a firm owns generate revenue provide market value to the firm
A benefit corporation is for profit, and has the legal attributes of accountability, _____, and purpose. Multiple choice question.
accountability = refers to the fact that a benefit corporation must consider how an action will affect shareholders, employees, customers, the community, and the environment Transparency = corporate reports, a benefit corporation must provide an annual report detailing how the company pursued a public benefit Purpose = the idea that a benefit corporation must provide a public benefit, either to society as a whole or the env
Because we are almost always unable to obtain all of the market information we want, we rely on________ numbers for much of our financial information.
accounting
Net income refers to money earned ______.
after interest and taxes
The relationship between stockholders and management can best be described as a(n) ______ relationship.
agency
If you hire a real estate company to sell your house, you are most apt to encounter which one of the following? - Securities Exchange Act of 1934 violation - Securities Act of 1933 violation - Capital structure problem - Agency problem
agency problem
_________ is the process of paying off loans by regularly reducing the principal.
amortizing
The future value factor for a(n)___________ is found by taking the future value factor and subtracting one, then dividing this number by the interest rate.
annuity
The ROE equals the net profit margin multiplied by the total ___________ turnover multiplied by the equity multiplier.
asset
One advantage to well-executed financial planning is that the firm can _____.
avoid surprises
A useful way of standardizing financial statements is to choose a ____ and then express each item relative to the _____.
base year; base amount
The alternative sustainable growth rate formula, growth equals ROE times b, is correct only when total equity is taken from the _____.
beginning of period balance sheet
______ budgeting is the process of making and managing expenditures on long-term assets.
capital
The cash flow identity reflects the fact that: Multiple select question. cash is either used to produce the product or service, pay creditors or pay out to the owners of the firm. operating cash flow is the same as operating income. a firm generates cash through its various activities. cash flow from the firm's assets equals the total of cash flow to creditors and cash flow to stockholders.
cash is either used to produce the product or service, pay creditors or pay out to the owners of the firm. a firm generates cash through its various activities. cash flow from the firm's assets equals the total of cash flow to creditors and cash flow to stockholders.
When combining common-size and common-base year analysis, the effect of overall growth in assets can be eliminated by first forming the:
common-size statements
The idea behind ______ is that interest is earned on interest.
compounding
The process of leaving your money and any accumulated interest in an investment for more than one period, thereby reinvesting the interest, is called
compounding
It is argued that, left to themselves, managers would tend to maximize the amount of resources over which they have control or, more generally, ______ power or wealth.
corporate
Joint stock company is another name for what is referred to as a ____________ in the United States.
corporation or corporations
The current ratio shows the relationship between ____.
current assets and current liabilities
Some of the cash flow generated by a firm goes back to the financial markets in the form of ______.
dividends and debt payments
Cash flow to stockholders equals:
dividends paid minus net new equity raised.
A common-base year financial statement presents items relative to a certain base, which is the _____.
dollar amount of each item during a common base year
An annuity ____________ is an annuity for which the cash flows occur at the beginning of each period.
due
A commonly cited reason for financial failure is a lack of _____.
effective long-range planning
In almost all multiple cash flow calculations, it is implicitly assumed that the cash flows occur at the _____ of each period.
end
In the standard present and future value tables, and in all the default settings on a financial calculator, the assumption is that cash flows occur at the ___________________ (beginning/end) of each period.
end
In financial markets, debt and _____ , securities are bought and sold.
equity
True or False: There is only one method for preparing the statement of cash flows.
false
A lack of effective long-range planning is commonly cited as a reason for _____.
financial distress
Costs that do not change in the short run arise because of ______. Multiple choice question.
fixed commitments
Pro __________statements are one of the key elements of financial planning.
forma
The inventory turnover ratios for Proctor and Gamble over the past three years are 5.09, 5.72, and 5.92 times, respectively. Explaining the upward trend in the inventory turnover ratio requires:
further investigation
A financial plan looks at what needs to be done in the _____.
future
____________ value is the cash value of an investment at some time in the _______________
future
Given an internal growth rate of 3 percent, a firm can: Multiple choice question.
grow by 3 percent or less without any additional external financing.
Given the same APR, more frequent compounding results in _____.
higher EARs
On the fin statement, assets are listed at their _____ value.
historical value both market and book
It is typically assumed that total assets (increase/decrease) with increased sales because additional working capital and fixed assets are needed to support growth.
increase
A(n) Blank______ in net profit margin will increase ROE.
increase reason ROE = net profit margin X total asset turnover X equity multiplier. An increase in net profit margin will increase ROE.
The ___________ growth rate tells us the maximum growth rate that can be achieved with no external financing of any kind.
internal
Growth, by itself, (is/isn't) a good financial goal.
isn't
A single cash flow is also known as a:
lump sum
Since ownership in a corporation can be dispersed over a huge number of stockholders, it can be argued that ______ effectively controls the firm.
management
In a shareholder-manager relationship, who is the agent?
manager
The price-earnings (PE) ratio is a ______ ratio.
market value
The price-earnings (PE) ratio is a ______ ratio. Multiple choice question.
market value
The ___________ principle of GAAP states that costs associated with a good or service should be recorded at the same time as the revenue from selling that good or service. Multiple choice question.
matching
Cash flow to stockholders is dividends paid _________(minus/plus) net new equity raised.
minus
Net working capital equals current assets ______ current liabilities.
minus
Given a firm requires external financing, the firm has multiple options including short- and long-term borrowing, and _____.
new equity
Given a firm requires external financing, the firm has multiple options including short- and long-term borrowing, and _____. Multiple choice question.
new equity
A sole proprietorship is a business owned by ______ person(s).
one
One method of calculating future values for multiple cash flows is to compound the accumulated balance forward _____ at a time.
one year
Cash generated from a firm's normal business activities is called _____. - cash flow to creditors - cash flow from assets - operating cash flow
operating cash flow
The loan __________ amorition , Incorrect Unavailable_ amortization loans declines so slowly because the payments are mostly interest.
partial
A business without separate legal authority formed by two or more people is known as a _____.
partnership
If you want to know how much you need to invest today at 12 percent compounded annually in order to have $4,000 in five years, you will need to find a(n) _______ value.
present
The formula for the ______ value interest factor of an annuity is {1-[1/(1+r)t]r}/r
present
The profit margin is equal to net income divided by ______.
profit margin = net income / sales
The percentage of _______________ approach is a financial planning method in which accounts are varied depending on a firm's predicted sales level.
sales
The percentage of sales approach separates accounts on the pro forma income statement and balance sheet into those that change directly with ____ and those that do not.
sales
Interest paid twice a year is known as ______ compounding. Multiple choice question.
semiannual
An effective annual rate of 7.12 percent is equal to 7 percent compounded ______.
semiannually For semiannual compounding, EAR = (1 + 0.07/2)2 - 1 = 7.12%
The difference between _______ interest and compound interest is that the amount of compound interest earned gets (bigger or smaller) ___________ every year.
simple; bigger
Common-size statements are used for comparing firms with differing ____.
sizes
The short run for a firm is the period of time during which ______.
some costs are fixed Reason: In the short run, some costs are fixed and some are variable. In the long run, all costs are variable
At the most fundamental level, firms generate cash and:
spend it
A ______ is someone other than an owner or a creditor who potentially has a claim of the cash flows of a firm. - shareholder - mortgage holder - bondholder - stakeholder
stakeholder
The alternative sustainable growth rate formula, where growth is equal to ROE times b, should only be applied when using total equity from the ______________ (end/beginning) of period balance sheet.
start
An official accounting statement that helps to explain the change in cash and cash equivalents is called the _____.
statement of cash flows
Financial statements are frequently a key source of information for financial decisions. True false question. True/False
t
How is the average income tax rate computed?
tax bill (divided) by your taxable income
The formula for the present value interest factor for annuities is: Annuity present value factor = {1-[1/(1+r)t]}/ r
true
The inventory is ____________calculated as the COGS divided by the inventory.
turnover
A partnership must have at least _______ owners.
two
Suppose present value is $100, future value is $1,000, and N is 10 years. Which formula below is used to find the (decimal) interest rate? Multiple choice question.
r = (1000/100)(1/10) - 1
The discount rate is also called the rate of
return
On which side of the balance sheet do liabilities appear?
right
Interest earned on the original principal amount invested is called _____.
simple interest
Interest earned only on the original principal amount invested is called
simple interest
The financial manager acts in the shareholders' best interests by making decisions that increase the value of _____.
stock
The goal of the for-profit business is to maximize _________ equity.
stockholders
How is the marginal tax rate computed?
the rate of the tax you would pay
Because of __________ and _________, interest rates are often quoted in many different ways. Multiple choice question.
tradition; legislation
Most importantly, assets provide ______ to the firm.
value
In the long run, all costs are _____.
variable
Another name for short-term financial management is ___ management.
working capital
The _________ identity can help to explain why two firms with the same return on equity may not be operating in the same way.
DuPont
Which of the following is the correct representation of the total debt ratio? Multiple choice question.
(Total assets - Total equity)/(Total assets)
Which three of the following are most apt to create problems when comparing financial statements for multiple firms? - Differing accounting methods - Seasonality - Differing levels of cash - Differing fiscal years
- Differing accounting methods - Seasonality - Differing fiscal years
Which of the following are traditional financial ratio categories? Multiple select question. Asset management ratios Real options ratios Market value ratios Profitability ratios
Asset management ratios Market value ratios Profitability ratios
Which of the following are often left out of most financial planning models?
Cash flow size, risk, and timing
Which one of the following is true? Multiple choice question. Financial statements explicitly show costing and pricing of individual products Earnings, net income, and cash flows are identical. Cash flows always exceed earnings. Cash flows can be derived from financial statements.
Cash flows can be derived from financial statements.
The statement of cash flows summarizes the sources and uses of cash, though which of the following is true of the statement?
There are different methods of preparing it.
A corporation is a distinct ______ entity and as such can have a name and take advantage of the legal powers of natural persons.
legal
A dollar received one year from today has _____ value than a dollar received today.
less
The five main areas of finance are
- corp fin - investment (assets like stocks and bonds) - fin institution (banks or insurance) - international fin - fintech
A ______ is someone other than an owner or a creditor who potentially has a claim of the cash flows of a firm.
- employees - customers - supplier - govt
Which of the following companies were involved in corporate scandals that led to Sarbanes-Oxley? - eron - worldcom - tyco - disney
- enron - worldcom - tyco
Corporations in other countries are often called: - autonomous entities - public limited companies - re-calibrated partnerships - Joint stock companies
- public limited companies - Joint stock companies
The passage of the Tax Cuts and Jobs Act of 2017 was to make the federal corporate tax rate in the United States a _____ tax.
flat
The _______ growth rate is the maximum rate of growth a firm can maintain without increasing its financial leverage.
sustainable
