BA 318 #1

The primary goal of financial management is to maximize which one of the following for a corporation? A. Current profits B. Market share C. Number of shares outstanding D. Market value of existing stock E. Revenue growth

D

Which of the following best describes free cash flow from an asset perspective? Answer earnings before interest and taxes Cash flows generated from accruals and accounts payable The after-tax cash flows generated from operations less the firm's investments in operating working capital, fixed and other assets Cash available to common stockholders that have no cost to the firm

The after-tax cash flows generated from operations less the firm's investments in operating working capital, fixed and other assets

What information does a firm's income statement provide to the viewing public? Answer an itemization of all of a firm's assets and liabilities for a defined period of time a complete listing of all of a firm's cash receipts and cash expenditures for a defined period of time a report of revenues and expenses for a defined period of time a report of investments made and their cost for a specific period of time

a report of revenues and expenses for a defined period of time

The firm obtains cash from which of the following? Answer from operations from the sale of assets through borrowing all of these

all of these

Which of the following are characteristics of a limited partnership? Limited partners may not participate in the management of the limited partnership. There must be one or more general partners. General partners have unlimited liability. all of these

all of these

The two principal sources of financing for corporation are: Answer debt and accounts payable. debt and equity. common equity and preferred equity. cash and common equity.

debt and equity

Which of the following are tax deductible items to a corporation? interest expenses dividends to common stockholders dividends to preferred stockholders interest expenses and dividends to preferred stockholders interest expenses, dividends to common stockholders, and dividends to preferred stockholders

interest expenses

Maximization of shareholder wealth as a goal is superior to profit maximization because: it considers the time value of the money. following the goal of shareholder wealth maximization will ensure high stock prices. it considers uncertainty. it considers the time value of the money and it considers uncertainty.

it considers the time value of the money and it considers uncertainty.

The goal of the firm should be: maximization of profits (net income per share). maximization of shareholder wealth. maximization of market share. maximization of sales.

maximization of shareholder wealth.

ll risk is not equal because: some can be diversified away and some cannot. some risk is free while some is not. some risk is too small to be considered. none of these.

some can be diversified away and some cannot.

What financial statement explains the changes that took place in the firm's cash balance over a period? statement of cash flow balance sheet income statement none of these

statement of cash flow

Which of the following statements best represents the "Agency Problem"? Managers might attempt to benefit themselves in terms of salary and perquisites at the expense of shareholders. The agency problem results from the separation of management and the ownership of the firm. The agency problem may interfere with the implementation of maximizing shareholder wealth. all of these

all of these

3. Lester's BBQ has $121,000 in current assets and $109,000 in current liabilities. These values as referred to as the firm's: A. capital structure. B. cash equivalents. C. working capital. D. net assets. E. fixed accounts.

c

4. Working capital management includes which one of the following? A. Deciding which new projects to accept B. Deciding whether to purchase a new machine or fix a current machine C. Determining which customers will be granted credit D. Determining how many new shares of stock should be issued E. Establishing the target debt-equity ratio

c

Which one of the following forms of business organization offers liability protection to some of its owners but not to all of its owners? A. Sole proprietorship B. General partnership C. Limited partnership D. Limited liability company E. Corporation

c

In order to reduce agency problems, managers may be provided compensation that includes: a fixed salary so managers' pay is not at risk, allowing managers to focus on the company's business. a bonus based on the level of profit achieved during the year. an option to buy the company's stock. Incentive pay for achieving higher sales than last year.

an option to buy the company's stock.

Net working capital is equal to: Answer total assets minus total liabilities. current assets minus total liabilities. total operating capital minus net income. current assets minus current liabilities.

current assets minus current liabilities.