Business Chapter 9

Earnings per share (EPS) is calculated by: a. dividing net income of a firm minus preferred dividends by the average number of shares of common stock outstanding. b. dividing the number of shares outstanding by the value of owner's equity. c. dividing the number of shares outstanding by net income of a firm. d. multiplying the net income of a firm by the preferred dividends and dividing it by the total capital invested by the owners.

a dividing net income of a firm minus preferred didvidends by the average number of shares of common stock outstanding

A _____ is a projection showing how a firm's budgeted sales and costs will affect expected net earnings. a. budgeted balance sheet b. budgeted income statement c. stretch budget d. liability statement

budgeted imcome statement

_____ is the process a firm uses to evaluate long-term investment proposals. a. Black marketing b. Capital budgeting c. Concessional financing d. Inventory benchmarking

capital budgeting

_____ is the mix of equity and debt financing a firm uses to meet its permanent financing needs. a. An offer curve b. Capital structure c. An index swap d. Marketing structure

capital structure

A(n) _____ is a restriction lenders impose on borrowers as a condition of providing long-term debt financing. a. fixture b. consol c. covenant d. equity

covenant

The purpose of _____ is to protect creditors by preventing the borrower from pursuing policies that might undermine its ability to repay the loan. a. cross subsidies b. covenants c. easements d. letter stocks

covenants

The _____ is computed by dividing a firm's total liabilities by its total assets. a. inventory turnover ratio b. debt ratio c. current ratio d. inventory turnover ratio

debt ratio

_____ refers to funds provided by the owners of a company. a. Peer-to-peer lending b. Equity financing c. Debt financing d. Trade crediting

equity financing

A(n) _____ is a company that provides short-term financing to firms by purchasing their accounts receivables at a discount. a. cascade b. subsidiary c. oligopoly d. factor

factor

The legal and ethical obligation of financial managers to make decisions consistent with the financial interests of their firm's owners is called their _____. a. implied duty b. fiduciary duty c. statutory duty d. directed duty

fiduciary duty

_____ is the functional area of business that is responsible for finding the best sources of funds and the best ways to use them. a. Production b. Marketing c. Finance d. Operation

finance

The _____ is computed by dividing a firm's cost of goods sold by average inventory levels. a. tradable good quantity b. average collection period c. inventory turnover ratio d. debt-to-assets ratio

inventory turnover ratio

A _____ is a financial arrangement in which a bank agrees to provide a firm with funds up to some specified limit, as long as the borrower's financial situation does not deteriorate, and the bank has sufficient funds. a. line of credit b. corporate bond c. term loan d. covenant

line of credit

In the context of basic financial planning tools, the budgeted income statement and budgeted balance sheet are referred to as _____. a. equity financial statements b. pro forma financial statements c. expenditure financial statements d. cash flow financial statements

pro forma financial statements

_____ provide a framework for analyzing the impact of a firm's plans on the financing needs of the company. a. Equity financial statements b. Income financial statements c. Pro forma financial statements d. Cash flow financial statements

pro forma finanical statements

When a firm negotiates a loan with a bank, it signs a(n) _____, which specifies the length of the loan, the rate of interest the firm must pay, and other terms and conditions of the loan. a. covenant b. accrual bond c. promissory note d. treasury bill

promissory note

____ are the part of a firm's net income it reinvests. a. Retained earnings b. Net liabilities c. Counter credits d. Cash dividends

retained earnings

_____ is calculated by dividing net income (profit) by owners' equity. a. The debt to equity ratio b. Return-on-equity c. Earnings per share d. The profit margin ratio

return on equity

Which of the following is a major issue that confronts financial managers as they seek to maximize the market price of stock? a. Social responsibility b. Trade credit c. Debt financing d. Cash management

social responsibility

_____ is one of the most important sources of short-term financing for many firms and arises when suppliers ship materials, parts, or goods to a firm without requiring payment at the time of delivery. a. A balanced scorecard b. Trade credit c. Working capital d. A corporate bond

trade credit

_____ are short-term IOUs issued by the U.S. government that typically mature in 4, 13, or 26 weeks. a. Covenants b. Trade credits c. Treasury bills d. Debentures

treasury bills