Finance 3001 Midterm Ch.1,2,3

Which one of the following represents the most liquid asset?

$500 worth of inventory that is sold today for $500 in cash

Equity=

=C/S+R/E

CF to SH

=Dividends-NNE

CFFA (cash flow from assets)

=OCF-NCS-NWC

CF to DH

=intrest-NND

Capital Structure

A firms mixture of debt & equity financing

Which one of the following accounts is the most liquid?

Accounts Receivable

Which one of the following is a source of cash?

Acquisition of debt

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

An increase in the market value per share.

Most liquid assets (from most liquid to least liquid)

Cash, A/R, Inventory

Operating Activities

Changes in most current accounts

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

Competitors

On the statement of cash flows, which one of the following is considered an operating activity?

Decrease in accounts payable

Which one of the following is a use of cash?

Decrease in accounts payable

Which one of the following is a source of cash?

Decrease in inventory

The relationship between the return on assets and the return on equity is identified by the:

DuPont identity.

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

Equity multiplier, net profit margin, and total asset turnover

General partnership

Firm owned by 2 or more people who share unlimited liabilities for firm debt.

NWC (new working capital)

How finance day to day operations

Which one of the following is classified as a current asset?

Inventory

Primary goals of Financial managers

Maximize the happiness of the shareholders

CF (cash flow)

Occurs when firm "buys" something

Which of the following actions would be most likely to decrease agency costs for the firm?

Reward high performing employees with shares of stock.

Which one of the following is a primary market transaction?

Sale of a new share of stock from a corporation to an individual investor

Hierarchy of a corporation

Shareholders, Board of directors, executives

Which one of the following questions involves a capital budgeting decision?

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

Balance sheet gives info on

Snapshot of a company's current financial position

The coding system established by the U.S. government to classify companies by the nature of their business operations is known as the:

Standard Industrial Classification codes.

Which one of the following statements concerning corporate income taxes is correct?

The federal income tax is applied at a flat rate across all levels of taxable income.

Limited partners benefit from which of the primary advantages?

Their maximum loss cannot exceed the amount of their capital investment.

Income statement

Video of firm's operations for a specified period.

Deciding which long-term investment a firm should make is a ______ decision.

capital budgeting

A firm's mixture of debt and equity financing is the result of its ______ decisions.

capital structure

The cash flow that is available for distribution to a corporation's creditors and stockholders is called the:

cash flow from assets.

The cash flow related to interest payments less any net new borrowing is called the:

cash flow to creditors.

Agency problems are most likely to be associated with:

corporations.

According to the statement of cash flows, an increase in interest expense will ______ the cash flow from ______ activities.

decrease; operating

According to the statement of cash flows, an increase in inventory will ______ the cash flow from ______ activities.

decrease; operating

Cash flow to stockholders is defined as:

dividend payments less net new equity raised.

Relationships determined from a company's financial information and used for comparison purposes are known as:

financial ratios.

A firm owned by two or more people who each have unlimited liability for all of the firm's debts is called a:

general partnership.

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

interest to a lender.

Net capital spending:

is equal to zero if the decrease in the net fixed assets is equal to the depreciation expense.

A general partner is responsible for:

is personally responsible for 100 percent of the debts of the partnership.

When developing a common-size balance sheet to evaluate last year's performance, all accounts are expressed as a percentage of:

last year's total assets.

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

market value per share of outstanding stock.

Eduardo sold 500 shares of Northcutt Corporation stock on the New York Stock Exchange. This transaction:

occurred in the secondary market.

The cash flow that results from a company's ongoing, normal business activities is called:

operating cash flow.

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

profitability

Shareholders' equity:

represents the residual value of a firm.

A sole proprietorship:

requires the owner to be personally responsible for all of the company's debts.

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

sales

Ultimately, the ______ control(s) the corporation.

shareholders

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

short-term solvency

A firm owned by a single person who has unlimited liability for the firm's debt is called a:

sole partnership

In a typical corporate organizational structure:

the controller reports to the chief financial officer.

Activities of a firm that require the spending of cash are known as:

uses of cash.

Limited partnership is responsible for:

A partner that the financial loss he or she will experience is the amount he or she will in invest in a firm.

Which one of the following statements regarding corporations is correct?

Corporations can have an unlimited life.

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

Current ratio

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

Distributed profits may experience double taxation.

A partner in a firm knows that the maximum financial loss he or she will experience is the amount he or she invested in the firm. The partner is called a ______ partner.

Limited

Investment Activities

Lookin for changes in FA

Total income taxes divided by total taxable income equals the ______ tax rate.

average