Managerial Finance (Ch. 3)

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which of the following represent cash outflows from financing activities?

-payment of dividends -repurchase of stock -repayment of debt

corporations with income over $18.33 million pay a corporate tax rate of

21%

Which of the following financial statements are public companies required to file with the SEC each quarter?

Balance sheet, income statement, statement of cash flows

Which of the following explain why a firm's cash flows differ from the net income?

The income statement does not recognize capital expenditures as expenses in the year purchased -The income statements spreads capital expenditure expenses over time - the income statement uses the accrual accounting method

True or false: In order to calculate cash produced by the business it is necessary to add back the depreciation charge.

True

Financial managers must track _______ inflows and outflows in order to pay interest to banks and dividends to shareholders.

cash

the purpose of depreciation is to allocate the original ______ of the asset over its life

cost

the largest single expense of a merchandising firm is called

cost of goods sold

Market values of assets and liabilities measure _______ value. Book values are based on ________ value.

current, original

corporations can deduct their expense to reduce taxable income, but they cannot deduct

dividends to shareholders

The rules governing the depreciation of asset values _____ reflect actual loss of market value.

do not

market values of assets and liabilities generally

do not equal their book values

cash generated for investors after the firm pays for new capital investments is known as

free cash flow

When a company pays more for an acquired business than what it is worth the difference is shown in an account entitled _____

goodwill

Shows how profitable a firm has been over the course of the past year

income statement

represents a cash inflow from financing activities?

issuing stock

Sources of funds raised by the company are known as

liabilities

Debt that needs to be repaid after one year is known as

long-term liabilities

the tax rate that an individual pays on each extra dollar of income known as the

marginal tax rate

Price at which shareholders can sell their shares is known as the ____ value

market

managers who wish to keep their shareholders happy will focus on

market value (current value)

Liabilities represent

money owed by the company

The operating activities section of the statement of cash flows begins with

net income

Current assets- current liabilites=

net working capital

Free cash flow is available for which of the following uses?

payment of debt, payment of dividends , payment of interest to investors

earnings that a firm keeps and reinvests are referred to as

retained earnings

The book value of _____ is generally close to the market value.

short-term liabilities

the financial statement that shows the firm's cash inflows and outflows from operations as well as from its investments and financing activities is called the:

statement of cash flows

The right-hand portion of a company balance sheet shows

where the money to buy assets came from

The net value or book value of an asset is determined by subtracting the ____ from the assets gross value.

accumulated depreciation

in the operating activities of the statement of cash flows, net income is adjusted for depreciation by

adding depreciation

The financing activities of the statement of cash flows is presented

after investing activities

Financial statements called 10Ks that are provided _____ contain more detailed information about the outcome of the company for the entire year.

annually

a personals total tax bill divided by their total income is known as

average tax rate

Fixed assets include

buildings, equipment, vehicles


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