Business Finance Mousalli Test 1

The ____ ratio may indicate poor collections procedures or a relaxed credit policy.

Average collection period

The ______ represents a summary statement of a firms financial position at a given point in time.

Balance sheet

An effective ethics program ___________ .

Can enhance a cooperations value.

managing a firms assets includes ___________ ?

Cash

A financial manager must choose between three alternative investments. Each asset is expected to provide earnings over a three- year period as described below. Based on the wealth maximization goal, the financial manager would__________. Year Asset 1 Asset 2 Asset 3 1 $21,000 $9,000 $15,000 2 $17,000 $15,000 $15,000 3 $7,000 $21,000 $15,000 --------- ----------- ---------- $45,000. $45,000 $45,000

Choose Asset 1 because the most is paid the first year

A crisis in the financial sector often spills over into other industries because when financial institutions _____________ borrowing, activity in most other industries ___________.

Contract; slows down

______ analysis involves the comparison of different firms financial ratios at the same point in time.

Cross-sectional

__________ ratio measures the proportion if total assets financed by the firms creditors.

Debt

Subprime mortgages are mortgage loans made to borrowers with high incomes and better than average credit histories.

False

Which of the following is excluded when calculating quick ratio?

Inventory

the two categories of ratios that should be utilized to assess a firms true liquidity are the _________.

Liquidity and activity ratios

Which of the following is true of mortgage-backed securities?

Mortgage-backed securities represent claims on the cash flows generated by a pool of homelands

A _____ ratio is commonly used to assess owners' appraisal of the share value.

Price/ earnings

_________ measures the return earned on the common stockholders' investment in firm.

Return on equity

The primary concern if creditors when assessing the strength of a firm is its ____________.

Short-term liquidity

In planning and managing the requirements of a firm, the financial manager is concerned with --------?

The mix and type of assets, the type of financing utilized, and analysis in order to monitor the financial condition.

An analyst should be careful when conducting ratio analysis to ensure that ________.

The overall performance of a firm is not judged on a single ratio.

An efficient market is one where ______________.

The price of a security is an unbiased estimate of its true value.

The money market is a market _____________.

Which brings together suppliers and demanders of short-term funds.

If managers are not owners of their company, then they are

a. bondholders b.dealers **C. AGENTS d. brokers

The stockholders annual report must include ________.

an income statement

the board of directors is typically responsible for __________.

approving strategic goals and plans

The 2002 Sarbanes-Oxley Act was designed to _____________.

eliminate the many disclosure and conflict-of-intrest problems of cooperations

The Sarbanes- Oxley Act of 2002 was passed in response to ______.

false disclosures in financial reporting

When home prices are falling, we would expect a(n) ___________.

higher mortgage default rates

which of the following is true of a partnership and a cooperation?

in a partnership, income taxed at the corporate level; whereas, in a corporation,income is taxed twice.

A(n)_______ provides a financial summary of a firm's operating results during a specified period.

income statement

A firm with a total asset turnover lower than industry standard may have________.

insufficient sale

The __________ measures the activity, or liquidity, of a firms stock of goods.

inventory turnover ratio

The _________ ratios are primarily used as measures of return.

profitability

The statement of cash flows _________.

provides insight into a firms operating, investment, and financing cash flows

The analyst should be careful when analyzing ratios that _________.

right interpretation of the ratio value is made.

The process of pooling mortgages or other types of loans and selling the claims or securities against that pool in the secondary market is called ______________.

securitization

The true owner(s) of the corporation is (are) the

stockholders

Economic theories that a financial manager must ensure for efficient business operations include _______.

supply and demand analysis

The primary risk of mortgage-backed securities is ___________.

that homeowners may not be able to or choose not to, repay their loans.

which of the following is the best measure to ensure that managment decisions are in the best intrest of the stockholders?

tie management compensation to the performance of the company's common stock price

Which of the following is used to analyze a firms financial performance over different years?

time-series analysis

The higher, the value of _______ ratio, the better able a firm is to fulfill its interest obligations.

times interest earned