FIN 351 CH 1, 2 & 3 exam

Which one of the following statements related to the cash flow to creditors must be correct?

A positive cash flow to creditors represents a net cash outflow from the firm.

Which one of the following accounts is the most liquid?

Accounts Receivable

Which form of business would be the best choice if it were necessary to raise large amounts of capital?

Corporation

On the statement of cash flows, which one of the following is considered a financing activity?

Dividends paid

Which one of the following describes a noncash item?

Expenses that do not consume cash

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

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

How much debt should the firm incur to fund a project?

The DuPont identity can be used to help managers answer which of the following questions related to a company's operations? I. How many sales dollars are being generated per each dollar of assets? II. How many dollars of assets have been acquired per each dollar in shareholders' equity? III. How much net profit is being generated per dollar of sales? IV. Does the company have the ability to meet its debt obligations in a timely manner?

I, II, and III only

Which one of the following financial statements summarizes a firm's revenue and expenses during a period of time?

Income statement

Which one of the following is a source of cash for a tax-exempt firm?

Increase in common 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

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

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

Which one of the following statements concerning stock exchanges is correct?

Some large companies are listed on Nasdaq.

Shareholders can replace company management by implementing:

a proxy fight

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

average

The book value of a firm is:

based on historical transactions

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

cash flow from assets

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

decrease; operating

Mortgage lenders probably have the most interest in the ______ ratios.

long-term debt and times interest earned

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

market value per share of outstanding stock.

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

operating cash flow

As the degree of financial leverage increases, the:

probability a firm will encounter financial distress increases.

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

sales.

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

short-term solvency

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

uses of cash.

Dominic's Custom Draperies has a fixed asset turnover rate of 1.13 and a total asset turnover rate of .94. Its competitor, Window Fashions, has a fixed asset turnover rate of 1.26 and a total asset turnover rate of .91. Both companies have similar operations. Based on this information, Dominic's must be _____ than Window Fashions.

utilizing its total assets more efficiently