FIN 301 Exam 1

EBIT stands for earnings before interest and taxes, and it is often called "operating income"

true

according to the finance theory, a business firm should attempt to maximize the long-term price of the firm's common stock

true

an increase in the quick ration over time usually means that the company's liquidity position is improving and that the company is managing its short-term assets well

true

if a company has a profit margin of 10%, it means that the company earned a net income of .10 for each dollar of sales

true

if a company's current liabilities are increasing faster than its current assets, the company's liquidity positioning is weakening

true

if a company's operating margin increases but its profit margin decreases, it could mean that the company paid more in interest or taxes

true

a stock trading at a price below its intrinsic value is considered to be

undervalued

an increase in the current ratio over time always means that the company's liquidity positioning is improving

false

an increase in the return on assets ratio implies an increase in the assets a firm owns

false

if a company issues new common shares but its net income does not increase, return on common equity will increase

false

firms that have a lot of debt are said to have a great deal of

financial leverage

refers to the stocks true value based on expected future cash flows and the risks involved

fundamental value

asset class that is generally considered to be the least liquid

inventories

radform is a small company that manufactures automobile bearings. managers at the company must make decisions on the kind and the const of equipment to buy.

corporate finance