BCOR 340 Quiz 1

Uptown Markets is financed with 45 percent debt and 55 percent equity. This mixture of debt and equity is referred to as the firm's:

Capital structure

Which one of the following has nearly the same meaning as free cash flow?

Cash flow from assets

Which one of the following actions will increase the current ratio, all else constant? Assume the current ratio is greater than 1.0.

Cash payment of an account payable

Donovan's would like to increase its internal rate of growth. Decreasing which one of the following will help the firm achieve its goal?

Dividend payout ratio

All else held constant, which one of the following will decrease if a firm increases its net income?

Price-earnings ratio

Cash flow to stockholders is defined as:

dividends paid minus net new equity raised

The accounting statement that measures the revenues, expenses, and net income of a firm over a period of time is called the:

income statement.

Cash flow to creditors is defined as:

interest paid minus net new borrowing.

A firm's liquidity level decreases when:

inventory is purchased with cash.

The market value of a firm's fixed assets:

is equal to the estimated current cash value of those assets

The cash ratio is used to evaluate the:

length of time that a firm can pay its bills if no additional cash becomes available.

The tax rate that determines the amount of tax that will be due on the next dollar of taxable income earned is called the:

marginal tax rate

The primary goal of financial management is most associated with increasing the:

market value of the firm.

Shareholders' equity is equal to:

net fixed assets minus long-term debt plus net working capital.

The market value:

of an asset tends to provide a better guide to the actual worth of that asset than does the book value

The equity multiplier is equal to:

one plus the debt-equity ratio.

Cash flow from assets is defined as:

operating cash flow minus the change in net working capital minus net capital spending

Financial statement analysis:

provides useful information that can serve as a basis for forecasting future performance.

Shareholders' equity is best defined as:

the residual value of a firm.

Net working capital includes:

an invoice from a supplier.

The financial statement that summarizes a firm's accounting value as of a particular date is called the:

balance sheet

Kessler Cleaners has accounts receivable of $28,943, total assets of $387,600, cost of goods sold of $317,400, and a capital intensity ratio of .97. What is the accounts receivable turnover rate?

13.81

Computer Geeks has sales of $618,900, a profit margin of 13.2 percent, a total asset turnover rate of 1.54, and an equity multiplier of 1.06. What is the return on equity?

21.55%

Fried Donuts has sales of $764,900, total assets of $687,300, total equity of $401,300, net income of $68,200, and dividends paid of $27,000. What is the internal growth rate?

6.38%

KBJ has total assets of $613,000. There are 21,000 shares of stock outstanding with a market value of $13 a share. The firm has a profit margin of 6.2 percent and a total asset turnover of 1.08. What is the price-earnings ratio?

6.65

A firm has net income of $4,238 and interest expense of $898. The tax rate is 35 percent. What is the firm's times interest earned ratio?

8.26

Which one of the following best indicates a firm is utilizing its assets more efficiently than it has in the past?

A decrease in the capital intensity ratio

Corporate shareholders:

have the ability to change the corporation's bylaws

Motor Works has total assets of $919,200, long-term debt of $264,500, total equity of $466,900, net fixed assets of $682,800, and sales of $1,021,500. The profit margin is 6.2 percent. What is the current ratio?

1.26

Wiley's has total equity of $679,400, long-term debt of $316,900, net working capital of $31,600, and total assets of $1,123,900. What is the total debt ratio?

0.40

Which one of the following terms is defined as the total tax paid divided by the total taxable income?

Average tax rate

Which one of the following is an intangible fixed asset?

Copyright

Matt and Alicia created a firm that is a separate legal entity and will share ownership of that firm on a 75/25 basis. Which type of entity did they create if they have no personal liability for the firm's debts?

Corporation

Which one of these transactions will increase the liquidity of a firm?

Credit sale of inventory at cost

Which one of the following will increase the profit margin of a firm, all else held constant?

Decrease in the tax rate

An increase in which one of the following will increase operating cash flow for a profitable, tax-paying firm?

Depreciation

The DuPont identity can be accurately defined as:

Equity multiplier × Return on assets

A sole proprietorship:

Has its profits taxed as personal income

Which one of the following is a working capital decision?

How much cash should the firm keep in reserve?

Which one of the following changes during a year will increase cash flow from assets but not affect the operating cash flow?

Increase in accounts payable

Which one of the following is the maximum growth rate that a firm can achieve without any additional external financing?

Internal growth rate

Which one of the following forms of business organization offers liability protection to some of its owners but not to all of its owners?

Limited partnership

Which one of the following is an advantage of being a limited partner?

Losses limited to capital invested

Which one of these is correct?

Net income is distributed either to dividends or retained earnings.

The sustainable growth rate is defined as the maximum rate at which a firm can grow given which of the following conditions?

No new external equity and a constant debt-equity ratio

Which one of the following decreases net income but does not affect the operating cash flow of a firm that owes no taxes for the current year?

Noncash item

Capital budgeting includes the evaluation of which of the following?

Size, timing, and risk of future cash flows

Margie opened a used bookstore and is both the 100 percent owner and the store's manager. Which type of business entity does Margie own if she is personally liable for all the store's debts?

Sole proprietorship

Which one of the following correctly defines a common chain of command within a corporation?

The controller reports directly to the chief financial officer.

The daily financial operations of a firm are primarily controlled by managing the:

Working capital

Theo's BBQ has $48,000 in current assets and $39,000 in current liabilities. Decisions related to these accounts are referred to as:

Working capital management

The shareholders of Weil's Markets would benefit if the firm were to be acquired by Better Foods. However, Weil's board of directors rejects the acquisition offer. This is an example of:

an agency conflict

Net working capital is defined as:

current assets minus current liabilities.

Over the past year, a firm decreased its current assets and increased its current liabilities. As a result, the firm's net working capital:

had to decrease.

The ratios that are based on financial statement values and used for comparison purposes are called:

financial ratios

A negative cash flow to stockholders indicates a firm:

received more from selling stock than it paid out to shareholders.

The recognition principle states that:

sales should be recorded when the earnings process is virtually completed and the value of the sale can be determined.

Operating cash flow is defined as:

the cash that a firm generates from its normal business activities.

An agency issue is most apt to develop when:

the control of a firm is separated from the firm's ownership

The matching principle states that:

the costs of producing an item should be recorded when the sale of that item is recorded as revenue