chapter 2 finance
Shareholders' equity represents:
a residual claim against the firm's total assets.
What is depreciation?
a systematic expensing of an asset based on the asset's estimated life.
Assets can be categorized as:
Tangible and intangible assets. Current and fixed assets.
The cash flow that results from the firm's day-to-day activities of producing and selling is called:
The cash flow that results from the firm's day-to-day activities of producing and selling is called: Operating cash flow
Financial leverage refers to a firm's:
Use of debt in its capital structure.
Net capital spending is negative when Blank______
a firm sold off more assets than it purchased.
Which of the following is a current asset? Multiple choice question. accounts payable accrued expense. equipment inventory
inventory
Net working capital will be negative when current assets Blank______ current liabilities.
less than
The Blank______ tax rate is the tax rate paid on the next dollar of income.
marginal
The price at which willing buyers and sellers would trade is called Blank______ value.
market
Costs incurred during a particular time period that might be reported as selling, general, and administrative expenses are also known as Blank______.
period costs.
Physical assets are termed:
tangible assets
True or false: For financial analysis, financial statements and accounting numbers are more important than cash flows.
False.
On a balance sheet, total assets must always equal total liabilities plus:
Shareholders' equity.
Liquidity has two dimensions, which are the ability to:
quickly convert assets into cash without significant loss in value.
Shareholders' equity equals Blank______.
total assets minus total liabilities
The last item (or "bottom line") on the income statement is typically the:
Net Income
In practice, accountants tend to classify costs as either:
Product; period costs
A balance sheet reflects a firm's:
accounting value on a specific date.
Liquidity refers to the ease of changing:
assets to cash.
A company's Blank______ tax rate is its tax bill divided by its total taxable income, and its Blank______ tax rate is the tax rate it pays on the next dollar of income.
average; marginal
The purpose of a(n) Blank______ is to measure performance over a set period of time.
income statement
Which of the following is not a component of cash flow from assets? Multiple choice question. capital spending operating cash flow financing expenses change in net working capital
financing expenses are not a component.
Current assets are defined as assets that can be turned into cash within:
12 months.
U.S. corporations pay tax at a rate of percent. (Enter number only.)
21%
Depreciation is the accountant's estimate of the cost of:
Equipment Fixed assets
Which of the following are classified as liabilities on a firm's balance sheet?
Accounts payable Long-term debt
Net income refers to income earned:
After interest and taxes.
Noncash items do not affect:
Cash flow.
Which of the following are components of cash flow from assets?
Change in net working capital Capital spending Operating cash flow
The more debt a firm has, the greater its:
Degree of financial leverage.