FIN Ch. 2 Connect

If a firm's current assets are $100 and its current liabilities are $80, then its net working capital is: Multiple choice question. $20 $100 $80 $180

$20

If a firm's current assets equal $200 and its current liabilities equal $150, then its net working capital equals ______.

$50

On which side of the balance sheet do liabilities appear? Multiple choice question. The left side Neither side The right side

The right side

____refers to the speed and ease with which an asset can be converted to cash.

liquidity

Net working capital is (negative/positive) when current assets exceed current liabilities.

positive

On a balance sheet, total assets must always equal total liabilities plus ______. Multiple choice question. shareholders' equity retained earnings fixed assets net working capital

shareholders' equity

The last (residual) claimants to be paid by a firm are the ______. Multiple choice question. creditors stockholders bondholders employees

stockholders

Most importantly, assets provide ______ to the firm. Multiple choice question. expenses leverage value depreciation

value

Another name for short-term financial management is ___ management.

working capital

When a customer purchases an item on credit, the purchase amount is recorded by the seller in which one of these accounts? Multiple choice question. Accounts receivable Accounts payable Cash Accrued expense

Accounts receivable

Which of the following will be found in the liabilities section of a firm's balance sheet? Multiple select question. Preferred stock issued by the firm Long-term bonds issued by the firm Inventory Notes payable

Long-term bonds issued by the firm Notes payable

The shareholders are the _____ in line to receive payment when a firm is forced to sell assets to pay off debt. Multiple choice question. third last second first

last

Liquidity refers to the ease of changing _____. Multiple choice question. cash in to other assets assets to cash liabilities to assets cash to liabilities

assets to cash

What does stockholders' equity represent? Multiple choice question. A fixed claim against the firm's liabilities A claim against all of the firm's assets A residual claim against the firm's liabilities (The book value of the firm's assets less the book value of its current assets.) A residual claim against the book value of the firm's assets. (The book value of the firm's assets less the book value of its liabilities.)

A residual claim against the book value of the firm's assets. (The book value of the firm's assets less the book value of its liabilities.)

Which one of these is a correct version of the balance sheet equation? Multiple choice question. Liabilities = Assets + Stockholders' equity Stockholders' equity = Assets + Liabilities Assets = Stockholders' equity - Liabilities Assets = Liabilities + Stockholders' equity

Assets = Liabilities + Stockholders' equity

Which of the following is a current asset? Multiple choice question. Inventory Accrued expense Accounts payable Equipment

Inventory

Which of the following are classified as liabilities on a firm's balance sheet? Multiple select question. Notes payable Inventory Accounts payable Accounts receivable

Notes payable Accounts payable

Financial Statements are frequently a key source of information for financial decisions.

True

Long-term liabilities are not due in the current year (from the date of the balance sheet). True false question.

True

Assets can be described as items that _____. Multiple select question. a firm owns are always the same amount as a firm's liabilities generate revenue provide market value to the firm

a firm owns generate revenue provide market value to the firm

The difference between the total assets and total liabilities is shareholders' equity, also called________ equity or________ equity.

common, owners'

Which one of the following is true? Multiple choice question. Earnings, net income, and cash flows are identical. Cash flows can be derived from financial statements. Cash flows always exceed earnings. Financial statements explicitly show costing and pricing of individual products

Cash flows can be derived from financial statements.

Assets are listed on a balance sheet in which order? Multiple choice question. In order of decreasing liquidity In no particular order In order of account value from smallest to largest In order of increasing liquidity

In order of decreasing liquidity

Which of the following are fixed assets? Multiple select question. Plant Buildings Land Accounts receivable

Plant Buildings Land

Which of these questions can be answered by reviewing a firm's balance sheet? Multiple select question. How much net income has the firm earned this period? What is the total amount of assets the firm owns? How much debt is used to finance the firm? How much of the firm's net income was paid out in dividends?

What is the total amount of assets the firm owns? How much debt is used to finance the firm?

Net working capital equals current assets ______ current liabilities. Multiple choice question. times plus minus divided by

minus

A long-term liability represents a(n) _____. obligation of the firm lasting over 1 month debt that must be paid within the year debt that is not due in the coming year obligation of the firm lasting over 90 days

debt that is not due in the coming year

A balance sheet reflects a firm's Blank______ value on a particular date.

accounting

Increasing its noncash liquid assets will enable a firm to do which of the following? Multiple select question. Reduce its investment in receivables and inventory Increase its ability to avoid financial distress Increase its ability to meet short-term obligations Increase its rate of return

Increase its ability to avoid financial distress Increase its ability to meet short-term obligations

Why is positive net working capital important? Multiple choice question. It means the firm should have sufficient cash to meet its current obligations. It results in the highest retained earnings possible. It allows the firm to become debt-free. It results in the lowest possible tax bill.

It means the firm should have sufficient cash to meet its current obligations.