Finance HW 1

Which one of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers?

Agency problem.

Which one of the following terms is defined as the management of a firm's long-term investments?

Capital budgeting.

Which one of the following terms is defined as the mixture of a firm's debt and equity financing?

Capital structure.

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

Cash flow from assets.

Net working capital is defined as:

Current assets minus current liabilities.

Which one of the following is a use of cash?

Decrease in accounts payable

Which one of the following is a source of cash?

Decrease in inventory

According to the statement of cash flows, an increase in inventory will _____ the cash flow from _____ activities.

Decrease; operating.

Which one of these is a working capital management decision? Determining the best method of producing a product. Determining if a competitor should be acquired. Determining the number of employees needed to work during a particular shift. Determining when to replace obsolete equipment. Determining the minimum level of cash to be kept in a checking account

Determining the minimum level of cash to be kept in a checking account.

Cash flow to stockholders is defined as:

Dividend payments less net new equity raised.

A business formed by two or more individuals who each have unlimited liability for all of the firm's business debts is called a:

General partnership.

Which of the following accounts are included in working capital management?

I. Accounts Payable II. Accounts Receivable IV. Inventory

Which of the following are advantages of the corporate form of business ownership?

I. Limited liability for firm debt. III. Ability to raise capital. IV. Unlimited firm life.

Which of the following are cash flows from a corporation into the financial markets?

I. Repayment of long-term debt. III. Payment of loan interest. IV. Payment of quarterly dividend.

Which of the following are included in current liabilities?

III. Account payable to a supplier that is due next week. IV. Loan payable to the bank in 10 months.

Which one of the following statements is correct? A general partnership is legally the same as a corporation. Only firms organized as sole proprietorships have limited lives. Income from both sole proprietorships and partnerships is taxed as individual income. Partnerships are the most complicated type of business to form. All business organizations have bylaws.

Income from both sole proprietorships and partnerships is taxed as individual income.

Which one of the following best states the primary goal of financial management?

Maximize the current value per share.

On a common-size balance sheet all accounts for the current year are expressed as a percentage of:

Total assets for the current year.

if sales increase while there is no change in accounts receivable , the receivable ration will

increase

a decrease in accounts receivable is a _ of cash

source

an increase in notes payable is a _ of cash

source

decrease in accounts payable is a _ of cash

use

increase in inventory is a _ of cash

use

increase in property plant and equipment is a _ of cash

use