Quiz 1

corporation.

A firm created as a separate and distinct legal entity that may be owned by one or more individuals or entities is called a:

mixture of debt and equity a firm uses to finance its operations.

Capital structure refers to the:

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

Cash flow from assets can be defined as:

II and IV only

Financial leverage: I. decreases the potential returns to shareholders, II. increases the potential returns to shareholders, III. decreases the likelihood the firm will face financial distress or IV. increases the likelihood the firm will face financial distress.

$5,600

Highland, Inc. has total assets of $16,200, net working capital of $3,900, owner's equity of $8,500, and long-term debt of $6,000. What is the value of the current assets?

financial ratios.

Relationships computed from a firm's financial information and used for comparison purposes are called:

.52

Teri's Photography has total assets of $50,800, fixed assets of $47,400, long-term debt of $36,300, and total debt of $42,900. If inventory is $1,200, what is the current ratio?

II and IV only

Which of the following are classified as tangible fixed assets? I. inventory, II. Machinery, III. Patents, or IV. Buildings.

II, III, and IV only

Which of the following transactions will increase the liquidity of a firm? I. purchasing equipment with cash, II. collecting an account receivable, III. selling inventory at cost, or IV. selling inventory at a profit

The production manager is granted an annual bonus based on the size of the firm's total operations.

Which one of the following situations is most apt to create an agency problem?