Un starred

If a firm has a debt-equity ratio of 1.0, then its total debt ratio must be which one of the following? A) 0 B) .5 C) 1.0 D) 1.5 E) 2.0

.5

Which one of the following accounts is the most liquid? A) Inventory B) Building C) Accounts Receivable D) Equipment E) Land

Accounts Receivable

Which one of the following is a current liability? A) Note payable to a supplier in 13 months B) Amount due from a customer in two weeks C) Account payable to a supplier that is due next week D) Loan payable to the bank in 18 months E) Amount due from a customer that is past due

C) Account payable to a supplier that is due next week

Net working capital is defined as A. Current assets minus current liabilities. B. Current liabilities minus shareholders' equity C. Total assets minus total liabilities. D. Total assets minus fixed assets

Current assets minus current liabilities

Total Equity beg + Retained Earnings =

Total Equity End

Which one of the following is included in working capital management? I. Accounts payable II. Fixed assets III. Inventory IV. Accounts receivable

accounts payable, inventory, and accounts recievable

Which one of the following terms is defined as the mixture of the firm's debt and equity financing? A. Capital structure B. Cash Management C. Working capital management D. Capital budgeting

capital structure

What type of business organization has all the respective rights and privileges of a legal person? A. Limited partnership B. General partnership C. Sole proprietorship D. Corporation

corporation

Cash flow to stockholders is defined as: A) the total amount of interest and dividends paid during the past year. B) the change in total equity over the past year. C) cash flow from assets plus the cash flow to creditors. D) operating cash flow minus the cash flow to creditors. E) dividend payments less net new equity raised.

dividend payments less net new equity raised

DL Farms currently has $600 in debt for every $1,000 in equity. Assume the company uses some of its cash to decrease its debt while maintaining its current equity and net income. Which one of the following will decrease as a result of this action? A) Equity multiplier B) Total asset turnover C) Profit margin D) Return on assets E) Return on equity

equity multiplier

Which of the following individuals have unlimited liability based on their ownership interest? I. General partner II. Stockholder III. Limited Partner IV. Sole proprietor

general partner and sole proprietorship

If a company produces a return on assets of 14 percent and also a return on equity of 14 percent, then the firm: A) may have short-term, but not long-term debt. B) is using its assets as efficiently as possible. C) has no net working capital. D) has a debt-equity ratio of 1.0. E) has an equity multiplier of 1.0.

has an equity multiplier of 1.0

Which one of the following financial statements summarizes a firm's revenues and expenses over a period of time? A. Statement of cash flows B. Income statement C. Market value report D. Balance sheet

income statement

Net capital spending: A) is equal to ending net fixed assets minus beginning net fixed assets. B) is equal to zero if the decrease in the net fixed assets is equal to the depreciation expense. C) reflects the net changes in total assets over a stated period of time. D) is equivalent to the cash flow from assets minus the operating cash flow minus the change in net working capital. E) is equal to the net change in the current accounts.

is equal to zero if the decrease in the net fixed assets is equal to the depreciation expense.

Which of the following represent cash outflows from a corporation? I. Issuance of new securities II. Payment of government taxes III. Proceeds from new loan IV. Payment of dividends

payment of government taxes and payment of dividends

Which one of the following is classified as a tangible fixed asset? A) Accounts receivable B) Production equipment C) Cash D) Patent E) Inventory

production equipment

Which one of the following ratios is a measure of a firm's liquidity? A) Cash coverage ratio B) Profit margin C) Debt-equity ratio D) Quick ratio E) NWC turnover

quick ratio

A common-size income statement is an accounting statement that expresses all of a firm's expenses as a percentage of: A) total assets. B) total equity. C) net income. D) taxable income. E) sales.

sales

A positive cash flow to stockholders indicates which one of the following with certainty? A) The dividends paid exceeded the net new equity raised. B) The amount of the sale of common stock exceeded the amount of dividends paid. C) No dividends were distributed, but new shares of stock were sold. D) Both the cash flow to assets and the cash flow to creditors must be negative. E) Both the cash flow to assets and the cash flow to creditors must be positive.

the dividends paid exceeded the net new equity raised

On a common-size balance sheet all accounts for the current year are expressed as a percentage of: A) sales for the period. B) the base year sales. C) total equity for the base year. D) total assets for the current year. E) total assets for the base year.

total assets for the current year

Which one of the following is a current asset? A) Accounts payable B) Trademark C) Accounts receivable D) Notes payable E) Equipment

Accounts receivable

Net Income

Sales - COGS - Expenses - Depreciation = EBIT - Interest = Taxable Income - Taxes = Net Income

Which one of the following statements related to the cash flow to creditors must be correct? A) If the cash flow to creditors is positive, then the firm must have borrowed more money than it repaid. B) If the cash flow to creditors is negative, then the firm must have a negative cash flow from assets. C) A positive cash flow to creditors represents a net cash outflow from the firm. D) A positive cash flow to creditors means that a firm has increased its long-term debt. E) If the cash flow to creditors is zero, then a firm has no long-term debt.

a positive cash flow to creditors represents a net cash outflow from the firm

The cash flow related to interest payments less any net new borrowing is called the: A) operating cash flow. B) capital spending cash flow. C) net working capital. D) cash flow from assets. E) cash flow to creditors.

cash flow to creditors

Which one of the following is an agency cost? A. increasing the quarterly dividend B. closing a division of a firm that is operating at a loss C. Accepting an investment opportunity to add vale to the firm D. paying financial incentives to management to keep shareholders' interest as top priority

paying financial incentives

Which one of the following is a correct formula for computing the return on equity? A) Profit margin × ROA B) ROA × Equity multiplier C) Profit margin × Total asset turnover × Debt-equity ratio D) Net income/Total assets E) Debt-equity ratio × ROA

ROA x Equity Multiplier

The ________ tax rate is equal to total taxes divided by total taxable income. A) deductible B) residual C) total D) average E) marginal

average

Equity Multiplier - 1 =

Debt to Equity Ratio

The DuPont identity can be used to help managers answer which of the following questions related to a company's operations? I. How many sales dollars are being generated per each dollar of assets? II. How many dollars of assets have been acquired per each dollar in shareholders' equity? III. How much net profit is being generating per dollar of sales? IV. Does the company have the ability to meet its debt obligations in a timely manner?

I, II, and III only

The cash flow of a firm that is available for distribution to a firm's creditors and shareholders is known as A. Operating cash flow B. Cash flow from assets C. Net working capital D. Net capital spending

cash flow from assets

Which one of the following represents the most liquid asset? A) $100 account receivable that is discounted and collected for $96 today B) $100 of inventory that is sold today on credit for $103 C) $100 of inventory that is discounted and sold for $97 cash today D) $100 of inventory that is sold today for $100 cash E) $100 of accounts receivable that will be collected in full next week

$100 of inventory that is sold today for $100 cash

An increase in current liabilities will have which one of the following effects, all else held constant? Assume all ratios have positive values. A) Increase in the cash ratio B) Increase in the net working capital to total assets ratio C) Decrease in the quick ratio D) Decrease in the cash coverage ratio E) Increase in the current ratio

decrease in the quick ratio

Cash payments that firms make to their stockholders are called A. interest B. coupon C. dividend D. principal

dividend

Which one of the following accurately describes the three parts of the DuPont identity? A) Equity multiplier, profit margin, and total asset turnover B) Debt-equity ratio, capital intensity ratio, and profit margin C) Operating efficiency, equity multiplier, and profitability ratio D) Return on assets, profit margin, and equity multiplier E) Financial leverage, operating efficiency, and profitability ratio

equity multiplier, profit margin, and total asset turnover

The percentage of the next dollar you earn that must be paid in taxes is referred to as the ________ tax rate. A) mean B) residual C) total D) average E) marginal

marginal

Which term relates to the cash flow that results from a company's ongoing, normal business activities? A) Operating cash flow B) Capital spending C) Net working capital D) Cash flow from assets E) Cash flow to creditors

operating cash flow