FM Chapter 2

Which one of the following accounts is the most liquid?

Accounts Receivable.

The _____ tax rate is equal to total taxes divided by total taxable income.

Average

Cash flow to stockholders is defined as:

Dividend payments less net new equity raised.

Which term relates to the cash flow that results from a firm's ongoing, normal business activities?

Operating cash flow

Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date?

Balance Sheet

The book value of a firm is:

Based on historical cost.

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.

The cash flow related to interest payments less any net new borrowing is called the:

Cash flow to creditors.

Net working capital is defined as:

Current assets minus current liabilities.

Noncash items refer to:

Expenses which do not directly affect cash flows.

Which one of these sets forth the common set of standards and procedures by which audited financial statements are prepared?

Generally Accepted Accounting Principles

Which one of the following is included in a firm's market value but yet is excluded from the firm's accounting value?

Good reputation of the company.

The higher the degree of financial leverage employed by a firm is, the:

Higher is the probability that the firm will encounter financial distress.

Which of the following are current assets? I. Cash II. Trademark III. Accounts receivable IV. Notes payable

I and III only.

Which of the following are included in current liabilities? I. Note payable to a supplier in 13 months. II. Amount due from a customer last week. III. Account payable to a supplier that is due next week. IV. Loan payable to the bank in 10 months.

III and IV only.

Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time?

Income statement.

The percentage of the next dollar you earn that must be paid in taxes is referred to as the _____ tax rate.

Marginal.

Based on historical cost.

Office salaries.

Which one of the following is classified as a tangible fixed asset?

Production equipment.

Which one of the following will decrease the value of a firm's net working capital?

Selling inventory at a loss.