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Corporate Finance T1
test one Ch. 1-3
| Question | Answer |
|---|---|
| all asset increases are uses of cash | true, outflow |
| using percent of sales as a forecasting tool will routinely inflate profits as sales rise and deflate profits as sales increase | false |
| dividends are not a tax deductible expense | true |
| interest is not a tax deductible expense | false |
| cash flow is defined as NPBT plus noncash charges | false, net income after taxes plus noncash charges |
| the debt ratio is equivalent to (TA-NW)/NW | false, liabilities/assets |
| all liability increases are considered a use of cash | false they are a source of cash |
| in the investment community investment bankers are retailers | false they are wholesalers |
| EPS of preferred stock divided into market price yields the PE or price earnings ratio | false, common stock does |
| inventory turnover, average inventory/COGS, is generally best when increasing | false its COGS/average inv |
| goodwill is defined as cost in excess of net assets of business acquired | true, GW=PP-NW |
| a treasury bond or bill is an IOU of the federal reserve bank | false, federal gov |
| as a business manager your primary goal should be to maximize EPS | false, cash flow |
| limited liability is the primary distinction between the corporate and other forms of business | false the raising and accumulation of cash is |
| the leverage ratio is equivalent to (ta-nw)/ta | false thats the debt ratio |
| depreciation is defined as the expensing of any asset over its useful life as defined by the IRS | false it has to be a fixed or tangible asset |
| the capital market deals with short term investments | false the money market deals with short term while the capital market deals with long term |
| in order to cause a rise in interest rates the federal reserve bank would sell a portion of its government investments | true |
| finance | the planning, use, and science of money for businesses, individuals, and organizations |
| what is the difference between finance and accounting | finance = using numbers to plan future accounting = using past numbers |
| what aspect of finance is essential for economies to grow? | a medium of exchange |
| cash flow | net profit after tax plus non cash charges (depletion and depreciation plus amortization) |
Created by:
akmacleod
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