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Corporate Finance T1

test one Ch. 1-3

QuestionAnswer
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