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fin mgt test 1

Question	Answer
which one of the following terms is defined as the management of a firms long term investments	capital budgeting
which one of the following terms is defined as the mixture of a firms debt and equity financing	capital structure
a business owned by a solitary individual who had unlimited liability for its debt is called a	sole proprietorship
a business formed by two or more individuals who each have unlimited liability for all of the firms business debts is called a	general partnership
A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a:	limited partner
A business created as a distinct legal entity and treated as a legal "person" is called a:	corporation
Which one of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers?	agency problem
Any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of a firm	stakeholder
Deciding whether or not to purchase a new machine for the production line.	capital budgeting decision
The decision to issue additional shares of stock is an example of which one of the following?	capital structure decision
Determining whether to pay cash for a purchase or use the credit offered by the supplier.	working capital management decision
Which one of the following statements concerning a sole proprietorship is correct?	The owner of a sole proprietorship is personally responsible for all of the company's debts.
Which of the following individuals have unlimited liability based on their ownership interest?	general partner and sole proprietor
Which one of the following business types is best suited to raising large amounts of capital?	corporation
Which type of business organization has all the respective rights and privileges of a legal person?	corporation
Which one of the following best states the primary goal of financial management?	maximize the current value per share
Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management?	increase in the market value per share
Why should financial managers strive to maximize the current value per share of the existing stock?	Because they have been hired to represent the interests of the current shareholders.
Decisions made by financial managers should primarily focus on increasing which one of the following?	market value per share of outstanding stock
Which form of business structure is most associated with agency problems?	corporation
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
Net working capital is defined as:	current assets minus current liabilities
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 the financial statement that summarizes a firm's revenue and expenses over a period of time?	income statement
Expenses which do not directly affect cash flows.	noncash items
The percentage of the next dollar you earn that must be paid in taxes is referred to as the _____ tax rate.	marginal
The _____ tax rate is equal to total taxes divided by total taxable income.	average
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
Which term relates to the cash flow that results from a firm's ongoing, normal business activities?	operating cash flow
The cash flow related to interest payments less any net new borrowing is called the:	cash flow to creditors
what is Dividend payments less net new equity raised.	cash flow to stockholders
Which one of the following is classified as a tangible fixed asset?	production equipment
Which of the following are current assets?	cash and accounts receivable
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
Which of the following are included in current liabilities?	account payable to a supplier that is due next week and loan payable to the bank in 10 months
Which one of the following will decrease the value of a firm's net working capital?	selling inventory at a loss
Which one of the following accounts is the most liquid?	accounts receivable
The higher the degree of financial leverage employed by a firm is, the:	higher is the probability that the firm will encounter financial distress
The book value of a firm is:	Based on historical cost.
Which one of these is most apt to be a fixed cost?	Office salaries.
Relationships determined from a firm's financial information and used for comparison purposes are known as:	financial ratios
Which one of these identifies the relationship between the return on assets and the return on equity?	duPont identity
Which one of the following is a use of cash?	decrease in accounts payable
On the statement of cash flows, which of the following are considered financing activities?	increase in long term debt and dividends paid
On a common-size balance sheet all accounts for the current year are expressed as a percentage of:	total assets for the current year
Which of the following ratios are measures of a firm's liquidity?	cash coverage ratio, interval measure, and quick ration
An increase in current liabilities will have which one of the following effects, all else held constant? Assume all ratios have positive values.	decrease in the quick ratio
An increase in which one of the following will increase a firm’s quick ratio without affecting its cash ratio?	accounts receivable
Ratios that measure a firm’s liquidity are known as _____ ratios.	short-term solvency
If a firm has a debt-equity ratio of 1.0, then its total debt ratio must be which one of the following?	.5
Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as _____ ratios.	profitability
If a firm produces a 13 percent return on assets and also a 13 percent return on equity, then the firm:	has an equity multiplayer of 1.0
Tobin’s Q relates the market value of a firm’s assets to which one of the following?	todays cost to duplicate those assets
The price-sales ratio is especially useful when analyzing firms that have which one of the following?	negative earnings
Lenders probably have the most interest in which one of the following sets of ratios?	long-term debt and times interest earned
Which one of the following accurately describes the three parts of the DuPont identity?	equity multiplier, profit margin, and total asset turnover
An increase in which of the following will increase the return on equity, all else constant?	total asset turnover, net income, and debt-equity ratio
The DuPont identity can be used to help managers answer which of the following questions related to a firm’s operations?	I. How many sales dollars has the firm generated per each dollar of assets? II. How many dollars of assets has a firm acquired per each dollar in shareholders’ equity? III. How much net profit is a firm generating per dollar of sales?
The most acceptable method of evaluating the financial statements of a firm is to compare the firm's current:	Financial ratios to the firm's historical ratios.

Created by: rcu10

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