4.The Mixture of Debt and Equity Used by a Firm to Finance Its Operations Is Called
4.The mixture of debt and equity used by a firm to finance its operations is called:
a.working capital management.
b.financial depreciation.
c.cost analysis.
d.capital budgeting.
e.capital structure.
5.The management of a firm’s short-term assets and liabilities is called:
a.working capital management.
b.debt management.
c.equity management.
d.capital budgeting.
e.capital structure.
14.A conflict of interest between the stockholders and management of a firm is called:
a.stockholders’ liability.
b.corporate breakdown.
c.the agency problem.
d.corporate activism.
e.legal liability.
15.Agency costs refer to:
a.the total dividends paid to stockholders over the lifetime of a firm.
b.the costs that result from default and bankruptcy of a firm.
c.corporate income subject to double taxation.
d.the costs of any conflicts of interest between stockholders and management.
e.the total interest paid to creditors over the lifetime of the firm.
16.A stakeholder is:
a.any person or entity that owns shares of stock of a corporation.
b.any person or entity that has voting rights based on stock ownership of a corporation.
c.a person who initially started a firm and currently has management control over the cash flows of the firm due to his/her current ownership of company stock.
d.a creditor to whom the firm currently owes money and who consequently has a claim on the cash flows of the firm.
e.any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of the firm.
17.The original sale of securities by governments and corporations to the general public occurs in the:
a.primary market.
b.secondary market.
c.private placement market.
d.proprietary market.
e.liquidation market.
18.When one shareholder sells stock directly to another the transaction is said to occur in the:
a.dealer market.
b.primary market.
c.secondary market.
d.OTC market.
e.NASDAQ market.
19.A market where dealers buy and sell securities for themselves, at their own risk, is called a(n):
a.primary market.
b.secondary market.
c.dealer market.
d.auction market.
e.liquidation market.
20.A market where trading takes place directly between buyers and sellers is called a(n):
a.primary market.
b.OTC market.
c.dealer market.
d.auction market.
e.liquidation market.
29.Working capital management:
a.ensures that sufficient equipment is available to produce the amount of product desired
on a daily basis.
b.ensures that long-term debt is acquired at the lowest possible cost.
c.ensures that dividends are paid to all stockholders on an annual basis.
d.balances the amount of company debt to the amount of available equity.
e.is concerned with having sufficient funds to operate the business on a daily basis.
54.Which one of the following statements concerning stock exchanges is correct?
a.The NYSE has more listed stocks than NASDAQ.
b.The NYSE is a dealer market.
c.The exchange with the strictest listing requirements is NASDAQ.
d.Some large companies are listed on NASDAQ.
e.Most debt securities are traded on the NYSE.
55.Dealer markets:
a.are reserved strictly for trading debt securities.
b.only exist outside of the United States.
c.are called over-the-counter markets.
d.include the American Exchange and the Pacific Stock Exchange.
e.list only the securities of the largest firms.
56.Which one of the following statements is correct concerning the NYSE?
a.A firm is expected to have a market value for its publicly held shares of at least $100 million to be listed on the NYSE.
b.The NYSE is the largest dealer market for listed securities in the United States.
c.The NYSE accounts for only 50 percent of the shares traded in the auction markets.
d.Any corporation desiring to be listed on the NYSE can do so.
e.The NYSE is an over-the-counter exchange functioning as both a primary and a secondary market.
57.Which of the following statements concerning NASDAQ are correct?
I.Most smaller firms are listed on NASDAQ rather than on the NYSE.
II.NASDAQ is an electronic market.
III.NASDAQ is an auction market.
IV.NASDAQ is an OTC market.
a.I and II only
b.I and III only
c.II and IV only
d.I, II, and IV only
e.I, II, III, and IV
50.Which one of the following parties is considered a stakeholder of a firm?
a.employee
b.short-term creditor
c.long-term creditor
d.preferred stockholder
e.common stockholder
51.Which of the following represent cash outflows from a firm?
I.issuance of securities
II.payment of dividends
III.new loan proceeds
IV.payment of government taxes
a.I and III only
b.II and IV only
c.I and IV only
d.I, II, and IV only
e.II, III, and IV only
52.Which one of the following is a primary market transaction?
a.a dealer selling shares of stock to an individual investor
b.a dealer buying newly issued shares of stock from a corporation
c.an individual investor selling shares of stock to another individual
d.a bank selling shares of a medical firm to an individual
e.a sole proprietor buying shares of stock from an individual investor
53.Which of the following statements concerning auction markets is (are) correct?
I.NASDAQ is an auction market.
II.The NYSE is an auction market.
III.All trades involve a dealer in an auction market.
IV.An auction market is called an over-the-counter market.
a.I only
b.II only
c.I and III only
d.II and III only
e.II and IV only
1.The financial statement showing a firm’s accounting value on a particular date is the:
a.income statement.
b.balance sheet.
c.statement of cash flows.
d.tax reconciliation statement.
e.shareholders’ equity sheet.
2.A current asset is:
a.an item currently owned by the firm.
b.an item that the firm expects to own within the next year.
c.an item currently owned by the firm that will convert to cash within the next 12 months.
d.the amount of cash on hand the firm currently shows on its balance sheet.
e.the market value of all items currently owned by the firm.
3.The long-term debts of a firm are liabilities:
a.that come due within the next 12 months.
b.that do not come due for at least 12 months.
c.owed to the firm’s suppliers.
d.owed to the firm’s shareholders.
e.the firm expects to incur within the next 12 months.
4.Net working capital is defined as:
a.total liabilities minus shareholders’ equity.
b.current liabilities minus shareholders’ equity.
c.fixed assets minus long-term liabilities.
d.total assets minus total liabilities.
e.current assets minus current liabilities.
5.A(n) ____ asset is one which can be quickly converted into cash without significant loss in value.
a.current
b.fixed
c.intangible
d.liquid
e.long-term
9.Noncash items refer to:
a.the credit sales of a firm.
b.the accounts payable of a firm.
c.the costs incurred for the purchase of intangible fixed assets.
d.expenses charged against revenues that do not directly affect cash flow.
e.all accounts on the balance sheet other than cash on hand.
12._____ refers to the cash flow that results from the firm’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
13._____ refers to the net expenditures by the firm on fixed asset purchases.
a.Operating cash flow
b.Capital spending
c.Net working capital
d.Cash flow from assets
e.Cash flow to creditors
14._____ refers to the difference between a firm’s current assets and its current liabilities.
a.Operating cash flow
b.Capital spending
c.Net working capital
d.Cash flow from assets
e.Cash flow to creditors
15._____ refers to the net total cash flow of the firm available for distribution to its creditors and stockholders.
a.Operating cash flow
b.Capital spending
c.Net working capital
d.Cash flow from assets
e.Cash flow to creditors
16._____ refers to the firm’s interest payments less any net new borrowing.
a.Operating cash flow
b.Capital spending
c.Net working capital
d.Cash flow from assets
e.Cash flow to creditors
17._____ refers to the firm’s dividend payments less any net new equity raised.
a.Operating cash flow
b.Capital spending
c.Net working capital
d.Cash flow from assets
e.Cash flow to stockholders
18.Cash flow from assets is also known as the firm’s:
a.capital structure.
b.equity structure.
c.hidden cash flow.
d.free cash flow.
e.historical cash flow.
2.1 Use these financial statements to answer the questions on this quiz.
Balance Sheet
2004 2005 2004 2005
Cash$ 1,100 $ 1,300Accounts payable$ 3,000 $ 2,100
Accounts receivable 3,900 3,600Long-term debt 6,800 7,300
Inventory 5,600 5,100Common stock 8,800 9,000
Net fixed assets 10,900 12,800Retained earnings 2,900 4,400
Total assets$21,500 $22,800Total liabilities and equity$21,500 $22,800
Income Statement
Net Sales$41,000
Costs 31,500
Depreciation 1,600
EBIT 7,900
Interest 400
Taxable income 7,500
Taxes 1,125
Net Income$ 6,375
______1.What is the amount of the current assets for 2005?
a. $4,900b. $10,000c. $10,600d. $22,800
______2.What is the amount of the net working capital for 2005?
a. $600b. $2,800c. $7,900d. $13,400
______3.What is the total amount of stockholders’ equity for 2005?
a. $4,400b. $9,000c. $13,400d. $22,800
______4.What is the amount of the non-cash expenses?
a. $1,600b. $2,000c. $4,625d. $4,875
______5.What is the amount of dividends paid this year?
a. $3,575b. $4,875c. $6,375d. $7,875
______6.What is the amount of the cash flow from operations?
a. $6,375b. $7,900c. $7,975d. $8,375
______7.What is the amount of net capital spending?
a. $300b. $1,900c. $2,900d. $3,500
______8.What is the change in net working capital?
a. -$800b. -$300c. $300d. $800
______9.What is the amount of the cash flow to creditors?
a. -$800b. -$100c. $100d. $800
______10.What is the amount of the cash flow to stockholders?
a. $3,175b. $3,375c. $4,675d. $6,375
2.2 Use these financial statements to answer the questions on this quiz.
Balance Sheet
2004 2005 2004 2005
Cash$ 1,800 $ 2,100Accounts payable$ 5,200 $ 3,900
Accounts receivable 7,300 6,400Long-term debt 27,400 22,500
Inventory 10,200 12,300Common stock 17,500 21,500
Net fixed assets 40,900 36,700Retained earnings 10,100 9,600
Total assets$60,200 $57,500Total liabilities and equity$60,200 $57,500
Income Statement
Net Sales$73,900
Costs 58,600
Depreciation 5,200
EBIT 10,100
Interest 2,200
Taxable income 7,900
Taxes 1,185
Net Income$ 6,715
______1.What is the average tax rate?
a. 15%b. 17% c. 18%d. 20%
______2.What is the amount of the net working capital for 2005?
a. -$5,600b. $4,600c. $12,300d. $16,900
______3.What is the total amount of stockholders’ equity for 2005?
a. $5,135b. $9,600c. $31,100d. $36,235
______4.If the firm has 15,000 shares of stock outstanding, what is the earnings per share?
(Round to the nearest penny)
a. $0.40b. $0.42c. $0.45d. $0.48
______5.What is the amount of dividends paid this year?
a. $6,215b. $6,715c. $7,215d. $7,715
______6.What is the amount of the cash flow from operations?
a. $6,085b. $6,715c. $11,915d. $14,115
______7.What is the amount of net capital spending?
a. $1,000b. $4,200c. $5,200d. $9,400
______8.What is the change in net working capital?
a. -$2,800b. -$2,100c. $700d. $2,800
______9.What is the amount of the cash flow to creditors?
a. $2,700b. $7,100c. $7,835d. $8,400
______10.What is the amount of the cash flow to stockholders?
a. $2,715b. $3,215c. $7,215d. $11,215
60.Ivan’s, Inc. paid $500 in dividends and $600 in interest this past year. Common stock increased by $200 and retained earnings decreased by $100. What is the net income for the year?
- $400
- $500
- $600
- $800
e.$1,000
61.Art’s Boutique has sales of $640,000 and costs of $480,000. Interest expense is $40,000 and depreciation is $60,000. The tax rate is 34%. What is the net income?
a.$20,400
b.$39,600
c.$50,400
d.$79,600
e.$99,600
65.Your firm has net income of $198 on total sales of $1,200. Costs are $715 and depreciation is $145. The tax rate is 34 percent. The firm does not have interest expenses. What is the operating cash flow?
- $93
- $241
- $340
- $383
e.$485