1. What is the primary goal of financial management?
- Maximizing shareholder wealth
2. Proper risk-return management means that:
- Consistent with the objectives of the firm, an appropriate trade-off between risk and
return should be determined
3. The residual income of the firm belongs to:
- Common shareholders
4. Which of the following is a result of high inflation? – D. Under-valued assets
A. Loss from disposal of assets
B. Over-valued liabilities
C. Lower stock price
D. Under-valued assets
E. None of the above
5. A firm has current assets of $25,000, long term assets of $1000,000, long term liabilities
of $50,000, and $50,000 in shareholders’ equity. What is its net working capital?
- $0
6. Agency theory deals with the issue of:
- The conflicts that can arise between the viewpoints and motivations of a firm’s owners
and managers
7. Which account represents the cumulative earnings of the firm since it’s formation,
minus dividends paid?
- Retained earnings
8. The primary disadvantage of accrual accounting is that:
- It does not adequately show the actual cash flow position of the firm
9. The best indication of the operational efficiency of management is:
- Earnings before interest and taxes (EBIT)
10. A corporation board of directors:
- Generally includes key management personnel
- May be liable for the mismanagement of the firm
-
Manages the shareholders’ interest
11. When a corporation uses the financial markets to raise new funds, the sale of securities
is made in the: -- primary market
12. Companies that have higher risk than a competitor in the same industry will generally
have:
- To pay a higher interest rate than its competitors
13. Maximization of shareholder wealth is a concept in which:
- Increased share price is of primary importance
14. Free cash flow is equal to cash flow from operating activities:
- Minus capital expenditures, minus dividends
15. A firm’s purchase of plant and equipment would be considered as a:
- Use of cash for investment activities
16. Inflation has its major impact on balance sheets in which of the following areas?
- Plant and equipment and inventory
17. Accrual based accounting results in income and cash flow being:
- Different
18. The firm’s price-earnings (P/E) ratio is influenced by its:
- Capital structure
- Earnings volatility
- Sales, profit margins, and earnings
19. Given that Cash Flow from operating activities equal $175,000, Capital expenditures
equal $35,000 and dividends are $25,000 what is free cash flow?
- $115,000
20. A statement of cash flow allows a financial analyst to determine:
- Whether a cash dividend is affordable
- How increase in asset accounts have been financed
- Whether long-term assets are being financed with long-term or short-term financing
21. The orientation of book value per share is historical, while the orientation of market
value per share is future
22. Which item is added to earnings after taxes when computing cash flows from operating
activities: -- Amortization
23. Total asset turnover indicates the firm’s:
- Ability to use its assets to generate sales
24. Asset utilization ratios:
- Relate the balance sheets to the income statement sales
25. Which is a potential problem of utilizing ratio analysis?
- Firms within an industry may not use similar accounting method
26. A quick ratio much smaller than the current ratio reflects:
- A large portion of current assets is in inventory
27. XYZ’s receivables turnover is 10x. The accounts receivable at year-end are $600,000.
What was the sales figure for the year?
- $6,000,000
28. A firm has total assets of $2,000,000. It has $9000.000 in long-term debt. The
shareholders’ equity is $900,000. What is the total debt to asset ratio?
- 55%
29. Investors and financial analysts waiting to evaluate the operating efficiency of a firm’s,
managers would probably look primarily at the firm’s
- Asset utilization ratios
30. An increasing average collection period indicates:
- The company is becoming less efficient in its collection policy
31. What do coverage ratios demonstrate?
- Debt management of the firm and ability to meet financial obligations
32. In addition to comparison with industry ratios, it is also helpful to analyze ratios using:
- Trend analysis
33. Which two ratios are used in the DuPont system to create return on assets?
- Profit margin and asset turnover
34. Which of the following would represent a use of funds and, indirectly, a reduction in
cash balances?
- An increase in inventories
- A decrease in marketable securities
- An increase in accounts payable
- The sale of new bonds by the firm
35. MixedUp Ltd. Reported the following information:
earnings after taxes, $40,000.
decrease in accounts receivable, $10000
decrease in accounts payable, $8,000
amortization expense, $6,000
-
what amount did MixedUp report as cash flow from operating activities on its statement
of cash flow?
$48,000