Chapters 1&2 Flashcards
Which of the following is not considered a core part of Business Finance:
A) Corporate Finance
B) Investments
C) Financial Institutions
D) All of the above
C) Financial Institutions
Which of the following terms involves the process of planning and managing a firm’s long-term investments:
A) Capital Budgeting
B) Working Capital Management
C) Cash Conversion Management
D) Net working Capital Management
A) Capital Budgeting
Which of the following terms involves managing a firm’s short-term assets and liabilities to continue operations day to day:
A) Capital Budgeting
B) Working Capital Management
C) Capital Structure Management
D) Long Term Cash Forecasting
B) Working Capital Management
What risk do Sole Proprietorships and Partnership have in common?
The Business owner(s) has unlimited liability for all debts and taxes
What is the ultimate goal for the Financial Manager of a firm?
Maximize the market value of the existing owner’s equity
Sarbanes Oxley was enacted in 2002 to protect against what?
Corporate Accounting Fraud
Control of a firm ultimately rests with whom?
Stockholders
Which of the following is NOT a way in which a firm TRADITIONALLY raises cash:
A) Issuing stocks and bonds
B) borrowing cash from creditors
C) seek investments from investors
D) sell off long term fixed assets
D) sell of long term fixed assets
Who are the traditional sellers on the Primary Market?
The issuing Corporation
Which of the following is NOT one way in which auction markets differ form dealer markets:
A) an auction market has a physical location
B) In a dealer market, the majority of selling is done by a dealer
C) dealer market are only contingent to the United States
C) dealer market are only contingent to the United States
What is the primary difference between a Balance Sheet and Income Statement?
the balance sheet is a snapshot of a firm, the income statement is a firm’s performance over a period of time
Net working capital is a measurement of what?
the difference between a firm’s current assets and current liabilities
Liquidity measures what?
the speed in which an asset can be converted to cash
Why does a Financial Manager generally want to know the Market Value of an Asset rather than Book Value?
Book Value is the historical cost of an asset and is normally accurate to the actual value of an asset
The formula “Revenue - Expenses = Income” is used to analyze which Financial Statement?
Income Statement
What is the primary difference between operating cash flow and free cash flow?
Operating cash flow does not take into consideration cash expenses for long term financing
Which of the following is an example of cash flow to stockholders:
A) Payment to creditors of long-term debt
B) Divided payment
C) Increase in the stock price due to market activity
D) A plaque indicating ownership of the share(s) of stock
B) Divided Payment
What is the Marginal Tax Rate for a company?
amount of tax payable for a corporation based upon the next dollar earned
