MGT-181 Midterm 1 [UCSD Buchanan] Exam Questions with Correct Answers Latest Update
2025/2026
Capital Budgeting - Answers Process of planning and managing a firm's long-term investments
Capital Structure - Answers The mixture of deb and equity maintained by a firm
Working Capital - Answers A firm's short-Term assets and liabilities.
Sole Proprietor - Answers Owned by single individual
Partnership - Answers Owned by 2+ individuals
Corporation - Answers Distinct legal entity composed of one or more individual or entities
Agency Problem - Answers The possibility of conflict of interest between the stockholders and
management of a firm.
Stakeholder - Answers Someone other than a stockholder or creditor who potentially has a
claim on the cash flows of the firm
Balance Sheet - Answers Financial statement showing a firm's accounting value on a particular
date.
Net Working Capital - Answers Current assets less current liabilities
Liquidity - Answers Refers to speed and easy with which an asset can be converted to cash.
GAAP - Generally Accepted Accounting Principles - Answers The common set of standards and
procedures by which audited financial statements are prepared.
Income Statement - Answers Financial statement summarizing a firm's performance over a
period of time
Noncash Items - Answers Expense charged against revenue that do not directly affect cash flow,
such as depreciation
Average Tax Rate - Answers Total Taxes divided by total taxable income
Marginal Tax Rate - Answers Amount of tax payable on the next dollar earned
Cash flow from assets - Answers The total cash flow to creditors and cash flow to stockholders,
consisting of the following: operating cash flow, capital spending, and change in net working
capital
Operating cash flow - Answers Cash generate from a firm's normal business activities
Free Cash Flow - Answers Another name for cash flow from assets
, Cash flow to creditors - Answers A firm's interest payments to creditors less new new
borrowing
Cash flow to stockholders - Answers Dividends paid out by a firm less net new equity raised.
Sources of Cash - Answers A firm's activites that generate cash
User of cash - Answers A firm's activities in which cash is spent AKA applications of cash
Statement of Cash Flows - Answers A firm's financial statement that summarizes its sources
and uses of cash over a specified period
Common-Size Statement - Answers A standard financial statement presenting all items in
percentage term. Balance sheet items are shown as percent of assets and income statement
items are percent of sales.
Common-base year statement - Answers A standardized financial statement presenting all
items relative to a certain base year amount
Financial Ratios - Answers Relationships determined from a firm's financial information and
used for comparison purposes.
DuPont Identity - Answers Popular expression breaking ROE into three parts: operating
efficiency, asset use efficiency, and financial leverage
Standard Industrial Classificiation - Answers A US government code used to classify a firm by
its type of business operations
Future Value - Answers The amount an investment is worth after one or more periods
Compounding - Answers Process of accumulating interest on an investment over time to earn
more interest
Interst on Interest - Answers Interest earned on the reinvestment of previus interst paments
Compound interst - Answers interest earned on both the initial principal and interest reinvested
from prior periods
Simple Interest - Answers Interst earned only on the original principal amount invested
Present Value - Answers Current value of future cash flows discounted at the appropriate
discount rate
Discount - Answers Calculate the present value or some future amount
Discount Rate - Answers The rate used to calculate the present value of future cash flows
Discounted cash flow valuation - Answers Calculating the present value of a future cash flow to
2025/2026
Capital Budgeting - Answers Process of planning and managing a firm's long-term investments
Capital Structure - Answers The mixture of deb and equity maintained by a firm
Working Capital - Answers A firm's short-Term assets and liabilities.
Sole Proprietor - Answers Owned by single individual
Partnership - Answers Owned by 2+ individuals
Corporation - Answers Distinct legal entity composed of one or more individual or entities
Agency Problem - Answers The possibility of conflict of interest between the stockholders and
management of a firm.
Stakeholder - Answers Someone other than a stockholder or creditor who potentially has a
claim on the cash flows of the firm
Balance Sheet - Answers Financial statement showing a firm's accounting value on a particular
date.
Net Working Capital - Answers Current assets less current liabilities
Liquidity - Answers Refers to speed and easy with which an asset can be converted to cash.
GAAP - Generally Accepted Accounting Principles - Answers The common set of standards and
procedures by which audited financial statements are prepared.
Income Statement - Answers Financial statement summarizing a firm's performance over a
period of time
Noncash Items - Answers Expense charged against revenue that do not directly affect cash flow,
such as depreciation
Average Tax Rate - Answers Total Taxes divided by total taxable income
Marginal Tax Rate - Answers Amount of tax payable on the next dollar earned
Cash flow from assets - Answers The total cash flow to creditors and cash flow to stockholders,
consisting of the following: operating cash flow, capital spending, and change in net working
capital
Operating cash flow - Answers Cash generate from a firm's normal business activities
Free Cash Flow - Answers Another name for cash flow from assets
, Cash flow to creditors - Answers A firm's interest payments to creditors less new new
borrowing
Cash flow to stockholders - Answers Dividends paid out by a firm less net new equity raised.
Sources of Cash - Answers A firm's activites that generate cash
User of cash - Answers A firm's activities in which cash is spent AKA applications of cash
Statement of Cash Flows - Answers A firm's financial statement that summarizes its sources
and uses of cash over a specified period
Common-Size Statement - Answers A standard financial statement presenting all items in
percentage term. Balance sheet items are shown as percent of assets and income statement
items are percent of sales.
Common-base year statement - Answers A standardized financial statement presenting all
items relative to a certain base year amount
Financial Ratios - Answers Relationships determined from a firm's financial information and
used for comparison purposes.
DuPont Identity - Answers Popular expression breaking ROE into three parts: operating
efficiency, asset use efficiency, and financial leverage
Standard Industrial Classificiation - Answers A US government code used to classify a firm by
its type of business operations
Future Value - Answers The amount an investment is worth after one or more periods
Compounding - Answers Process of accumulating interest on an investment over time to earn
more interest
Interst on Interest - Answers Interest earned on the reinvestment of previus interst paments
Compound interst - Answers interest earned on both the initial principal and interest reinvested
from prior periods
Simple Interest - Answers Interst earned only on the original principal amount invested
Present Value - Answers Current value of future cash flows discounted at the appropriate
discount rate
Discount - Answers Calculate the present value or some future amount
Discount Rate - Answers The rate used to calculate the present value of future cash flows
Discounted cash flow valuation - Answers Calculating the present value of a future cash flow to
