BUSI 408 Midterm Exam.

BUSI 408 Midterm Exam. The management of a firm's short-term assets and liabilities - CORRECT ANSWER Working capital management The process of planning and managing a firm's long-term investments - CORRECT ANSWER Capital budgeting The mixture of debt and equity used by a firm to finance its operations - CORRECT ANSWER Capital structure The primary goal of financial management - CORRECT ANSWER To maximize the current value per share of the existing stock A capital budgeting decision could be... - CORRECT ANSWER Deciding whether or not to open a new store Working capital management includes decisions concerning what? - CORRECT ANSWER Accounts payable, Accounts Receivable, Inventory. NOT long term debt This is concerned with the upper portion of the balance - CORRECT ANSWER Working capital management Financial managers should strive to maximize the current value per share of the existing stock because.. - CORRECT ANSWER Because the current stockholders are the owners of the corporation The decisions made by financial managers should all be ones which increase the.. - CORRECT ANSWER market value of the existing owners' equity Accounting profits and cash flows are... - CORRECT ANSWER ...generally not the same since GAAP allows for revenue recognition separate from the receipt of cash flows The financial statement showing a firm's accounting value on a particular date is the... - CORRECT ANSWER balance sheet Net working capital is defined as: - CORRECT ANSWER Current Assets—Current Liabilities A _______ asset is one which can be quickly converted into cash without significant loss in value - CORRECT ANSWER Liquid The financial statement summarizing a firm's accounting performance over a period of time is the: - CORRECT ANSWER Income Statement Noncash items refer to: - CORRECT ANSWER expenses charged against revenues that do not directly affect cash flow _______ refers to the cash flow that results from the firm's ongoing, normal business activities - CORRECT ANSWER Cash flow from operating activities ______ refers to the changes in net capital assets - CORRECT ANSWER Cash flow from investing _______ refers to the difference between a firm's current assets and its current liabilities - CORRECT ANSWER Net working capital ______ is calculated by adding back noncash expenses to net income and adjusting for changes in current assets and liabilities - CORRECT ANSWER Cash flow from operations Earnings per share is equal to: - CORRECT ANSWER net income divided by total number of shares outstanding The following are included in current assets: - CORRECT ANSWER inventory and cash. NOT equipment or accounts payable The following are included in current liabilities: - CORRECT ANSWER Debt payable to a mortgage company in 9 months and accounts payable to suppliers. NOT note payable to a supplier in 18 months nor loan payable to the bank in 14 months An increase in total assets: - CORRECT ANSWER must be offset by an equal increase in liabilities and shareholders' equity Which asset is generally the most liquid? - CORRECT ANSWER Accounts receivable. NOT inventory, buildings, equipment, or patents