BMAL 590 BUSINESS FINANCE EXAM 2 QUESTIONS WITH CORRECT ANSWERS

A company's balance sheet shows the value of assets, liabilities, and stockholders' equity CORRECT ANSWER At a specific point in time On a balance sheet, retained earnings are not "unspent cash" because CORRECT ANSWER They have been used to finance the firm's assets For both managers and external financial analysts, ________ is the single most important accounting number found on the income statement CORRECT ANSWER Net income (net profit after tax) Earnings per share (EPS) is calculated by CORRECT ANSWER Dividing earnings available for common stockholders by the number of shares of common stock outstanding Net working capital CORRECT ANSWER Is a measure of a firm's overall liquidity Why is the quick ratio a more appropriate measure of liquidity than the current ratio for a large-airplane manufacturer? CORRECT ANSWER It excludes inventory from the numerator of the ratio because it is difficult to convert inventory to cash and most sales are made on a credit basis The one fixed asset that is not depreciated is _________ CORRECT ANSWER Land Return on total assets (ROA) is equal to _________ CORRECT ANSWER All of the above When a firm has no "other income," its operating profit and _________ are equal CORRECT ANSWER EBIT The firms ________ are primarily interested in ratios that measure the short-term liquidity of the company and its ability to make principal and interest payments CORRECT ANSWER Creditors When evaluating financial ratios, analysts typically examine a firm's ratio values CORRECT ANSWER Compared to the firm's previous years' ratio _________ ratios would provide the best information regarding total return to common stockholders CORRECT ANSWER Profitability The firm's managers use ratios to _________ CORRECT ANSWER All of the above