BMAL 590 Business Finance Exam Questions and Answers
Grade A+
A company's balance sheet shows the value of assets, liabilities, and stockholders'
equity - Answer-At a specific point in time
On a balance sheet, retained earnings are not "unspent cash" because - 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 - Answer-Net income
(net profit after tax)
Earnings per share (EPS) is calculated by - Answer-Dividing earnings available for
common stockholders by the number of shares of common stock outstanding
Net working capital - 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? - 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 _________ - Answer-Land
Return on total assets (ROA) is equal to _________ - Answer-All of the above
, When a firm has no "other income," its operating profit and _________ are equal -
Answer-EBIT
The firm's ________ are primarily interested in ratios that measure the short-term
liquidity of the company and its ability to make principal and interest payments -
Answer-Creditors
When evaluating financial ratios, analysts typically examine a firm's ratio values -
Answer-Compared to the firm's previous years' ratio
_________ ratios would provide the best information regarding total return to
common stockholders - Answer-Profitability
The firm's managers use ratios to _________ - Answer-All of the above
The ________ flows result from debt and equity financing transactions - Answer-
Financing
Which of the following is an inflow of corporate cash? - Answer-Depreciation
charges
The bottom-up method for forecasting sales - Answer-Relies on the ability of sales
personnel to assess future demand, usually without the aid of statistical models
Following ________ financing strategy takes advantage of short-term interest rates
but also increases refinancing risk. Following ________ financing strategy
Grade A+
A company's balance sheet shows the value of assets, liabilities, and stockholders'
equity - Answer-At a specific point in time
On a balance sheet, retained earnings are not "unspent cash" because - 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 - Answer-Net income
(net profit after tax)
Earnings per share (EPS) is calculated by - Answer-Dividing earnings available for
common stockholders by the number of shares of common stock outstanding
Net working capital - 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? - 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 _________ - Answer-Land
Return on total assets (ROA) is equal to _________ - Answer-All of the above
, When a firm has no "other income," its operating profit and _________ are equal -
Answer-EBIT
The firm's ________ are primarily interested in ratios that measure the short-term
liquidity of the company and its ability to make principal and interest payments -
Answer-Creditors
When evaluating financial ratios, analysts typically examine a firm's ratio values -
Answer-Compared to the firm's previous years' ratio
_________ ratios would provide the best information regarding total return to
common stockholders - Answer-Profitability
The firm's managers use ratios to _________ - Answer-All of the above
The ________ flows result from debt and equity financing transactions - Answer-
Financing
Which of the following is an inflow of corporate cash? - Answer-Depreciation
charges
The bottom-up method for forecasting sales - Answer-Relies on the ability of sales
personnel to assess future demand, usually without the aid of statistical models
Following ________ financing strategy takes advantage of short-term interest rates
but also increases refinancing risk. Following ________ financing strategy
