Chapter 8: Assessing a New Venture's Financial Strength and Viability (L8)

1) The four main financial objectives of a firm are ________.

• A) efficiency, effectiveness, strength, and flexibility

• B) power, success, efficiency, and effectiveness

• C) control, effectiveness, liquidity, and power

• D) success, strength, liquidity, and profitability

• E) profitability, liquidity, efficiency, and stability

2) Match the financial objective with its correct definition.

• A) Stability — the overall health of the financial structure of the firm, particularly as it relates to its debt-to-equity ratio

• B) Profitability — how productively a firm utilizes its assets

• C) Liquidity — a company's ability to make a profit

• D) Efficiency — a company's ability to meet its short-term obligations

• E) Profitability — the overall health of the financial structure of the firm, particularly as it relates to its debt-to-equity ratio

3) ________ is a company's ability to meet its short-term financial obligations.

• A) Liquidity

• B) Profitability

• C) Effectiveness

• D) Stability

• E) Efficiency

4) A company's ability to productively utilize its assets relative to its revenue and its profits is referred to as ________.

• A) efficiency

• B) effectiveness

• C) stability

• D) liquidity

• E) profitability

5) Money owed to a company by its customers is referred to as ________.

• A) accounts obtainable

• B) accounts payable

• C) accounts receivable

• D) inventory

• E) accounts collectable

6) Susan Howard owns a seafood restaurant in Naples, Florida. She is currently owed $21,000 by a corporation that she catered a series of meetings for and $3,000 on an overdue account. Amanda has $24,000 in ________.

• A) accounts receivable

• B) inventory

• C) accounts collectable

• D) accounts obtainable

• E) accounts payable

7) The strength and vigor of a firm's overall financial posture is referred to as ________.

• A) liquidity

• B) effectiveness

• C) stability

• D) profitability

• E) efficiency

8) A financial statement is a(n) ________.

• A) set of ratios which depict relationships between a firm's financial items

• B) estimate of a firm's future income and expenses

• C) hybrid statement of cash flows

• D) itemized forecast of a company's income, expenses, and capital needs

• E) written report that quantitatively describes a firm's financial health

9) ________ are an estimate of a firm's future income and expenses, based on its past performance, its current circumstances, and its future plans.

• A) Calculation statements

• B) Forecasts

• C) Statements of cash flow

• D) Financial statements

• E) Prediction statements