Corporate Finance Quiz

One key reason a long-term financial plan is developed is because:

• the plan determines your financial policy.

• the plan determines your investment policy.

• there are connections between achievable corporate growth and the financial policy.

• there is unlimited growth possible in a well-developed financial plan.

• None of these.

Projected future financial statements are called:

• plug statements.

• pro forma statements.

• reconciled statements.

• aggregated statements.

• None of these.

The percentage of sales method:

• requires that all accounts grow at the same rate.

• separates accounts that vary with sales and those that do not vary with sales.

• allows the analyst to calculate how much financing the firm will need to support the predicted sales level.

• Both requires that all accounts grow at the same rate; and separates accounts that vary with sales and those that do not vary with sales.

• Both separates accounts that vary with sales and those that do not vary with sales; and allows the analyst to calculate how much financing the firm will need to support the predicted sales level.

A standardizes items on the income statement and balance sheet as a percentage of total sales and total assets, respectively.

• tax reconciliation statement

• statement of standardization

• statement of cash flows

• common-base year statement

• common-size statement

Relationships determined from a firm's financial information and used for comparison purposes are known as:

• financial ratios.

• comparison statements.

• dimensional analysis.

• scenario analysis.

• solvency analysis.

Financial ratios that measure a firm's ability to pay its bills over the short run without undue stress are known as ratios.

• asset management

• long-term solvency

• short-term solvency

• profitability

• market value

The current ratio is measured as:

• current assets minus current liabilities.

• current assets divided by current liabilities.

• current liabilities minus inventory, divided by current assets.

• cash on hand divided by current liabilities.

• current liabilities divided by current assets.

The quick ratio is measured as:

• current assets divided by current liabilities.

• cash on hand plus current liabilities, divided by current assets.

• current liabilities divided by current assets, plus inventory.

• current assets minus inventory, divided by current liabilities.

• current assets minus inventory minus current liabilities.

The cash ratio is measured as:

• current assets divided by current liabilities.

• current assets minus cash on hand, divided by current liabilities.

• current liabilities plus current assets, divided by cash on hand.

• cash on hand plus inventory, divided by current liabilities.

• cash on hand divided by current liabilities.

Ratios that measure a firm's financial leverage are known as ratios.

• asset management

• long-term solvency

• short-term solvency

• profitability

• market value