TCDN chapter 1

Which of the following is the correct definition?

• Working capital equals current assets plus current liabilities.

• Current liabilities are debts that must be paid within 18 months or less.

• Current assets are assets with a short usage period, such as inventory.

• Long-term debt is defined as the remaining claims against a company's assets.

• Tangible assets are fixed assets such as patents.

The person controlling the company is usually responsible for which of the following functions?

• Capital expenditure

• Cash management

• Tax reporting

• Financial planning

• Credit management

Which area does the company's treasurer supervise among the following?

• Financial planning

• Cost accounting

• Tax reporting

• Information systems

• Financial accounting

The capital structure of a company refers to:

• The mix of different types of production equipment.

• Investment choices for surplus cash funds.

• The combination of cash and cash equivalents.

• The combination of accounts appearing on the left side of the balance sheet.

• The ratio of financing from short-term debt, long-term debt, and equity.

Short-term finance relates to:

• Time of cash flow.

• Buying and selling fixed assets.

• Funding long-term projects.

• Capital budgeting.

• Issuing additional common stock.

Which of the following statements best describes agency costs?

• Increased dividend payments per share

• Benefits received from reduced production costs per unit

• Corporate income tax payments

• Payments necessary for an external audit of the company

• Interest payments on the company's debts

Which of the following accounts is included in working capital?

• Copyright

• Production equipment

• Common stock

• Long-term debt

• Inventory

Financial managers primarily create value for the company by:

• Maximizing current dividends.

• Investing in assets that generate cash flow exceeding their costs.

• Reducing earnings per share.

• Increasing the company's market share.

• Maximizing current revenue.

Which of the following is a cash outflow from a company?

• Sale of an asset

• Dividend payment

• Sale of common stock

• Issuance of debt

• Retained earnings by the company

For a company to create value, it must:

• Have cash inflows greater than cash outflows from shareholders.

• Generate more cash flow than it uses.

• Reduce investment in fixed assets because fixed assets require cash usage.

• Avoid paying the government so that dividends can be increased.

• Avoid issuing debt securities.