fm ch 2-5

Which one of the following items is classified as a tangible fixed asset?

• • Accounts receivable

• • Goodwill

• • Office furniture

• • Cash

Which one of the following items is a current liability?

• A loan payable to the bank in 4 years

• An invoice payable to a supplier in 45 days

• An amount due from a customer within 90 days

• A note payable to a lender in 18 months

Shareholders' equity:

• is referred to as a firm’s financial leverage.

• is equal to total assets plus total liabilities.

• represents the residual value of a firm.

• includes patents, preferred stock, and common stock.

Net working capital is defined as:

• total liabilities minus shareholders' equity.

• current liabilities minus shareholders' equity.

• fixed assets minus long-term liabilities.

• current assets minus current liabilities.

The cash flow that results from a company's ongoing, normal business activities is called:

• operating cash flow.

• capital spending.

• net working capital.

• cash flow from assets.

A firm has an interval measure of 74. This means that the firm has sufficient liquid assets to:

• cover all of its accounts receivable that are due within the next 74 days

• pay all of its debts that are due within the next 74 days.

• cover its operating costs for the next 74 days

• pay all of its accounts payable for the next 74 days.

Which one of the following ratios best measures a firm's liquidity?

• Market-to-book ratio

• Current ratio

• Debt-equity ratio

• Net profit margin

A firm had sales of $456,000 in 2023 and $520,000 in 2024. The firm's current accounts remained constant. Given this information, which one of the following statements must be true?

• he total asset turnover rate increased.

• he receivables turnover rate decreased.

• The fixed asset turnover decreased.

• The net working capital turnover rate increased.

When done well, financial plans:

• concentrate solely on income and expense items.

• often contain alternative options based on economic developments.

• frequently contain conflicting goals

• assume that firms obtain no additional external financing

Pro forma financial statements:

• must assume that no new equity is issued.

• are projections, not guarantees

• are limited to a balance sheet and income statement

• must assume that no dividends will be paid.