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WorksheetsChapter 9 Financial Management Review
Total questions: 35
Worksheet time: 3hrs 55mins
What are the funds that a firm uses to acquire its assets and finance its operations?
Physical assets
Human resources
Intellectual property
Financial capital
Who are some of the possible uses of financial capital?
Paying bills from suppliers
Repaying bank loans
Meeting Payroll expenses
Paying taxes
What is the functional area of a business that is concerned with finding the best sources and uses of financial capital?
Marketing
Finance
Operations
Human Resources
What is, historically, the most widely accepted goal of financial management?
Increase market share
Maximize the value of the firm to its owners
Reduce operational costs
Expand product lines
What is the famous court case that found that a business corporation is organized and carried on primarily for the profit of the stockholders?
Brown v. Board of Education
Roe v. Wade
Dodge v. Ford Motor Company
Marbury v. Madison
What is the term for a degree of uncertainty regarding the outcome of a decision?
Loss
Profit
Risk
Gain
What is the observation that financial opportunities that offer high rates of return are generally riskier than opportunities that offer lower rates of return?
Profit/Loss analysis
Supply-demand balance
Cost-benefit analysis
Risk-return trade-off
What is a low risk, low return investment and what is the average return?
3 month Treasury bills, about 3.5%
Corporate bonds, about 5.00%
Real estate, about 7.00%
Mutual funds, about 6.50%
What is a high risk, high return investment and what is the average return?
S & P 500 Stocks, about 11.5%
Government bonds, about 4.00%
Savings account, about
1.00%
Gold, about 8.00%
What is it called when you compute ratios that compare values of key accounts listed on a firm’s financial statements?
Cost analysis
Market analysis
Financial ratio analysis
Break-even analysis
What are the most important financial ratio categories?
Liquidity
Asset Management
Leverage
Profitability
How do you calculate the Current Ratio and what does it measure?
Current Assets/Current Liabilities, ability to pay short-term liabilities
Total Assets/Total Liabilities, overall financial health
Net Income/Revenue, profitability
Cash Flow/Operating Expenses, liquidity
What is the ratio that compares the amount of profit to the resources invested?
Gross margin
Return on investment
Earnings per share
Net profit margin
What is a projection showing how a firm's budgeted sales and costs will affect expected net income?
Budgeted income statement
Cash flow statement
Balance sheet
Profit and loss account
What is a detailed forecast of future cash flows that helps financial managers identify when their firm is likely to experience temporary shortages or surpluses of cash?
Income statement
Cash budget
Balance sheet
Cash flow statement
What are the common options for short-term financing?
Trade Credit
Factoring
Short Term Bank Loans
Commercial Paper
What is financing granted by sellers when they deliver goods and services without requiring immediate payment?
Cash Advance
Trade Credit
Installment credit
Revolving credit
What is it called when a company sells their accounts receivable at a discount?
Privatizing
Leasing
Factoring
Securitization
What is a short term promissory note issued by large corporations?
Commercial paper
Corporate bond
Treasury bill
Certificate of deposit
What is a part of a firm’s net income that it reinvests in the company?
Cash Flow
Retained earning
Capital gains
Interest income
What is it called when the owners of a company provide funding for the company?
Crowd funding
Debt financing
Venture capital
Equity financing
What is it called when funds to finance a company are provided by a lender?
Venture capital
Equity financing
Debt financing
Crowdfunding
What is one advantage of debt financing?
Interest payments are tax deductible
No obligation to repay
Ownership is diluted
Higher risk of bankruptcy
What is an obvious disadvantage of debt financing?
The requirement to make fixed payments
Dilution of ownership
Higher cost of capital
Limited access to funds
For corporations, what are the two major sources of equity financing?
Bank loans and Bonds
Retained earnings and money invested by new stockholders
Venture capital and angel investors
Government grants and subsidies
What do you call a firm that relies on a lot of debt in their capital structure?
Over-capitalized
Under-capitalized
Highly leveraged
Debt-free
What is the law enacted that strengthened government oversight of financial markets?
Dodd-Frank Act
Sarbanes-Oxley Act
Glass-Steagall Act
Gramm-Leach-Bliley Act
What are safe and highly liquid assets that many firms list with their cash holdings on their balance sheet?
Inventory
Fixed assets
Intangible assets
Cash equivalents
What are short term, 1 year or less, IOUs issued by the US federal government?
Municipal bonds
Corporate bonds
US Treasury Bills (T-bills)
Commercial paper
What do you call a mutual fund that pools funds from many investors and uses these funds to purchase very safe, highly liquid securities?
Money market mutual funds
Equity mutual funds
Bond mutual funds
Index mutual funds
What is it called when customers buy on credit and owe money to a company?
Accounts Payable
Accounts Receivable
Credit Liability
Debt Obligation
What is the process a firm uses to evaluate long-term investment proposals?
Capital budgeting
Financial forecasting
Investment analysis
Risk assessment
What is the principle that a dollar received today is worth more than a dollar received in the future?
Present value theory
Inflation principle
Future value concept
Time value of money
What is an interest earning deposit that requires funds to remain deposited for a fixed term?
Certificate of deposit (CD)
Savings account
Money market account
Checking account
What is the sum of the expected cash flows from an investment, minus the cost of the investment?
Net present value (NPV)
Gross profit
Return on investment (ROI)
Internal rate of return (IRR)
