Financial Management Exam 1 (Chapters 1–3) – Study Guide, Key Concepts and Practice
Questions Review
Which one of the following questions involves a capital (budgeting) decision? - ANS ✔✔Should
the firm purchase a new machine for the production line?
Which one of the following questions involves a capital (structure) decision? - ANS ✔✔How
much debt should the firm incur to fund a project?
Determining the number of shares of stock to issue is an example of a _________ decision. -
ANS ✔✔capital structure
Which one of the following questions is a working capital management decision? - ANS
✔✔Should we offer credit terms to all customers or only certain customers?
Which one of the following questions involves a working capital management decision? - ANS
✔✔Should the firm require immediate payment from customers or offer credit terms?
Which one of the following questions involves a working capital management decision? - ANS
✔✔What is the maximum level of cash to be kept in the firm's bank account?
Deciding which long-term investment a firm should make is a _________decision. - ANS
✔✔capital budgeting
A firm's mixture of debt and equity financing is the result of its _________ decisions. - ANS
✔✔capital structure
A firm's _________balance reflects the firm's mix of short-term assets and short-term liabilities.
- ANS ✔✔net working capital
,Financial managers should primarily focus on the interests of: - ANS ✔✔shareholders
Which one of the following outcomes best illustrates that the management of a firm is adhering
to the goal of financial management? - ANS ✔✔
Which one of the following outcomes best illustrates that the management of a firm is adhering
to the goal of financial management? - ANS ✔✔An increase in the market value per share
Decisions made by financial managers should primarily focus on increasing the? - ANS
✔✔market value per share of outstanding stock.
Agency problems are most likely to be associated with - ANS ✔✔corporations
Ultimately, the _________ control(s) the corporation. - ANS ✔✔shareholders
Which one of the following items is classified as a tangible(can be touched) fixed asset?
Multiple Choice
Accounts receivable
Goodwill
Office furniture
Cash
Inventory - ANS ✔✔Office Furniture
Which one of the following items is classified as a current asset?
, Multiple Choice
Accounts payable
Patents
Inventory
Goodwill
Office furniture - ANS ✔✔Inventory
Which one of the following items is a current liability?
Multiple Choice
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
A past due amount due from a customer - ANS ✔✔An invoice payable to a supplier in 45 days
Which one of the following statements concerning net working capital is correct?
Multiple Choice
Net working capital increases when inventory is purchased with cash.
Net working capital may be a negative value.
Total assets must increase if net working capital increases.
Net working capital excludes inventory.
Net working capital is the amount of cash a firm currently has available for spending. - ANS
✔✔Net working capital may be a negative value.
Questions Review
Which one of the following questions involves a capital (budgeting) decision? - ANS ✔✔Should
the firm purchase a new machine for the production line?
Which one of the following questions involves a capital (structure) decision? - ANS ✔✔How
much debt should the firm incur to fund a project?
Determining the number of shares of stock to issue is an example of a _________ decision. -
ANS ✔✔capital structure
Which one of the following questions is a working capital management decision? - ANS
✔✔Should we offer credit terms to all customers or only certain customers?
Which one of the following questions involves a working capital management decision? - ANS
✔✔Should the firm require immediate payment from customers or offer credit terms?
Which one of the following questions involves a working capital management decision? - ANS
✔✔What is the maximum level of cash to be kept in the firm's bank account?
Deciding which long-term investment a firm should make is a _________decision. - ANS
✔✔capital budgeting
A firm's mixture of debt and equity financing is the result of its _________ decisions. - ANS
✔✔capital structure
A firm's _________balance reflects the firm's mix of short-term assets and short-term liabilities.
- ANS ✔✔net working capital
,Financial managers should primarily focus on the interests of: - ANS ✔✔shareholders
Which one of the following outcomes best illustrates that the management of a firm is adhering
to the goal of financial management? - ANS ✔✔
Which one of the following outcomes best illustrates that the management of a firm is adhering
to the goal of financial management? - ANS ✔✔An increase in the market value per share
Decisions made by financial managers should primarily focus on increasing the? - ANS
✔✔market value per share of outstanding stock.
Agency problems are most likely to be associated with - ANS ✔✔corporations
Ultimately, the _________ control(s) the corporation. - ANS ✔✔shareholders
Which one of the following items is classified as a tangible(can be touched) fixed asset?
Multiple Choice
Accounts receivable
Goodwill
Office furniture
Cash
Inventory - ANS ✔✔Office Furniture
Which one of the following items is classified as a current asset?
, Multiple Choice
Accounts payable
Patents
Inventory
Goodwill
Office furniture - ANS ✔✔Inventory
Which one of the following items is a current liability?
Multiple Choice
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
A past due amount due from a customer - ANS ✔✔An invoice payable to a supplier in 45 days
Which one of the following statements concerning net working capital is correct?
Multiple Choice
Net working capital increases when inventory is purchased with cash.
Net working capital may be a negative value.
Total assets must increase if net working capital increases.
Net working capital excludes inventory.
Net working capital is the amount of cash a firm currently has available for spending. - ANS
✔✔Net working capital may be a negative value.
