BMAL 590 Business Finance Complete
Solution 2022
A company's balance sheet shows the value of assets, liabilities, and
stockholders' equity
At a specific point in time
On a balance sheet, retained earnings are not "unspent cash" because
They have been used to finance the firm's assets
For both managers and external financial analysts, ________ is the single most
important accounting number found on the income statement
Net income (net profit after tax)
Earnings per share (EPS) is calculated by
Dividing earnings available for common stockholders by the number of shares of
common stock outstanding
Net working capital
Is a measure of a firm's overall liquidity
Why is the quick ratio a more appropriate measure of liquidity than the current
ratio for a large-airplane manufacturer?
It excludes inventory from the numerator of the ratio because it is difficult to convert
inventory to cash and most sales are made on a credit basis
The one fixed asset that is not depreciated is _________
Land
Return on total assets (ROA) is equal to _________
All of the above
When a firm has no "other income," its operating profit and _________ are equal
EBIT
The firm's ________ are primarily interested in ratios that measure the short-term
liquidity of the company and its ability to make principal and interest payments
Creditors
When evaluating financial ratios, analysts typically examine a firm's ratio values
Compared to the firm's previous years' ratio
_________ ratios would provide the best information regarding total return to
common stockholders
Profitability
The firm's managers use ratios to _________
All of the above
The ________ flows result from debt and equity financing transactions
Financing
Which of the following is an inflow of corporate cash?
Depreciation charges
The bottom-up method for forecasting sales
Relies on the ability of sales personnel to assess future demand, usually without the aid
of statistical models
Following ________ financing strategy takes advantage of short-term interest
rates but also increases refinancing risk. Following ________ financing strategy
minimizes the risk of a liquidity crisis, but generally increases borrowing costs.
, Following ________ financing strategy results in the use of long-term funding for
permanent assets and short-term financing for temporary or seasonal
requirements
None of the above
The sustainable growth model gives managers a kind of shorthand projection
that ties together ________ and ________
Growth objectives and financial needs
The key input required to build a cash budget is
The firm's sales forecast
Which of the following are common cash disbursements?
All of the above
Most pro forma statements begin with a sales forecast. One approach to deriving
a sales forecast is the top-down approach. Top-down sales forecasts rely heavily
on
Macroeconomic and industry forecasts
A firm that employs an aggressive strategy to finance assets
Will finance a portion of long-term (permanent) growth in assets with short-term
financing
A strategic plan is a
Long-term guide driven by competitive forces
A cash budget is
A statement of a firm's planned inflows and outflows of cash used to ensure that a firm
has available cash to meet short-term financial obligations
A speedup in ________ should ________ a firm's financing needs; whereas, a
slow down in ________ should ________ financing needs for a firm
Payments; increase; collections; increase
________ are often used as the plug figure in pro forma projections
Cash balances
"Required total financing" figures in a cash budget
Show the additional amount a firm must borrow at the end of each month
A long-term financial plan begins with ________
Strategy
When generating pro forma statements, most firms rely on a ________ approach
to sales forecasts
Blended
Most firms when planning for growth focus on
Meeting sales target growth rates
The terms and conditions to which a bond is subject are set forth in its
Indenture
The preemptive right is important to shareholders because it
Protects the current shareholders against dilution of ownership interests
Companies can issue different classes of common stock. Which of the following
statements concerning stock classes is correct?
None of the above statements is necessarily true
Pure options are instruments that are
All of the above
Solution 2022
A company's balance sheet shows the value of assets, liabilities, and
stockholders' equity
At a specific point in time
On a balance sheet, retained earnings are not "unspent cash" because
They have been used to finance the firm's assets
For both managers and external financial analysts, ________ is the single most
important accounting number found on the income statement
Net income (net profit after tax)
Earnings per share (EPS) is calculated by
Dividing earnings available for common stockholders by the number of shares of
common stock outstanding
Net working capital
Is a measure of a firm's overall liquidity
Why is the quick ratio a more appropriate measure of liquidity than the current
ratio for a large-airplane manufacturer?
It excludes inventory from the numerator of the ratio because it is difficult to convert
inventory to cash and most sales are made on a credit basis
The one fixed asset that is not depreciated is _________
Land
Return on total assets (ROA) is equal to _________
All of the above
When a firm has no "other income," its operating profit and _________ are equal
EBIT
The firm's ________ are primarily interested in ratios that measure the short-term
liquidity of the company and its ability to make principal and interest payments
Creditors
When evaluating financial ratios, analysts typically examine a firm's ratio values
Compared to the firm's previous years' ratio
_________ ratios would provide the best information regarding total return to
common stockholders
Profitability
The firm's managers use ratios to _________
All of the above
The ________ flows result from debt and equity financing transactions
Financing
Which of the following is an inflow of corporate cash?
Depreciation charges
The bottom-up method for forecasting sales
Relies on the ability of sales personnel to assess future demand, usually without the aid
of statistical models
Following ________ financing strategy takes advantage of short-term interest
rates but also increases refinancing risk. Following ________ financing strategy
minimizes the risk of a liquidity crisis, but generally increases borrowing costs.
, Following ________ financing strategy results in the use of long-term funding for
permanent assets and short-term financing for temporary or seasonal
requirements
None of the above
The sustainable growth model gives managers a kind of shorthand projection
that ties together ________ and ________
Growth objectives and financial needs
The key input required to build a cash budget is
The firm's sales forecast
Which of the following are common cash disbursements?
All of the above
Most pro forma statements begin with a sales forecast. One approach to deriving
a sales forecast is the top-down approach. Top-down sales forecasts rely heavily
on
Macroeconomic and industry forecasts
A firm that employs an aggressive strategy to finance assets
Will finance a portion of long-term (permanent) growth in assets with short-term
financing
A strategic plan is a
Long-term guide driven by competitive forces
A cash budget is
A statement of a firm's planned inflows and outflows of cash used to ensure that a firm
has available cash to meet short-term financial obligations
A speedup in ________ should ________ a firm's financing needs; whereas, a
slow down in ________ should ________ financing needs for a firm
Payments; increase; collections; increase
________ are often used as the plug figure in pro forma projections
Cash balances
"Required total financing" figures in a cash budget
Show the additional amount a firm must borrow at the end of each month
A long-term financial plan begins with ________
Strategy
When generating pro forma statements, most firms rely on a ________ approach
to sales forecasts
Blended
Most firms when planning for growth focus on
Meeting sales target growth rates
The terms and conditions to which a bond is subject are set forth in its
Indenture
The preemptive right is important to shareholders because it
Protects the current shareholders against dilution of ownership interests
Companies can issue different classes of common stock. Which of the following
statements concerning stock classes is correct?
None of the above statements is necessarily true
Pure options are instruments that are
All of the above
