busfin chapter 2

a balance sheet is a financial statement that

reflects a firms accounting value on a particular date

a current asset is defined as an asset that

normally converts to cash within one year

a fixed asset by definition

has a relatively long life

a tangible asset

is a fixe asset with a physical existence

an intangible asset

is a valuable fixed asset that has no physical existence

shareholders equity can be defined as

the residual value of a corporation after all debts have been paid

networking capital is defined as the

diff between a firms current assetsand its current liabilities

liquidity is best defined as the

ease and speed with which an asset can be converted to cash

GAAP

are a common set of procedures and standards for preparing audited financial statements

an income statement is a financial statement

that reflects a firms performance over a period of time

earnings per share represent the

amount of net income attributable to each share of stock

a noncash item is defined as

an expense charged against revenues that does not affect the cash flow of a firm

the average tax rate is defined as the

total tax paid divided by the total taxable income

the marginal tax rate is defined as the

amount of tax payable on the next taxable dollar earned

the cash generated from a firms normal business activities is referred to as the

operating cash flow

the cash flow from assetes can be defined as the

cash available to distribute to the creditors and to the stockholders

the net amount of a firms cash flows that are spent on fixed assets is called

net capital spending

free cash flow is another term for the

cash flow from assets

cash flow to creditors is defined as

interest paid mines net new borrowing

the amount of the dividends paid minus the net new equity raised is called the

cash flow to stockholders

which of the folliwing is a current asest

inventory

which one of the following... concerning fixed assets

the book value of most fixed assets decreases over time

tangible assets

are assets that can be physcially touched

intabgible assets

include trademarks and generally have a life of one year or more

which one of the following debts is a current liability?

bull payable to a supplier for the purchase of inventory for resale

long-tern debt can be computed by

adding net working capital to fixed assets and then subtracting the owners equity

shareholders equity includes which of the following

I III and IV only
piad in surplus, bonds payable, retained earnings

which of these accounts are included in net working capital

accounts payable and cash I and IV only

which one of the follwoing will increase the net wokring capital of a firm?

selling shares in the company and using the funds to increase the inventory level

which of the floowing will increase the liquity level of a firm

II III IV the sale of inventory on credit/for cash and the collection of accounts rec

holding highly liquid assets

tends to reduce the potential profits as compared to holding less liquid assets

the greater the degree of financial leverafe employed by a firm, the

greter the level of debt

financial leverage

when overextended greatly magnifies the possibility that a firm will become bankrupt

estimate porential cash inflow

market value

the market value of land is equal to the

anticipated selling price if the land were sold today

the book value of an asset is equal to the

initial cost minus the depreciation to date

an income statement

reflects the income of a firm based upon the acct methods employed

all else constant, as computed in teh income statement, will increase when

the tax rate decreases

which two determine when rev is recorded on teh financial statements based on recognition principle

when the earning process is virutally completeed
when the value of a sale can be reliabily determined

which one of the following is a non cash item

annual depreciation on a fixe asset

angie is analyzing potential income and cash flows which she might realize if she adds a new product to her sales line up, the tac rate relevant to this analysis is the

marginal tax rate

which of teh follow best exemplifies the concept of marginal tax rate

as the result of opening a new store, the Jones Co, had to pay an additional 1.2 mil in taxes

which of the foll will increase the cash flow from assets all else constant

a decrease in net capital spending

a negative cash flow from assets

signals that a firm is relying on external financing operations

if a firm has a negative cash flow from assets every year for several years

the firm is probably either financially distressed or continuously growing

operating cash flow increases when

depreciation increases

capital spending

is the money spent by a firm for net new assets

a decrease in net working capital

is caused by a firm purchasing additional fixed assets

net working capital decreases when

accts payable increases more than accts rec inc

party town downtown paid 800

cash flow is negative

cashflow to creditors is equal to interest paid minus

beginning long term debt minus ending long term debt

cash flow to stockholders

is positive when the amount of the dividends paid exceeds the amount of net new equity raised

a negative cash flow to stockholders indicated that a firm has

sold additional shares of stock

winslow enterprises current assets

4600

peteres pants

7400

gladstone inc

15900

calibers inc

34200

bluestone

12900

le son inc

6900

kaminski and sons

11200

whaling boats

20300

jepsen inc

1400

dallas inc

45900

boardwald boutique

30800

fiels and flowers

75445

ernst electrical

25700

grunzel potters

11000

michaela

30900

rogers sundries

239000

bruces antiques

206000

paulettes clutter

3168

charlies tuna

525

lester

12500

bernie's inc

12655

jonstone nurseries inc

136350

holbotton inc

22 percent

blue bottles inc

44625

Busters Brooms

34 percent