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Which of the following legal forms of organization is characterized by limited liability?

Making investment and financial decisions

The primary emphasis of the financial manager is the use of____

Maximize profit of the owners

The primary goal of the financial manager is____

The share price of the stock

The wealth of the owners of a corporation is represented by_____

Operating Profits

Profits earned from producing and selling products (EBIT)

Financial Leverage

_____ is a term used to describe the magnification of risk and return introduced through the use of fixed cost financing such as preferred stock and long-term debt.

Net Profit Margin

The _______ measures the percentage of each sales dollar remaining after ALL expenses, including taxes, have been deducted.

Operating Cash Flow (OCF)

The cash flow a firm generates from its normal operations

Operating, Investment, Financing

Which of the following is a source of cash flows?

A number of operating budgets, cash budget, and pro forma financial statements

The key output (s) of the short-run financial planning process are a(n)_____

Cash Budget

The________ is a financial projection of the firm's short-term cash surpluses or shortages

Depreciation and other noncash charges

Cash disbursements may include all of the following EXCEPT

Assumes all costs are variable

A weakness of the percent-of-sales method to preparing a pro forma income statement

Tends to understate profits when sales are increasing

In a period of rising sales, utilizing past cost and expense ratios (percent-of-sales method) when preparing pro forma financial statements will tend to


A collection of assets is called

The higher the required return

the higher an asset's beta,

Capital Budgeting

_____is the process of evaluating and selecting long-term investments consistent with the firm's goal of owner wealth maximization

Internal Rate of Return (IRR)

The______ is the discount rate that equates the present value of the cash inflows with the initial investment

Cost of Capital

The______ is the rate of return a firm must earn on its investments in projects in order to maintain the market value of its stock

Net proceeds; Flotation costs

The ______ from the sale of a security are the funds actually received from the sale after_____, or the total costs of issuing and selling the security, which have been subtracted from the total proceeds

Breakeven Analysis

Is a technique used to assess the returns associated with various cost structures and levels of sales


_____costs are a function of volume, not time


_____ leverage is concerned with the relationship between sales revenue and earnings per share


The higher financial leverage causes____ to increase more for a given increase in _______

Lower the market price

The purpose of a stock split is to____

Increase the market price

The purpose of a reverse stock split is to _____

Increase; Increase

The repurchase of stock____ the earnings per share and _____ the market price of stock

Net Working Capital

The portion of a firm's current assets financed with long-term funds may be called

Technically Insolvent

In working capital management, risk is measured by the probability that a firm will become________

Risk decreases

In general, the more net working capital a firm has,

Permanent and seasonal

The firm's financing requirements can be separated into


_______are liabilities for services received for which payment has yet to be made. The most common accounts are taxes and wages

Revolving credit agreements

A line of credit guaranteed to a borrower by a commercial bank regardless of the scarcity of money. Commitment fee usually charged. Can be greater than 1


_____involves the sale of accounts receivable

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