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Terms in this set (20)
The primary goal of financial management is to:
Maximize the current value per share of the existing stock.
The possibility of conflict of interest between the stockholders and management of the firm is called:
The agency problem
Which of the following statements is true regarding the corporate form of organization compared to that of the sole proprietorship?
The sole proprietorship is the simplest business to start-up.
Commtel Partners hires Smith Brothers investment bank to negotiate the purchase of the fiber optic assets of Lightware.com. Identify the parties to this transaction.
Commtel is the principle and Smith is the agent.
Why does the double taxation problem exist for corporations?
Corporations earn taxable income, pays taxes on that income, and then pay dividends to the stockholders, who also have net taxable income.
Which of the following is NOT typically characterized as a current asset?
Which of the following would most likely be considered the most liquid asset?
A bond issued by a municipal government
Which of the following is a FALSE statement?
All public companies are required to file timely, audited financial statements for purposes of public perusal.
A firm has net fixed assets of $8 million on December 31, 2001 and $14.5 million on December 31, 2002. If the depreciation expense for 2002 was $1,630,000, what was the firm's 2002 capital spending?
Capital Spending = Ending fixed assets - Beginning Fixed Assets + Depreciation = 8.13 million
If total assets = $900, fixed assets = $550, current liabilities = $250, equity = $175, long-term debt = $475, and current assets is the only remaining item on the balance sheet, what is the value of net working capital?
Networking Capital = Current assets - Current liabilities = $100
Given the following income statement data, calculate operating cash flow: net sales = $4,200, cost of goods sold = $2,650, operating expenses = $580, depreciation = $610, interest expense = $200, tax rate = 35%.
OCF = Earning before interest and taxes + Depreciation - tax
If cash flow from operations is $7,300, net capital spending is $3,500, and net working capital increases by $1,600, what is cash flow from assets?
Cashflow from assets=
Cash flow from operations + Net capital spending
+ Net working capital = 12,400
What was the dividend payout ratio for ABC in 2018?
Dividend payout ration= Dividend pay/Net Income= 0.37
What was the equity multiplier for 2018?
Equity Multiplier = Total Assets/ Total Stock holders equity (Common Stock+Retained earnings) = 1.82
If ABC stock was selling for $30 per share at the end of 2018 and there were 500 shares outstanding, what was the P/E ratio?
P/E Ratio = Current price/ Earnings per share (Net Income/ Shares outstanding) = 13.9
The future value of a series of cash flows over time can be computed by:
c. summing the future values of each of the individual cash flows.
Which one of the following statements is correct?
The present value of an annuity increases when the interest rate increases.
The payment key on a financial calculator generally refers to the:
amount of each annuity cash flow.
the ease with which an asset can be converted into cash
Three forms of business organization
sole proprietorship, partnership, corporation
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