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Finance Flashcards

Managerial Finance: Chapter 1

A sole proprietor has unlimited liability; his or her total investment in a business, but not his or her personal assets, can be taken to satisfy creditors. False
The financial manager must look beyond financial statements to obtain insight into developing or existing problems since the accrual accounting data do not fully describe the circumstances of a firm. True
Managerial finance ________. involves tasks such as budgeting, financial forecasting, cash management, and funds procurement
Which of the following is true of a partnership and a corporation? In a partnership, income is taxed at the corporate level; whereas, in a corporation, income is taxed twice.
Which of the following is true of cash flows and risk? High cash flow and low risk result in an increase in share price.
Johnson, Inc. has just ended the calendar year making a sale in the amount of $10,000 of merchandise purchased during the year at a total cost of $7,000. Although the firm paid in full for the merchandise during the year, it is yet to collect at year end from the customer. The net profit and cash flow from this sale for the year are ________. $3,000 and -$7,000, respectively
Investment decisions generally refer to the items that appear on the ________. left-hand side of the balance sheet, and financing decisions relate to the items on the right-hand side
The board of directors is responsible for managing day-to-day operations and carrying out the policies established by the chief executive officer. False
Cash flows and risk are the key determinants in share price. Increased risk, other things remaining the same, results in ________. a lower share price
Corporate ethics policies typically apply to ________ in dealing with ________. employee actions; all corporate constituents
A capital expenditures analyst/manager is responsible for the evaluation and recommendation of proposed asset investments. True
Institutional investors are professional investors who work on behalf of individuals, business, and government. True
Which of the following is true of sole proprietorships and corporations? In sole proprietorships, owners have unlimited liability; whereas, in corporations, owners have limited liability
The key variables in the owner wealth maximization process are ________. cash flows and risk
A firm has just ended its calendar year making a sale in the amount of $150,000 of merchandise purchased during the year at a total cost of $112,500. Although the firm paid in full for the merchandise during the year, it is yet to collect at year end from the customer. The net profit and cash flow from this sale for the year are ________. $37,500 and -$112,500, respectively
The primary activity of a financial manager is ________. making an investment decision
The board of directors is responsible for managing day-to-day operations and carrying out the policies established by the chief executive officer. False
The conflict between the goals of a firm’s owners and the goals of its non-owner managers is ________. the agency problem
An ethics program is expected to have ________ impact on a firm’s share price. a positive
The profit maximization goal ignores the timing of returns, does not directly consider cash flows, and ignores risk. True
Which of the following is a duty of a financial manager in a business firm? raising financial resources
As the risk of a stock investment increases, investors’ ________. required rate of return will increase
Which of the following line items in a balance sheet is considered the most for making a financing decision? long-term liabilities
If managers are not owners of their company, then they are ________. agents
The amount earned during the accounting period on each outstanding share of common stock is called ________. Earnings per share
An effective ethics program ________. can enhance a corporation’s value

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