Exam 8: Finance: Acquiring and Using Funds to Maximize Value

Earnings per share (EPS)is a profitability ratio measuring how much a firm earns per share of common stock outstanding.

Inventories include stocks of goods,materials,and work-in-process that firms hold as part of doing business.

Which of the following represents funds that arise as a natural result of a firm's business operations without the need for special arrangements?

Which of the following is one drawback of offering credit customers more time to pay?

Return on equity is a profitability ratio calculated by dividing net income by average common stock equity.If the firm issues preferred stock,the dividends paid to preferred shareholders are subtracted from net income.

Discuss how financial managers use cash budgets.

The financial managers at the Swictek Corporation want to ensure that the company has access to a guaranteed amount of money from their bank over the next year.They can achieve this result by arranging a line of credit with their banker.

Lottadoe and Bigbux are two companies that are identical in every respect except that Lottadoe uses only equity financing while Bigbux relies heavily on debt financing.Over the past year,the firms had identical net incomes before interest and taxes were taken into account.If this net income was very high,what would it mean for Bigbux?

Evaluating recent financial performance,planning for effective use of one's financial resources,and evaluating long-run investments are all functions that are carried out by financial managers.

Sally Snooks has recently completed this class.While attending her company's holiday party,she hears one of the executives mention that the company is heavily leveraged.Sally,who recently bought 300 shares in the company's stock,is very interested in this bit of information.What does Sally understand such leverage will do for her?

What are the four basic categories of financial ratios?

If an invoice contains the terms 2/10 net 30,the supplier is offering a 10% cash discount off the invoice price if the buyer pays quickly (within 2 days).

Which of the following forecasts the sales,expenses,and net income for the firm in some future time period?

Jason,the regional manager for a large electronics firm,is trying to determine whether a new warehouse is a good investment.After working with his firm's financial managers,he concludes that the project carries a negative net present value.What should Jason do-and why?

Two firms in the same industry are the same size and have very similar real-world financial results.Which of the following describes the profitability ratios of these firms?

Which of the following tells us that a dollar received today is worth more than a dollar received in the future?

A cash budget is a detailed projection of cash flows that financial managers use to identify when a firm is likely to experience temporary shortages or surpluses of cash.

Danielle,the regional manager of CDz music store,is trying to determine if the store should invest in a new computerized inventory tracking system.Using financial analysis,she would decide that the investment was desirable in which of the following situations?

Return on assets is a profitability ratio that is found by dividing net income by average total assets.

A factor is a company that provides long-term financing to firms by purchasing the firm's bonds and other long-term securities at a discount.