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

Which ratio compares profit to some measure of resources invested?

The development of pro forma income statements and balance sheets is an important step in the financial planning function performed by financial managers.

List four specific financial ratios used by financial managers and explain what each measures.

A wealthy relative offers you $1000 today but doesn't actually get around to giving you the money until a year later.The delay in receiving the money causes you to lose the opportunity to earn a year's worth of interest.This example illustrates the rationale for the time value of money.

Financial managers at Tuckerverse Corporation have just computed the NPV for a capital budgeting proposal and found that it is $1500.The financial managers are likely to approve this proposal.

Which of the following is granted by suppliers when they ship materials,parts,or goods to a firm without requiring immediate payment?

Sally Meadows works for Swictek Industries.Her primary responsibilities involve management of the firm's working capital and the analysis of long-term investment opportunities for Swictek.In which area is Sally's job?

The net present value of an investment proposal is found by adding the present values of all of its estimated future cash flows and subtracting the initial cost of the investment from the sum.

Which of the following best describes how today's financial managers feel about treating customers,employees,suppliers,creditors,and other stakeholders with fairness and respect?

The manager of Timmy's Timbers,the local landscape company,realizes that he runs a seasonal business.For example,although his sales do not start coming in until April and May,he needs to be well-stocked in March in anticipation of the spring sales.What should he create to help plan for when the firm will need to arrange for additional funds in order to avoid a cash crunch?

A pro forma balance sheet projects the types and amounts of revenues a firm will need to execute future plans and shows the amount of additional financing needed to acquire those assets.

What is the term for short-term IOUs issued by the government that mature in 4,13,and 26-week increments?

A firm can never hold too much cash.

A high debt-to-equity ratio indicates that the firm is relying heavily on debt,or is "highly leveraged."

Which of the following is a mathematical tool financial managers use to assess the financial strengths and weaknesses of their firm?

What are the two primary sources of equity financing?

In the 21st century,managers use financial calculators and spreadsheet software to make computing present values easy by simply entering the amount and timing of the estimated cash flow into the calculator (or spreadsheet)along with the discount rate.

Lentz-Tucker Incorporated reported net income of $3 million and paid no dividends to its shareholders.The shareholders have the legal right to sue the company for failure to provide a return on their investment.

Managing current assets involves trade-offs.Give two examples of current assets,and specify the trade-offs involved a manager needs to consider when managing those assets.

Two firms that have very similar real-world financial performance might report very different profitability ratios if they use different but equally acceptable accounting procedures to develop their income statements and balance sheets.