10 Financial Choice Questions

QUESTION 1

1. The sources and uses of cash over a stated period of time are reflected on the

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    income statement.
    balance sheet.
    shareholders’ equity statement.
    cash flow statement.

5 points   

QUESTION 2

1. Noncash items refer to:

    sales which are made on a credit basis.
    inventory items purchased using credit.
    intangible assets such as patents.
    expenses, like depreciation, which do not directly affect cash flows.

5 points   

QUESTION 3

1. The book value of a firm is:

    equivalent to the firm’s market value provided that the firm has some fixed assets.
    based on historical cost.
    generally greater than the market value when fixed assets are included.
    more of a financial than an accounting valuation.

5 points   

QUESTION 4

1. The most popular yardstick of financial performance among investors and senior managers is the:

    profit margin.
    return on equity.
    return on assets.
    times burden covered ratio.

5 points   

QUESTION 5

1. Which one of the following ratios identifies the amount of assets a firm needs in order to generate $1 in sales?

    current ratio
    debt-to-equity
    retention
    asset turnover

5 points   

QUESTION 6

1. On a common-size balance sheet, all accounts are expressed as a percentage of:

    sales for the period.
    the base year sales.
    total equity for the base year.
    total assets for the current year.

5 points   

QUESTION 7

1. The most common approach to developing proforma financial statements is called the:

    cash budget method.
    financial planning method.
    seasonality approach.
    percent-of-sales method.

5 points   

QUESTION 8

1. Which one of the following statements is correct concerning the cash balance of a firm?

    Most firms attempt to maintain a zero cash balance at all times.
    The cumulative cash surplus shown on a cash budget is equal to the ending cash balance plus the minimum desired cash balance.
    Most firms attempt to maximize the cash balance at all times.
    A cumulative cash deficit indicates a borrowing need.

5 points   

QUESTION 9

1. Steve has estimated the cash inflows and outflows for his sporting goods store for next year. The report that he has prepared summarizing these cash flows is called a:

    pro forma income statement.
    sales projection.
    cash budget.
    receivables analysis.

5 points   

QUESTION 10

1. Financial planning:

    focuses solely on the short-term outlook for a firm.
    is a process that firms employ only when major changes to a firm’s operations are anticipated.
    is a process that firms undergo once every five years.
    considers multiple options and scenarios for the next two to five years.