Fin Mgt Of The Firm Test 1 Set 2

Front 1

is a snapshot of the firm’s assets and liabilities at a given point in time

Back 1

the balance sheet

Front 2

Assets are listed in order of

Back 2

decreasing liquidity

Front 3

Positive when the cash that will be received over the next 12 months exceeds the cash that will be paid out
–Usually positive in a healthy firm

Back 3

networking capital

Front 4

–Ability to convert to cash quickly without a significant loss in value
–Liquid firms are less likely to experience financial distress
–But liquid assets typically earn a lower return
–Trade-off to find balance between liquid and illiquid assets

Back 4

liquidity

Front 5

is the price at which the assets, liabilities, or equity can actually be bought or sold.

Back 5

Market value

Front 6

Which is more important to the decision-making process? market value or book value

Back 6

market value because the goal is to maximize shareholder value

Front 7

is more like a video of the firm’s operations for a specified period of time.

Back 7

income statement

Front 8

You generally report revenues first and then deduct any expenses for the period when doing an income statement t/f

Back 8

True

Front 9

GAAP says to show revenue when it accrues and match the expenses required to generate the revenue

Back 9

matching principle

Front 10

the percentage paid on the next dollar earned

Back 10

marginal tax rate

Front 11

the tax bill / taxable income

Back 11

average tax rate

Front 12

one of the most important pieces of information that a financial manager can derive from financial statements

Back 12

cashflow