Financial Management 41. The first area of study to benefit from the focus in the 1950's to a more analytical, decision oriented approach was:
cash and inventory management capital budgeting (allocating financial capital to the purchase of plant and equipment) capital structure formulation (the balance between liabilities and equity) dividend policy (the relationship between dividends and earnings) View answer Correct answer: (B)
42. Agency theory examines the:
relationship between the owners and managers of the firm insurability of the firm's assets relationship between dividend policy and firm value value of the firm relative to other firms in the industry View answer Correct answer: (A)
43. A corporation will typically pay moderate dividends in:
Development-Stage I Growth-Stage II Expansion-Stage III Maturity-Stage IV View answer Correct answer: (C)
44. The balance sheet of the firm shows:
the profitability of the firm over time the holdings and obligations of the firm the assets of the firm on a current cost basis the receipt and disbursement of corporate funds View answer Correct answer: (B)
45. The statement of cash flows:
measures changes in net income over time the receipt and disbursement of funds of the firm the assets of the firm and the means by which they are financed emphasizes the critical nature of the firm's cash flows View answer Correct answer: (D)
46. To an economist, the term income means:
sales-cost of goods sold change in real worth taking place between the beginning and each of a period operating profit-interest expense earnings aftertaxes View answer Correct answer: (B)
47. Under the Du Pont method of analysis, return on total assets is:
profit margin times assets turnover net income/total assets income before interest and taxes (EBIT)/total assets net income/sales View answer Correct answer: (B)
48. To the securities analyst, the most important ratio group is:
asset utilization profitability liquidity debt utilization View answer Correct answer: (B)
49. Which of the following is not a step in the development of the pro forma income statement?
Establish a sales projection. Determine a production schedule and associated expenses to determine gross profit. Determine the cash receipts. Determine profit by completing the actual pro forma statement. View answer Correct answer: (C)
50. The first step in preparing the pro forma balance sheet is to:
prepare the pro forma income statement prepare the cash budget prepare the statement of cash flows examine the prior period's balance sheet and translate the items through time View answer Correct answer: (D)