FINC201.CH1-2HW

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Siena College *

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201

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Finance

Date

Feb 20, 2024

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docx

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Chapter 1&2 homework 1) Which one of the following terms is defined as the management of a firm's long-term investments? A) Working capital management. B) Capital budgeting. (what to do? = what long-term investments to take) C) Capital structure. D) Financial allocation. E) Agency cost analysis. 2) Which one of the following terms is defined as the mixture of a firm's debt and equity financing? A) Working capital management. B) Capital budgeting. C) Capital structure. (How to get $ = how should we pay for assets?) D) Cost analysis. E) Cash management. 3) A business owned by a solitary individual who has unlimited liability for its debt is called a: A) General partnership. B) Corporation. C) Limited liability company. D) Sole proprietorship. (single owner) E) Limited partnership. 4) A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a: A) Limited partner. (invest in exchange for shares; liability does not exceed investment) B) General partner. C) Corporate shareholder. D) Zero partner. E) Sole proprietor.

5) Which one of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers? A) Corporate breakdown. B) Legal liability. C) Articles of incorporation. D) Bylaws. E) Agency problem. (Management goals vs. agency costs) 6) Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date? A) Balance sheet. (snapshot) B) Statement of cash flows. C) Dividend statement. D) Income statement. E) Creditor's statement. 7) Net working capital is defined as: A) Fixed assets minus long-term liabilities. B) Current assets minus current liabilities. (NWC = CA-CL) C) Total liabilities minus shareholders' equity. D) Total assets minus total liabilities. E) Current liabilities minus shareholders' equity.

8) At the beginning of the year, the long-term debt of a firm was $72,918 and total debt was $138,407. At the end of the year, long-term debt was $68,219 and total debt was $145,838. The interest paid was $6,430. What is the amount of the cash flow to creditors? CF to creditor = $11,129 9) The Daily News had net income of $121,600 of which 40 percent was distributed to the shareholders as dividends. During the year, the company sold $75,000 worth of common stock. What is the cash flow to stockholders? CF to stockholders = -26,360

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