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Foundations of Business Finance (Peregrine) Exam Questions & Answers
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Foundations of Business Finance(Peregrine) Exam Questions & Answers
True or false: The one fixed asset that is not depreciated is land because it
seldom declines in value. - -True
-__________ liabilities are those due within one year. - -Current
-__________-__________ __________ liabilities are due after more than a year,
and may include bonds, mortgages, and long-term loans. - -Long-term debt
-Name the three types of accounts listed as current liabilities on balance
sheets. - -(1) Accounts Payable
(2) Notes Payable
(3) Accrued Expenses
-Accounts payable - -The amounts owed for credit purchases by a firm
-Notes payable - -Outstanding short-term loans, typically from commercial
banks
-Accrued expenses - -Costs that have been incurred by a firm which have
not yet been paid; examples of accruals include taxes owed to the
government and unpaid wages
-The __________ __________ section of a balance sheet provides information
about the claims against a firm held by investors who own preferred and
common shares. - -Stockholders' equity
-The Stockholders' equity section of the balance sheet is reflected in four
types of accounts. These include __________ __________, __________ __________,
__________-__________-__________ __________ ___________ __________ __________,
and __________ __________. - -(1) preferred stock
(2) common stock
(3) paid-in-capital excess of par
(4) retained earnings
-__________ __________ shows the total proceeds from the sale of preferred
stock. - -Preferred stock
-__________-__________-__________ __________ __________ __________ __________
equals the number of shares outstanding multiplied by the original selling
price of the shares, net of the par value. - -Paid-in-capital in excess of par
, -__________ __________ equals the number of outstanding common shares
multiplied by the par value per share. - -Common stock
-__________ __________ (often $1) is an artifact of earlier pre-computer
accounting methods used to track the number of outstanding shares. It has
no relation to the actual value of the shares. - -Par value
-__________ __________ are the cumulative total of the earnings that the firm
has reinvested in its assets and operations since its inception. - -Retained
earnings
-The combined value of __________ __________ and __________-__________-
__________ equals the proceeds the firm received when it originally sold
shares to investors (including initial public offerings and rights offerings). - -
common stock, paid-in-capital
-The __________ __________ entry on a balance sheet records the value of
common shares that a firm currently holds in reserve. - -treasury stock
-The __________ __________ __________ __________ provides a summary of what
cash has gone into and out of a firm because of its operations, investments,
and financing activities during a year. It isolates the firm's operating,
investment, and financing cash flows and reconciles them with changes in its
cash and marketable securities during the year. - -statement of cash flows
-A firm's total cash flows can be conveniently divided into three categories.
These include __________ flows, __________ flows, and __________ flows. - -
operating, investment, financing
-Operating flows - -Cash inflows and outflows directly related to the
production and sale of products or services
-Investment flows - -Cash flows associated with the purchase or sale of
fixed assets and business equity
-Financing flows - -Cash flows which result from debt and equity financing
transactions
-__________ __________ __________ is the amount of cash flow available to
investors - the providers of debt and equity capital. It represents the net
amount of cash flow remaining after the firm has met all operating needs
and has made all required payments on both long-term (fixed) and short-
term (current) investments. - -Free cash flow
-__________ current liability changes occur automatically with changes in
sales. They must, therefore, be deducted from current assets in order to find
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