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Foundations of Business Finance questions and answers
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Foundations of Business Finance Exam
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Foundations of Business Finance(Peregrine)
True or false: The one fixed asset that is not depreciated is land because it seldom
declines in value. - answersTrue
__________ liabilities are those due within one year. - answersCurrent
__________-__________ __________ liabilities are due after more than a year, and
may include bonds, mortgages, and long-term loans. - answersLong-term debt
Name the three types of accounts listed as current liabilities on balance sheets. -
answers(1) Accounts Payable
(2) Notes Payable
(3) Accrued Expenses
Accounts payable - answersThe amounts owed for credit purchases by a firm
Notes payable - answersOutstanding short-term loans, typically from commercial banks
Accrued expenses - answersCosts 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. -
answersStockholders' equity
The Stockholders' equity section of the balance sheet is reflected in four types of
accounts. These include __________ __________, __________ __________,
__________-__________-__________ __________ ___________ __________
__________, and __________ __________. - answers(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. -
answersPreferred stock
__________-__________-__________ __________ __________ __________
__________ equals the number of shares outstanding multiplied by the original selling
price of the shares, net of the par value. - answersPaid-in-capital in excess of par
__________ __________ equals the number of outstanding common shares multiplied
by the par value per share. - answersCommon 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. - answersPar value
__________ __________ are the cumulative total of the earnings that the firm has
reinvested in its assets and operations since its inception. - answersRetained 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). - answerscommon stock,
paid-in-capital
The __________ __________ entry on a balance sheet records the value of common
shares that a firm currently holds in reserve. - answerstreasury 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. - answersstatement of cash flows
A firm's total cash flows can be conveniently divided into three categories. These
include __________ flows, __________ flows, and __________ flows. -
answersoperating, investment, financing
Operating flows - answersCash inflows and outflows directly related to the production
and sale of products or services
Investment flows - answersCash flows associated with the purchase or sale of fixed
assets and business equity
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