Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which one of these is a correct definition? A) Long-term debt is defined as a residual claim on a firm’s assets. B) Tangible assets are fixed assets such as patents. C) Net working capital equals current assets plus current liabilities. D) Current assets are assets with short lives, such as inventory. E) Current liabilities are debts that must be repaid in 18 months or less. 1) 2) Which one of these accounts is included in net working capital? A) inventory B) long-term debt C) copyright D) manufacturing equipment E) common stock 2) 3) The ultimate control of a corporation lies in the hands of the corporate: A) president. B) stockholders. C) chairman of the board. D) board of directors. E) chief executive officer. 3) 4) Net working capital is defined as: A) fixed assets minus long-term liabilities. B) current assets plus stockholders’ equity. C) current assets minus current liabilities. D) total assets minus total liabilities. E) current assets plus fixed assets. 4) 5) An asset that can be quickly converted into cash without significant loss in value is referred to as being: A) liquid. B) tangible. C) intangible. D) fixed. E) marketable. 5) 1 6) Noncash items refer to: A) expenses charged against revenues that do not directly affect cash flow. B) the costs incurred for the purchase of intangible fixed assets. C) all accounts on the balance sheet other than cash on hand. D) the credit sales of a firm. E) the accounts payable of a firm. 6) 7) The cash flow resulting from a firm’s ongoing, normal business activities is referred to as the: A) cash flow to investors. B) net capital spending. C) additions to net working capital. D) operating cash flow. E) cash flow to retained earnings. 7) 8) Projected future financial statements are called: A) plug statements. B) comparative statements. C) reconciled statements. D) aggregated statements. E) pro forma statements. 8) 9) Which statement expresses all accounts as a percentage of total assets? A) common-size income statement B) common-size balance sheet C) pro forma balance sheet D) pro forma income statement E) statement of cash flows 9) 10) The quick ratio is measured as: A) current assets minus inventory minus current liabilities. B) current liabilities divided by current assets, plus inventory. C) current assets minus inventory, divided by current liabilities. D) current assets divided by current liabilities. E) cash on hand plus current liabilities, divided by current assets. 10) 11) Ratios that measure a firm’s financial leverage are known as ________ ratios. A) asset management B) profitability C) long-term solvency D) market value E) short-term solvency 11) 2 12) The debt-equity ratio is measured as: A) long-term debt divided by total equity. B) total equity divided by total debt. C) total debt divided by total eq ...