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FUNDAMENTALS OF CORPORATE FINANCE MIDTERM REVIEW QUESTIONS AND ANSWERS #4
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FUNDAMENTALS OF CORPORATE FINANCE MIDTERM REVIEW QUESTIONS AND ANSWERS #4
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FUNDAMENTALS OF CORPORATE FINANCE MIDTERM REVIEWQUESTIONS AND ANSWERS #4
Working capital management - correct answer how will we manage the day-to-day
financial activities?
Capital structuring - correct answer how will this investment be financed?
Capital structure - correct answer the mixture of debt and equity maintained by a firm
Capital budgeting - correct answer what long term investments should the firm make?
Capital budgeting - correct answer the process of planning and managing a firm's long-
term investments.
Net working capital - correct answer current assets - current liabilities
What is the term for the money you have for daily operating? - correct answer net
working capital
Depreciation - correct answer _________ does not affect cash flow.
Agency problem - correct answer the possibility of conflict of interest between the
owners and management of the firm
Would there be an agency problem in a sole proprietorship? - correct answer no,
because the agent is the principal
Noncash expenses - correct answer expenses charged against revenues that do not
directly affect cash flow, such as depreciation.
Generally accepted accounting principles [g a a p] - correct answer the common set of
standards and procedures by which audited financial statements are prepared.
Ocf (operating cash flow) equation - correct answer earnings before interest and taxes
(ebit) + depreciation - taxes
Operating cash flow [ocf] - correct answer cash generated from a firm's normal business
activities
Common-size statement - correct answer a standardized financial statement presenting
all items in percentage terms. Balance sheet items are shown as percentage of assets
and income statement items as a percentage of sales.
Ebit - correct answer earnings before interest & taxes
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