Chapter 1 Flashcards
(15 cards)
A firm’s financial structure represents the sources of funds used to finance its assets.
True
Depreciation is an operating expense that directly affects a company’s cash outflows.
False
(It’s a non-cash expense that reflects asset value reduction over time.)
Fixed liabilities include obligations expected to be settled within one year.
False
(Fixed liabilities are long-term obligations.)
The primary goal of financial management is to maximize short-term profits.
False
(The goal is to maximize shareholder value over the long term.)
A company’s balance sheet reflects its financial status at a specific point in time.
True
Working capital is calculated as the difference between total assets and total liabilities.
False
(It’s the difference between current assets and current liabilities.)
Fixed assets like machinery are considered part of a company’s economic structure.
True
The cash conversion cycle is always negative for all industries.
False
(It depends on the industry; some industries like retail groceries may have a negative cash cycle.)
Current assets like inventory and receivables are part of a firm’s economic structure.
True
The assets of the firm are part of the economic structure of the balance.
True
Net working capital is always a positive value for financially stable companies.
True
The depreciation process is both an economic and financial tool for managing long-term assets.
True
A mismatch between cash inflows and outflows during operating activities is a common short-term finance challenge.
True
The operating cycle includes the time from placement of the order of raw materials or merchandise until arrival of the stock.
False
(the operating cycle may not include the time from placement of the order until arrival of the stock).
Deciding the optimum level of the inventories it is a one of the tasks of the financial manager.
True
