For the following, fill in the blanks with the appropriate term(s). For questions that give you two or three choices to choose from, circle the most appropriate. (7.)A bal ahie shee t can be thought of as a snapshot of fim accounting value at a particular date. The value of a firm's assets equals liabiiaies+Stodhales y Altematively, shareholders' equity - assets-Libilitie (7.2) Equity holders are entitled only to are paid. The use of debt in a firm's capital structure is called are debts, so the firm is obligated to pay creditors principal and interest. value, the portion left after creditors (7.3) A primary reason that accounting income differs from cash flow is that an income statement contains EoLash items; the most important of these is deprecnto esc Some of period costs may be fixed and others may be variable. The company president's salary for example, is a period cost and is probably in the short run. tab (7.4) The statement of cash flows organizes sources and uses of cash into three categories: and activities Depreciation reduces the firm's tax liabinty, it appears as dividends paid are a of cash, while a of cash (7.5) Activities that bring in cash are called spending cash are called account some assets. This would be a net then the firm has made a net payment -a of cash. of cash, and activities that involve of cash. Loosely speaking, an increase in an asset of cash. If an asset account went down, then, on a net basis, the firm sold means a of cash. Similary, if a liability account goes down, (7.6) The DuPont identity tells us that ROE is affected by three things:ycaig ollcie uge (7.7) Basic policy elements that must be established by management to develop a financial plan are: of cash. (7.5) Activities that bring in cash are called spending cash are called account means a of cash. If some assets. This would be a net then the firm has made a net payment-a of cash, and activities that involve of cash. Loosely speaking, an increase in an asset an asset account went down, then, on a net basis, the firm sold of cash. Similary, if a liability account goes down of cash ty tells us that ROE is affected by three things: D ere (7.6) The DuP (7.7) Basic policy elements that must be established by management to develop a financial plan are: 1. The firm's needed investment in new assets. 2. The degree of financial leverage the firm elects to employ. 3. The amount of cash the firm thinks is necessary and appropriate to pay shareholders. 4. The amount of liquidity and working capital the firm needs on an ongoing basis. policy, decisions, These four areas represent the firm's decisions. policy, and (7.8) The external financing. Since the required increase in assets is exactly equal to the addition to growth rate is the rate that allows the firm to grow without and the firm obtains no new external debt financing, the debtlequity ratio will (increase/decrease) over time. The maximum growth rate which the firm can achieve without external equity financing, while maintaining a constant debt-to-equity ratio, is the evenne (79).+The DuPont identity specifies that return on equity equalslesxTstelr orchoder erur Thus, the sustainable growth rate depends on four factors:(Q)An increase in the profit margin creases/decreases) the firm's ability to generate internal financing and (increases/decreases) the firm's SGR. (2) An increase in the retention ratio (increases/decreases) retained earnings and _(increases/decreases) SGR. (3) An increase in the debt/equity ratio (increases/decreases) financial leverage, and thereby makes additional debt financing available and (increases/decreases) the SGR. (4) An increase in total asset turnover increases/decreases) the need for financing of new assets and consequently (increases/decreases) the SGR. (7.10) A(n) income, while a(n) tax rate equals total taxes paid divided by total taxable tax rate is the rate applied to the last dollar earned. For the following, fill in the blanks with the appropriate term(s). For questions that give you two or three choices to choose from, circle the most appropriate. (7.)A bal ahie shee t can be thought of as a snapshot of fim accounting value at a particular date. The value of a firm's assets equals liabiiaies+Stodhales y Altematively, shareholders' equity - assets-Libilitie (7.2) Equity holders are entitled only to are paid. The use of debt in a firm's capital structure is called are debts, so the firm is obligated to pay creditors principal and interest. value, the portion left after creditors (7.3) A primary reason that accounting income differs from cash flow is that an income statement contains EoLash items; the most important of these is deprecnto esc Some of period costs may be fixed and others may be variable. The company president's salary for example, is a period cost and is probably in the short run. tab (7.4) The statement of cash flows organizes sources and uses of cash into three categories: and activities Depreciation reduces the firm's tax liabinty, it appears as dividends paid are a of cash, while a of cash (7.5) Activities that bring in cash are called spending cash are called account some assets. This would be a net then the firm has made a net payment -a of cash. of cash, and activities that involve of cash. Loosely speaking, an increase in an asset of cash. If an asset account went down, then, on a net basis, the firm sold means a of cash. Similary, if a liability account goes down, (7.6) The DuPont identity tells us that ROE is affected by three things:ycaig ollcie uge (7.7) Basic policy elements that must be established by management to develop a financial plan are: of cash. (7.5) Activities that bring in cash are called spending cash are called account means a of cash. If some assets. This would be a net then the firm has made a net payment-a of cash, and activities that involve of cash. Loosely speaking, an increase in an asset an asset account went down, then, on a net basis, the firm sold of cash. Similary, if a liability account goes down of cash ty tells us that ROE is affected by three things: D ere (7.6) The DuP (7.7) Basic policy elements that must be established by management to develop a financial plan are: 1. The firm's needed investment in new assets. 2. The degree of financial leverage the firm elects to employ. 3. The amount of cash the firm thinks is necessary and appropriate to pay shareholders. 4. The amount of liquidity and working capital the firm needs on an ongoing basis. policy, decisions, These four areas represent the firm's decisions. policy, and (7.8) The external financing. Since the required increase in assets is exactly equal to the addition to growth rate is the rate that allows the firm to grow without and the firm obtains no new external debt financing, the debtlequity ratio will (increase/decrease) over time. The maximum growth rate which the firm can achieve without external equity financing, while maintaining a constant debt-to-equity ratio, is the evenne (79).+The DuPont identity specifies that return on equity equalslesxTstelr orchoder erur Thus, the sustainable growth rate depends on four factors:(Q)An increase in the profit margin creases/decreases) the firm's ability to generate internal financing and (increases/decreases) the firm's SGR. (2) An increase in the retention ratio (increases/decreases) retained earnings and _(increases/decreases) SGR. (3) An increase in the debt/equity ratio (increases/decreases) financial leverage, and thereby makes additional debt financing available and (increases/decreases) the SGR. (4) An increase in total asset turnover increases/decreases) the need for financing of new assets and consequently (increases/decreases) the SGR. (7.10) A(n) income, while a(n) tax rate equals total taxes paid divided by total taxable tax rate is the rate applied to the last dollar earned