Question 21

Of the following choices, which most accurately defines shareholders equity?

(a) the residual value of a firm;

(b) positive net working capital;

(c) the net liquidity of a firm;

(d) cash inflows, minus cash outflows; or

(e) the residual repercussion of the outworking of liquidity.

Question 22

Ceteris paribus, the book value of owners equity will decline when:

(a) the market value of inventory goes up;

(b) dividends exceed net income for a period of time;

(c) cash is used to pay an accounts that is payable;

(d) a long-term debt is distinguished; or

(e) Mr. Esquivel learns to speak Esperanto.

Question 23

A corporations liquidity level declines when:

(a) inventory is purchased with cash;

(b) inventory is sold on credit;

(c) inventory is sold for cash;

(d) an account receivable is collected; or

(e) a river runs through the companys foyer.

Question 24

Generally, assets that are highly liquid:

(a) increase the probability a firm will face a financial downturn;

(b) appear on the right side of a balance sheet;

(c) produce a relatively high rate of return; or

(d) can be sold very quickly at close to full value.

Question 25

__________ is usually included in a firms market value, but not in its book value.

(a) raw materials;

(b) partially-built inventory;

(c) long-term debt;

(d) Goodwill, or the reputation of a company; or

(e) the residual value of a partially-depreciated piece of equipment.