a. Stockholders equity is equal to assets minus liabilities. True False b. Book

Question

a. Stockholders equity is equal to assets minus liabilities.

True False

b. Book value per share of stock is of greater concern to the financial manager than market value per share of stock.

True

False

c. Given the following, what is free cash flow?

    Cash flow from operating activities $200,000
    Cash flow from investing activities $140,000
    Cash flow from financing activities $56,000
Building purchases$50,000
    Dividends Paid $20,000

$396,000

$270,000

$326,000

$130,000

$396,000

$270,000

$326,000

$130,000

Explanation / Answer

a) True,

Total Assets= Shareholders's Equity + Total Liabilities

Shareholders Equity= Total Assets- Total Liabilities

b) False,

Book Value per share is of historic value which is not much important as market value per share. Market Value per share is of future value. Book Value of a company is equal to net worth of the company, which is not always equal to the market value of the company So, Book value per share is not of greater concern for financial manager than market value per share of stock.

c) Free cash flows= cash flow from operating activities-capital expenditure- dividend paid

Free cash flow=$2,00,000-$50,000-$20,000=$1,30,000

Correct option is d

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