1. Liquidity is: A. a measure of the use of debt in a firm's capital structure. B. equal to current assets minus current liabilities. C. equal to the market value of a firm's total assets minus its total liabilities. D. valuable to a firm even though liquid assets tend to be less profitable to own. E. generally associated with intangible assets.
2. For a firm with long-term debt, net income is equal to: A. Pretax income - Interest expense - Taxes. B. EBIT - Taxes. C. Taxes + Addition to retained earnings. D. Pretax income × (1 - Marginal tax rate). E. Dividends + Addition to retained earnings.