Question 1

What is net capital spending for 2011?

Accepted Answer

A)  -$250
B)  -$57
C)  $0
D)  $57
E)  $477F) B) and C)
G) A) and B)

Question 2

As seen on an income statement:

Accepted Answer

A)  interest is deducted from income and increases the total taxes incurred.
B)  the tax rate is applied to the earnings before interest and taxes when the firm has both depreciation and interest expenses.
C)  depreciation is shown as an expense but does not affect the taxes payable.
D)  depreciation reduces both the pretax income and the net income.
E)  interest expense is added to earnings before interest and taxes to get pretax income.F) B) and E)
G) All of the above

Question 3

Assets are listed on the balance sheet in order of:

Accepted Answer

A)  decreasing liquidity.
B)  decreasing size.
C)  increasing size.
D)  relative life.
E)  None of the above.F) A) and D)
G) A) and B)

Question 4

Liquidity is:

Accepted Answer

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 current liabilities.
D)  valuable to a firm even though liquid assets tend to be less profitable to own.
E)  generally associated with intangible assets.F) None of the above
G) A) and B)

Question 5

Which of the following accounts are included in shareholders' equity?
I.interest paid
II.retained earnings
III.capital surplus
IV.long-term debt

Accepted Answer

A)  I and II only
B)  II and IV only
C)  I and IV only
D)  II and III only
E)  I and III onlyF) A) and B)
G) C) and D)

Question 6

When making financial decisions related to assets,you should:

Accepted Answer

A)  always consider market values.
B)  place more emphasis on book values than on market values.
C)  rely primarily on the value of assets as shown on the balance sheet.
D)  place primary emphasis on historical costs.
E)  only consider market values if they are less than book values.F) A) and B)
G) B) and E)

Question 7

A(n) ____ asset is one which can be quickly converted into cash without significant loss in value.

Accepted Answer

A)  current
B)  fixed
C)  intangible
D)  liquid
E)  long-termF) B) and E)
G) C) and D)

Question 8

Brad's Company has equipment with a book value of $500 that could be sold today at a 50% discount.Its inventory is valued at $450 and could be sold to a competitor for that amount.The firm has $100 in cash and customers owe it $250.What is the accounting value of its liquid assets?

Accepted Answer

A)  $100
B)  $550
C)  $800
D)  $1,050
E)  $1,300F) C) and D)
G) B) and C)

Question 9

_____ refers to the firm's interest payments less any net new borrowing.

Accepted Answer

A)  Operating cash flow
B)  Capital spending
C)  Net working capital
D)  Cash flow from shareholders
E)  Cash flow to creditorsF) D) and E)
G) A) and B)

Question 10

One of the reasons why cash flow analysis is popular is because:

Accepted Answer

A)  cash flows are more subjective than net income.
B)  cash flows are hard to understand.
C)  it is easy to manipulate,or spin the cash flows.
D)  it is difficult to manipulate,or spin the cash flows.
E)  None of the above.F) A) and D)
G) A) and C)

Question 11

What is the cash flow to creditors for 2011?

Accepted Answer

A)  -$405
B)  -$225
C)  $225
D)  $405
E)  $630F) A) and B)
G) A) and C)

Question 12

Which one of the following statements concerning liquidity is correct?

Accepted Answer

A)  If you sold an asset today,it was a liquid asset.
B)  If you can sell an asset next year at a price equal to its actual value,the asset is highly liquid.
C)  Trademarks and patents are highly liquid.
D)  The less liquidity a firm has,the lower the probability the firm will encounter financial difficulties.
E)  Balance sheet accounts are listed in order of decreasing liquidity.F) A) and E)
G) C) and E)

Question 13

The carrying value or book value of assets:

Accepted Answer

A)  is determined under GAAP/IFRS and is based on the cost of the asset.
B)  represents the true market value according to GAAP/IFRS.
C)  is always the best measure of the company's value to an investor.
D)  is always higher than the replacement cost of the assets.
E)  None of the above.F) A) and C)
G) B) and C)

Question 14

Interpret,in words,what cash flow of the firm represents by discussing operating cash flow,changes in net working capital,and additions to fixed assets.

Accepted Answer

Operating cash flow is the cash flow a f...

Question 15

Net capital spending is equal to:

Accepted Answer

A)  net additions to net working capital.
B)  the net change in fixed assets.
C)  net income plus depreciation.
D)  total cash flow to stockholders less interest and dividends paid.
E)  the change in total assets.F) B) and E)
G) C) and D)

Question 16

Why is interest expense excluded from the operating cash flow calculation?

Accepted Answer

Operating cash flow is designed to repre...

Question 17

Earnings per share

Accepted Answer

A)  will increase if net income increases and number of shares remains constant.
B)  will increase if net income decreases and number of shares remains constant.
C)  is number of shares divided by net income.
D)  is the amount of money that goes into retained earnings on a per share basis.
E)  None of the above.F) All of the above
G) A) and D)

Question 18

When you are making a financial decision,the most relevant tax rate is the _____ rate.

Accepted Answer

A)  average
B)  fixed
C)  marginal
D)  total
E)  variableF) A) and B)
G) None of the above

Question 19

_____ refers to the changes in net capital assets.

Accepted Answer

A)  Operating cash flow
B)  Cash flow from investing
C)  Net working capital
D)  Cash flow from assets
E)  Cash flow to creditorsF) A) and B)
G) B) and D)

Question 20

What is operating cash flow and how does it different from the total cash flow to the firm?

Accepted Answer

Several types of cash flow are relevant ...

Exam 2: Financial Statements and Cash Flow

The carrying value or book value of assets:

Correct AnswerverifiedShow Answer

What is net capital spending for 2011?

Correct AnswerverifiedShow Answer

_____ refers to the changes in net capital assets.

Correct AnswerverifiedShow Answer

When you are making a financial decision,the most relevant tax rate is the _____ rate.

Correct AnswerverifiedShow Answer

Earnings per share

Correct AnswerverifiedShow Answer

Which one of the following statements concerning liquidity is correct?

Correct AnswerverifiedShow Answer

What is the cash flow to creditors for 2011?

Correct AnswerverifiedShow Answer

Net capital spending is equal to:

Correct AnswerverifiedShow Answer

A(n) ____ asset is one which can be quickly converted into cash without significant loss in value.

Correct AnswerverifiedShow Answer

_____ refers to the firm's interest payments less any net new borrowing.

Correct AnswerverifiedShow Answer

Brad's Company has equipment with a book value of $500 that could be sold today at a 50% discount.Its inventory is valued at $450 and could be sold to a competitor for that amount.The firm has $100 in cash and customers owe it $250.What is the accounting value of its liquid assets?

Correct AnswerverifiedShow Answer

Interpret,in words,what cash flow of the firm represents by discussing operating cash flow,changes in net working capital,and additions to fixed assets.

Correct AnswerverifiedOperating cash flow is the cash flow a f...View AnswerShow Answer

What is operating cash flow and how does it different from the total cash flow to the firm?

Correct AnswerverifiedSeveral types of cash flow are relevant ...View AnswerShow Answer

Assets are listed on the balance sheet in order of:

Correct AnswerverifiedShow Answer

Why is interest expense excluded from the operating cash flow calculation?

Correct AnswerverifiedOperating cash flow is designed to repre...View AnswerShow Answer

When making financial decisions related to assets,you should:

Correct AnswerverifiedShow Answer

One of the reasons why cash flow analysis is popular is because:

Correct AnswerverifiedShow Answer

As seen on an income statement:

Correct AnswerverifiedShow Answer

Liquidity is:

Correct AnswerverifiedShow Answer

Which of the following accounts are included in shareholders' equity? I.interest paid II.retained earnings III.capital surplus IV.long-term debt

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Operating cash flow is the cash flow a f...
View Answer

Correct Answer
verified
Several types of cash flow are relevant ...
View Answer

Correct Answer
verified

Correct Answer
verified
Operating cash flow is designed to repre...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified