Question 1

Net working capital decreases when:

Accepted Answer

A) a new 3-year loan is obtained with the proceeds used to purchase inventory. 
B) a credit customer pays his or her bill in full. 
C) depreciation increases. 
D) a long-term debt is used to finance a fixed asset purchase. 
E) a dividend is paid to current shareholders. 
A) a new 3-year loan is obtained with the proceeds used to purchase inventory. 
B) a credit customer pays his or her bill in full. 
C) depreciation increases. 
D) a long-term debt is used to finance a fixed asset purchase. 
E) a dividend is paid to current shareholders.

Question 2

Dockside Warehouse has net working capital of $42,400, total assets of $519,300, and net fixed assets of $380,200.What is the value of the current liabilities?

Accepted Answer

A) $61,700 
B) $88,40000 
C) $102,900 
D) $96,700 
E) $111,500 
A) $61,700 
B) $88,40000 
C) $102,900 
D) $96,700 
E) $111,500

Question 3

The financial statements of Blue Fin Marina reflect depreciation expenses of $41,600 and interest expenses of $27,900 for the year.The current assets increased by $31,800 and the net fixed assets increased by $28,600.What is the amount of the net capital spending for the year?

Accepted Answer

A) $13,000 
B) $21,600 
C) $28,600 
D) $60,400 
E) $70,200 
A) $13,000 
B) $21,600 
C) $28,600 
D) $60,400 
E) $70,200

Question 4

Which one of the following statements concerning the balance sheet is correct?

Accepted Answer

A) Total assets equal total liabilities minus total equity. 
B) Net working capital is equal total assets minus total liabilities. 
C) Assets are listed in descending order of liquidity. 
D) Current assets are equal to total assets minus net working capital. 
E) Shareholders' equity is equal to net working capital minus net fixed assets plus long-term debt. 
A) Total assets equal total liabilities minus total equity. 
B) Net working capital is equal total assets minus total liabilities. 
C) Assets are listed in descending order of liquidity. 
D) Current assets are equal to total assets minus net working capital. 
E) Shareholders' equity is equal to net working capital minus net fixed assets plus long-term debt.

Question 5

Bleu Berri Farms had equity of $58,900 at the beginning of the year.During the year, the company earned net income of $8,200 and paid $2,500 in dividends.Also during the year, the company repurchased $3,500 of stock from one of its shareholders.What is the value of the owners' equity at year end?

Accepted Answer

A) $61,100 
B) $67,600 
C) $64,900 
D) $64,400 
E) $68,100 
A) $61,100 
B) $67,600 
C) $64,900 
D) $64,400 
E) $68,100

Question 6

Marcie's has sales of $179,600,depreciation of $14,900, costs of goods sold of $138,200, and other costs of $28,400.The tax rate is 35 percent.What is the net income?

Accepted Answer

A) -$1,235 
B) $382 
C) $1,204 
D) $14,660 
E) $13,665 
A) -$1,235 
B) $382 
C) $1,204 
D) $14,660 
E) $13,665

Question 7

Net working capital is defined as:

Accepted Answer

A) the depreciated book value of a firm's fixed assets. 
B) the value of a firm's current assets. 
C) available cash minus current liabilities. 
D) total assets minus total liabilities. 
E) current assets minus current liabilities. 
A) the depreciated book value of a firm's fixed assets. 
B) the value of a firm's current assets. 
C) available cash minus current liabilities. 
D) total assets minus total liabilities. 
E) current assets minus current liabilities.

Question 8

Production equipment is classified as:

Accepted Answer

A) a net working capital item. 
B) a current liability. 
C) a current asset. 
D) a tangible fixed asset. 
E) an intangible fixed asset. 
A) a net working capital item. 
B) a current liability. 
C) a current asset. 
D) a tangible fixed asset. 
E) an intangible fixed asset.

Question 9

Cash flow to creditors increases when:

Accepted Answer

A) interest rates on debt decline. 
B) accounts payables decrease. 
C) long-term debt is repaid. 
D) current liabilities are repaid. 
E) new long-term loans are acquired. 
A) interest rates on debt decline. 
B) accounts payables decrease. 
C) long-term debt is repaid. 
D) current liabilities are repaid. 
E) new long-term loans are acquired.

Question 10

An income statement prepared according to GAAP:

Accepted Answer

A) reflects the net cash flows of a firm over a stated period of time. 
B) reflects the financial position of a firm as of a particular date. 
C) distinguishes variable costs from fixed costs. 
D) records revenue when payment for a sale is received. 
E) records expenses based on the matching principle. 
A) reflects the net cash flows of a firm over a stated period of time. 
B) reflects the financial position of a firm as of a particular date. 
C) distinguishes variable costs from fixed costs. 
D) records revenue when payment for a sale is received. 
E) records expenses based on the matching principle.

Question 11

The Pretzel Factory has net sales of $821,300 and costs of $698,500.The depreciation expense is $28,400 and the interest paid is $8,400.What is the amount of the firm's operating cash flow if the tax rate is 34 percent?

Accepted Answer

A) $87,620 
B) $89,540 
C) $91,220 
D) $93,560 
E) $95,240 
A) $87,620 
B) $89,540 
C) $91,220 
D) $93,560 
E) $95,240

Question 12

Which one of the following changes during a year will increase cash flow from assets but not affect the operating cash flow?

Accepted Answer

A) Increase in depreciation 
B) Increase in accounts receivable 
C) Increase in accounts payable 
D) Decrease in cost of goods sold 
E) Increase in sales 
A) Increase in depreciation 
B) Increase in accounts receivable 
C) Increase in accounts payable 
D) Decrease in cost of goods sold 
E) Increase in sales

Question 13

Which one of the following has nearly the same meaning as free cash flow?

Accepted Answer

A) Net income 
B) Cash flow from assets 
C) Operating cash flow 
D) Cash flow to shareholders 
E) Addition to retained earnings 
A) Net income 
B) Cash flow from assets 
C) Operating cash flow 
D) Cash flow to shareholders 
E) Addition to retained earnings

Question 14

Kat Outfitting currently has $22,500 in cash.The company owes $49,500 to suppliers for merchandise and $52,500 to the bank for a long-term loan.Customers owe the company $41,000 for their purchases.The inventory has a book value of $76,800 and an estimated market value of $72,000.If the store compiled a balance sheet as of today, what would be the book value of the current assets?

Accepted Answer

A) $135,500 
B) $79,500 
C)  $86,000 
D) $140,300 
E) $144,000 
A) $135,500 
B) $79,500 
C)  $86,000 
D) $140,300 
E) $144,000

Question 15

Joie's Fashions has current liabilities of $45,600 and accounts receivable of $59,700.The firm has total assets of $275,000 and net fixed assets of $205,500.The owners' equity has a book value of $107,500.What is the amount of the net working capital?

Accepted Answer

A) $121,900 
B) $23,900 
C) $9,800 
D) $83,600 
E) -$35,800 
A) $121,900 
B) $23,900 
C) $9,800 
D) $83,600 
E) -$35,800

Question 16

If a firm has a negative cash flow from assets every year for several years, the firm:

Accepted Answer

A) may be continually increasing in size. 
B) must also have a negative cash flow from operations each year. 
C) is operating at a high level of efficiency. 
D) is repaying debt every year. 
E) has annual net losses. 
A) may be continually increasing in size. 
B) must also have a negative cash flow from operations each year. 
C) is operating at a high level of efficiency. 
D) is repaying debt every year. 
E) has annual net losses.

Question 17

Cash flow to creditors is defined as:

Accepted Answer

A) interest paid minus net new borrowing. 
B) interest paid plus net new borrowing. 
C) operating cash flow minus net capital spending minus the change in net working capital. 
D) dividends paid plus net new borrowing. 
E) cash flow from assets plus net new equity. 
A) interest paid minus net new borrowing. 
B) interest paid plus net new borrowing. 
C) operating cash flow minus net capital spending minus the change in net working capital. 
D) dividends paid plus net new borrowing. 
E) cash flow from assets plus net new equity.

Question 18

All else held constant, the book value of owners' equity will decrease when:

Accepted Answer

A) the market value of inventory increases. 
B) dividends exceed net income for a period. 
C) cash is used to pay an accounts payable. 
D) a long-term debt is repaid. 
E) taxable income increases. 
A) the market value of inventory increases. 
B) dividends exceed net income for a period. 
C) cash is used to pay an accounts payable. 
D) a long-term debt is repaid. 
E) taxable income increases.

Question 19

AV Sales has net revenue of $513,000 and costs of $406,800.The depreciation expense is $43,800,interest paid is $11,200, and dividends for the year are$4,500.The tax rate is 33 percent.What is the addition to retained earnings?

Accepted Answer

A) $38,804 
B) $34,304 
C) $28,120 
D) $29,804 
E) $30,450 
A) $38,804 
B) $34,304 
C) $28,120 
D) $29,804 
E) $30,450

Question 20

Which one of the following decreases net income but does not affect the operating cash flow of a firm that owes no taxes for the current year?

Accepted Answer

A) Indirect cost 
B) Direct cost 
C) Noncash item 
D) Period cost 
E) Variable cost 
A) Indirect cost 
B) Direct cost 
C) Noncash item 
D) Period cost 
E) Variable cost

Net working capital decreases when:

Dockside Warehouse has net working capital of $42,400, total assets of $519,300, and net fixed assets of $380,200.What is the value of the current liabilities?

The financial statements of Blue Fin Marina reflect depreciation expenses of $41,600 and interest expenses of $27,900 for the year.The current assets increased by $31,800 and the net fixed assets increased by $28,600.What is the amount of the net capital spending for the year?

Which one of the following statements concerning the balance sheet is correct?

Bleu Berri Farms had equity of $58,900 at the beginning of the year.During the year, the company earned net income of $8,200 and paid $2,500 in dividends.Also during the year, the company repurchased $3,500 of stock from one of its shareholders.What is the value of the owners' equity at year end?

Marcie's has sales of $179,600,depreciation of $14,900, costs of goods sold of $138,200, and other costs of $28,400.The tax rate is 35 percent.What is the net income?

Net working capital is defined as:

Production equipment is classified as:

Cash flow to creditors increases when:

An income statement prepared according to GAAP:

The Pretzel Factory has net sales of $821,300 and costs of $698,500.The depreciation expense is $28,400 and the interest paid is $8,400.What is the amount of the firm's operating cash flow if the tax rate is 34 percent?

Which one of the following changes during a year will increase cash flow from assets but not affect the operating cash flow?

Which one of the following has nearly the same meaning as free cash flow?

Joie's Fashions has current liabilities of $45,600 and accounts receivable of $59,700.The firm has total assets of $275,000 and net fixed assets of $205,500.The owners' equity has a book value of $107,500.What is the amount of the net working capital?

If a firm has a negative cash flow from assets every year for several years, the firm:

Cash flow to creditors is defined as:

All else held constant, the book value of owners' equity will decrease when:

AV Sales has net revenue of $513,000 and costs of $406,800.The depreciation expense is $43,800,interest paid is $11,200, and dividends for the year are$4,500.The tax rate is 33 percent.What is the addition to retained earnings?

Which one of the following decreases net income but does not affect the operating cash flow of a firm that owes no taxes for the current year?

Introduction to Financial Management

Working With Financial Statements

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Equity Markets and Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Some Lessons From Capital Market History

Risk and Return

Cost of Capital

Leverage and Capital Structure

Dividends and Dividend Policy

Raising Capital

Short-Term Financial Planning

Working Capital Management

International Aspects of Financial Management

Filters

Exam 2: Financial Statements, Taxes, and Cash Flow

Net working capital decreases when:

Dockside Warehouse has net working capital of $42,400, total assets of $519,300, and net fixed assets of $380,200.What is the value of the current liabilities?

The financial statements of Blue Fin Marina reflect depreciation expenses of $41,600 and interest expenses of $27,900 for the year.The current assets increased by $31,800 and the net fixed assets increased by $28,600.What is the amount of the net capital spending for the year?

Which one of the following statements concerning the balance sheet is correct?

Bleu Berri Farms had equity of $58,900 at the beginning of the year.During the year, the company earned net income of $8,200 and paid $2,500 in dividends.Also during the year, the company repurchased $3,500 of stock from one of its shareholders.What is the value of the owners' equity at year end?

Marcie's has sales of $179,600,depreciation of $14,900, costs of goods sold of $138,200, and other costs of $28,400.The tax rate is 35 percent.What is the net income?

Net working capital is defined as:

Production equipment is classified as:

Cash flow to creditors increases when:

An income statement prepared according to GAAP:

The Pretzel Factory has net sales of $821,300 and costs of $698,500.The depreciation expense is $28,400 and the interest paid is $8,400.What is the amount of the firm's operating cash flow if the tax rate is 34 percent?

Which one of the following changes during a year will increase cash flow from assets but not affect the operating cash flow?

Which one of the following has nearly the same meaning as free cash flow?

Joie's Fashions has current liabilities of $45,600 and accounts receivable of $59,700.The firm has total assets of $275,000 and net fixed assets of $205,500.The owners' equity has a book value of $107,500.What is the amount of the net working capital?

If a firm has a negative cash flow from assets every year for several years, the firm:

Cash flow to creditors is defined as:

All else held constant, the book value of owners' equity will decrease when:

AV Sales has net revenue of $513,000 and costs of $406,800.The depreciation expense is $43,800,interest paid is $11,200, and dividends for the year are$4,500.The tax rate is 33 percent.What is the addition to retained earnings?

Which one of the following decreases net income but does not affect the operating cash flow of a firm that owes no taxes for the current year?

Introduction to Financial Management

Working With Financial Statements

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Equity Markets and Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Some Lessons From Capital Market History

Risk and Return

Cost of Capital

Leverage and Capital Structure

Dividends and Dividend Policy

Raising Capital

Short-Term Financial Planning

Working Capital Management

International Aspects of Financial Management

Filters