Question 1

Net working capital increases when:

Accepted Answer

A) fixed assets are purchased for cash. 
B) inventory is purchased on credit. 
C) inventory is sold at cost. 
D) a credit customer pays for his or her purchase. 
E) inventory is sold at a profit. 
A) fixed assets are purchased for cash. 
B) inventory is purchased on credit. 
C) inventory is sold at cost. 
D) a credit customer pays for his or her purchase. 
E) inventory is sold at a profit.

Question 2

Highly liquid assets:

Accepted Answer

A) increase the probability a firm will face financial distress. 
B) appear on the right side of a balance sheet. 
C) generally produce a high rate of return. 
D) can be sold quickly at close to full value. 
E) include all intangible assets. 
A) increase the probability a firm will face financial distress. 
B) appear on the right side of a balance sheet. 
C) generally produce a high rate of return. 
D) can be sold quickly at close to full value. 
E) include all intangible assets.

Question 3

Based on the recognition principle, revenue is recorded on the financial statements when the:
I.payment is collected for the sale of a good or service.
II.earnings process is virtually complete.
III.value of a sale can be reliably determined.
IV.product is physically delivered to the buyer.

Accepted Answer

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

Question 4

Cash flow to stockholders is defined as:

Accepted Answer

A) cash flow from assets plus cash flow to creditors. 
B) operating cash flow minus cash flow to creditors. 
C) dividends paid plus the change in retained earnings. 
D) dividends paid minus net new equity raised. 
E) net income minus the addition to retained earnings. 
A) cash flow from assets plus cash flow to creditors. 
B) operating cash flow minus cash flow to creditors. 
C) dividends paid plus the change in retained earnings. 
D) dividends paid minus net new equity raised. 
E) net income minus the addition to retained earnings.

Question 5

The accounting statement that measures the revenues, expenses, and net income of a firm over a period of time is called the:

Accepted Answer

A) statement of cash flows. 
B) income statement. 
C) GAAP statement. 
D) balance sheet. 
E) net working capital schedule. 
A) statement of cash flows. 
B) income statement. 
C) GAAP statement. 
D) balance sheet. 
E) net working capital schedule.

Question 6

Financial leverage:

Accepted Answer

A) increases as the net working capital increases. 
B) is equal to the market value of a firm divided by the firm's book value. 
C) is inversely related to the level of debt. 
D) is the ratio of a firm's revenues to its fixed expenses. 
E) increases the potential return to the stockholders. 
A) increases as the net working capital increases. 
B) is equal to the market value of a firm divided by the firm's book value. 
C) is inversely related to the level of debt. 
D) is the ratio of a firm's revenues to its fixed expenses. 
E) increases the potential return to the stockholders.

Question 7

What is the maximum average tax rate for corporations?

Accepted Answer

A) 38 percent 
B) 25 percent 
C) 33 percent 
D) 39 percent 
E) 35 percent 
A) 38 percent 
B) 25 percent 
C) 33 percent 
D) 39 percent 
E) 35 percent

Question 8

Taylor Industries has current liabilities of $54,900 and accounts receivable of $88,700.The firm has total assets of $395,000 and net fixed assets of $265,100.The owners' equity has a book value of $147,500
)What is the amount of the net working capital?

Accepted Answer

A) $77,400 
B) $75,000 
C) $33,800 
D) $8,500 
E) -$2,400 
A) $77,400 
B) $75,000 
C) $33,800 
D) $8,500 
E) -$2,400

Question 9

Roscoe's fixed assets were purchased three years ago for $1.8 million.These assets can be sold to Stewart's today for $1.2 million.Roscoe's current balance sheet shows net fixed assets of $960,000, current liabilities of $348,000, and net working capital of $121,000.If all the current assets were liquidated today, the company would receive $518,000 cash.The book value of the firm's assets today is _____ and the market value is ____.

Accepted Answer

A) $1,081,000; $1,308,000 
B) $1,081,000; $1,718,000 
C) $1,307,000; $1,429,000 
D) $1,429,000; $1,308,000 
E) $1,429,000; $1,718,000 
A) $1,081,000; $1,308,000 
B) $1,081,000; $1,718,000 
C) $1,307,000; $1,429,000 
D) $1,429,000; $1,308,000 
E) $1,429,000; $1,718,000

Question 10

For the year, Movers United has net income of $31,800, net new equity of $7,500, and an addition to retained earnings of $24,200.What is the amount of the dividends paid?

Accepted Answer

A) $100 
B) $7,500 
C) $7,600 
D) $15,100 
E) $16,700 
A) $100 
B) $7,500 
C) $7,600 
D) $15,100 
E) $16,700

Question 11

Kahlan Opinion Surveys had beginning retained earnings of $24.600.During the year, the company reported sales of $105,700, costs of $78,300, depreciation of $9.000, dividends of $1,200, and interest paid of $$635.The tax rate is 30 percent.What is the retained earnings balance at the end of the year?

Accepted Answer

A) $38,835.50 
B) $36,082.15 
C) $36,121.44 
D) $37,671.44 
E) $35,721.45 
A) $38,835.50 
B) $36,082.15 
C) $36,121.44 
D) $37,671.44 
E) $35,721.45

Question 12

Ezmerelda Jewelers has a marginal tax rate of 32 percent and an average tax rate of 20.9percent.If the firm owes $$34,330 in taxes, how much taxable income did it earn?

Accepted Answer

A) $127,584 
B) $116,649 
C) $164,500 
D) $157,500 
E) $168,500 
A) $127,584 
B) $116,649 
C) $164,500 
D) $157,500 
E) $168,500

Question 13

Sunny Disposition, Inc.has net working capital of $32,500, current assets of $59,000, equity of $74,500, and long-term debt of $42,500.What is the amount of the net fixed assets?

Accepted Answer

A) $58,000 
B) $111,000 
C) $94,600 
D) $63,900 
E) $84,500 
A) $58,000 
B) $111,000 
C) $94,600 
D) $63,900 
E) $84,500

Question 14

Gino's Winery has net working capital of $29,800, net fixed assets of $64,800, current liabilities of $34,700, and long-term debt of $23,000.What is the value of the owners' equity?

Accepted Answer

A) $36,900 
B) $66,700 
C) $71,600 
D) $89,400 
E) $106,300 
A) $36,900 
B) $66,700 
C) $71,600 
D) $89,400 
E) $106,300

Question 15

National Importers paid $38,600 in dividends and $24,615 in interest over the past year while net working capital increased from $15,506 to $17,411.The company purchased $38,700 in net new fixed assets and had depreciation expenses of $14,784.During the year, the firm issued $20,000 in net new equity and paid off $23,800 in long-term debt.What is the amount of the cash flow from assets?

Accepted Answer

A) $21,811 
B) $41,194 
C) $36,189 
D) $26,410 
E) $67,015 
A) $21,811 
B) $41,194 
C) $36,189 
D) $26,410 
E) $67,015

Question 16

Which one of the following is included in the market value of a firm but not in the book value?

Accepted Answer

A) Raw materials 
B) Partially built inventory 
C) Long-term debt 
D) Reputation of the firm 
E) Value of a partially depreciated machine 
A) Raw materials 
B) Partially built inventory 
C) Long-term debt 
D) Reputation of the firm 
E) Value of a partially depreciated machine

Question 17

The Carpentry Shop has sales of $398,600, costs of $254,800, depreciation expense of $26,400, interest expense of $1,600, and a tax rate of 34 percent.What is the net income for this firm?

Accepted Answer

A) $61,930 
B) $66,211 
C) $67,516 
D) $76,428 
E) $83,219 
A) $61,930 
B) $66,211 
C) $67,516 
D) $76,428 
E) $83,219

Question 18

A firm's liquidity level decreases when:

Accepted Answer

A) inventory is purchased with cash. 
B) inventory is sold on credit. 
C) inventory is sold for cash. 
D) an account receivable is collected. 
E) proceeds from a long-term loan are received. 
A) inventory is purchased with cash. 
B) inventory is sold on credit. 
C) inventory is sold for cash. 
D) an account receivable is collected. 
E) proceeds from a long-term loan are received.

Question 19

The Plaza Cafe has an operating cash flow of $83,770, depreciation expense of $43,514, and taxes paid of $21,590.A partial listing of its balance sheet accounts is as follows:   What is the amount of the cash flow from assets?

Accepted Answer

A) $26,359 
B) $47,949 
C) $61,487 
D) $43,909 
E) $35,953 
A) $26,359 
B) $47,949 
C) $61,487 
D) $43,909 
E) $35,953

Question 20

An increase in which one of the following will increase operating cash flow for a profitable, tax-paying firm?

Accepted Answer

A) Fixed expenses 
B) Marginal tax rate 
C) Net capital spending 
D) Inventory 
E) Depreciation 
A) Fixed expenses 
B) Marginal tax rate 
C) Net capital spending 
D) Inventory 
E) Depreciation

Net working capital increases when:

Highly liquid assets:

Based on the recognition principle, revenue is recorded on the financial statements when the: I.payment is collected for the sale of a good or service. II.earnings process is virtually complete. III.value of a sale can be reliably determined. IV.product is physically delivered to the buyer.

Cash flow to stockholders is defined as:

The accounting statement that measures the revenues, expenses, and net income of a firm over a period of time is called the:

Financial leverage:

What is the maximum average tax rate for corporations?

Taylor Industries has current liabilities of $54,900 and accounts receivable of $88,700.The firm has total assets of $395,000 and net fixed assets of $265,100.The owners' equity has a book value of $147,500 )What is the amount of the net working capital?

For the year, Movers United has net income of $31,800, net new equity of $7,500, and an addition to retained earnings of $24,200.What is the amount of the dividends paid?

Ezmerelda Jewelers has a marginal tax rate of 32 percent and an average tax rate of 20.9percent.If the firm owes $$34,330 in taxes, how much taxable income did it earn?

Sunny Disposition, Inc.has net working capital of $32,500, current assets of $59,000, equity of $74,500, and long-term debt of $42,500.What is the amount of the net fixed assets?

Gino's Winery has net working capital of $29,800, net fixed assets of $64,800, current liabilities of $34,700, and long-term debt of $23,000.What is the value of the owners' equity?

Which one of the following is included in the market value of a firm but not in the book value?

The Carpentry Shop has sales of $398,600, costs of $254,800, depreciation expense of $26,400, interest expense of $1,600, and a tax rate of 34 percent.What is the net income for this firm?

A firm's liquidity level decreases when:

The Plaza Cafe has an operating cash flow of $83,770, depreciation expense of $43,514, and taxes paid of $21,590.A partial listing of its balance sheet accounts is as follows: What is the amount of the cash flow from assets?

An increase in which one of the following will increase operating cash flow for a profitable, tax-paying firm?

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 increases when:

Highly liquid assets:

Based on the recognition principle, revenue is recorded on the financial statements when the: I.payment is collected for the sale of a good or service. II.earnings process is virtually complete. III.value of a sale can be reliably determined. IV.product is physically delivered to the buyer.

Cash flow to stockholders is defined as:

The accounting statement that measures the revenues, expenses, and net income of a firm over a period of time is called the:

Financial leverage:

What is the maximum average tax rate for corporations?

Taylor Industries has current liabilities of $54,900 and accounts receivable of $88,700.The firm has total assets of $395,000 and net fixed assets of $265,100.The owners' equity has a book value of $147,500 )What is the amount of the net working capital?

For the year, Movers United has net income of $31,800, net new equity of $7,500, and an addition to retained earnings of $24,200.What is the amount of the dividends paid?

Ezmerelda Jewelers has a marginal tax rate of 32 percent and an average tax rate of 20.9percent.If the firm owes $$34,330 in taxes, how much taxable income did it earn?

Sunny Disposition, Inc.has net working capital of $32,500, current assets of $59,000, equity of $74,500, and long-term debt of $42,500.What is the amount of the net fixed assets?

Gino's Winery has net working capital of $29,800, net fixed assets of $64,800, current liabilities of $34,700, and long-term debt of $23,000.What is the value of the owners' equity?

Which one of the following is included in the market value of a firm but not in the book value?

The Carpentry Shop has sales of $398,600, costs of $254,800, depreciation expense of $26,400, interest expense of $1,600, and a tax rate of 34 percent.What is the net income for this firm?

A firm's liquidity level decreases when:

The Plaza Cafe has an operating cash flow of $83,770, depreciation expense of $43,514, and taxes paid of $21,590.A partial listing of its balance sheet accounts is as follows: What is the amount of the cash flow from assets?

An increase in which one of the following will increase operating cash flow for a profitable, tax-paying firm?

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