Question 1

Which one of the following is an accounting statement that provides information on a firm's revenues and expenses?

Accepted Answer

A) balance sheet 
B) cash budget 
C) pro forma balance sheet 
D) income statement 
E) cash flow statement 
A) balance sheet 
B) cash budget 
C) pro forma balance sheet 
D) income statement 
E) cash flow statement

Question 2

What is the operating cash flow, given the following information?
$\begin{array}{lrr}
  \text {Net income  } &\$740\
 \text {  Depreciation} &\$40\
 \text {Issuance of new stock  } &\$20\
 \text { Repayment of dept } &\$35\
 \text {Sale of old equipment  } &\$40\
 \text {  Purchase of new equipment} &\$60\
 \text { Dividend payments } &\$65\
 \text {  Interest payments} &\$80\
\end{array}$

Accepted Answer

A) $680 
B) $650 
C) $780 
D) $890 
E) $930 
A) $680 
B) $650 
C) $780 
D) $890 
E) $930

Question 3

ABC Construction, Inc., has buildings and equipment of $315,600, long-term debt of $154,700, accounts payable of $52,000, cash of $9,800, accounts receivable of $18,300, inventory of $62,000, and retained earnings of $147,000. What is the total equity of the firm?

Accepted Answer

A) $5,200 
B) $97,000 
C) $147,000 
D) $199,000 
E) $228,000 
A) $5,200 
B) $97,000 
C) $147,000 
D) $199,000 
E) $228,000

Question 4

Return on equity is equal to which one of the following?

Accepted Answer

A) dividend yield divided by total equity 
B) retained earnings divided by total equity 
C) revenue divided by total equity 
D) net income divided by total equity 
E) operating cash flow divided by total equity 
A) dividend yield divided by total equity 
B) retained earnings divided by total equity 
C) revenue divided by total equity 
D) net income divided by total equity 
E) operating cash flow divided by total equity

Question 5

The summation of the operating, investment, and financing cash flows for a stated period of time must equal which one of the following for the same time period?

Accepted Answer

A) net income 
B) total assets 
C) ending cash balance 
D) change in the cash balance 
E) taxable income 
A) net income 
B) total assets 
C) ending cash balance 
D) change in the cash balance 
E) taxable income

Question 6

Marley Enterprises has financing cash flow of −$45,200 and investment cash flow of $24,500 for the year. The beginning cash balance was $64,200 and the ending cash balance was $55,100. What was the operating cash flow for the period?

Accepted Answer

A) −$15,500 
B) −$9,600 
C) −$7,700 
D) $8,900 
E) $11,600 
A) −$15,500 
B) −$9,600 
C) −$7,700 
D) $8,900 
E) $11,600

Question 7

Which one of the following ratios indicates the amount of assets a firm needs to generate $1 in sales?

Accepted Answer

A) capital intensity ratio 
B) return on assets 
C) asset turnover rate 
D) profit margin 
E) earnings ratio 
A) capital intensity ratio 
B) return on assets 
C) asset turnover rate 
D) profit margin 
E) earnings ratio

Question 8

Which one of the following is defined as anything a firm owns that has value?

Accepted Answer

A) equity 
B) asset 
C) liability 
D) cash inflow 
E) cash outflow 
A) equity 
B) asset 
C) liability 
D) cash inflow 
E) cash outflow

Question 9

Better Products just filed its quarterly report with the SEC. This report is referred to as which one of the following?

Accepted Answer

A) 10-F 
B) 10-K 
C) 10-Q 
D) EDGAR 10 
E) 10FD 
A) 10-F 
B) 10-K 
C) 10-Q 
D) EDGAR 10 
E) 10FD

Question 10

Eagle Tactical, Inc., has taxable income of $1,500,000. The company paid out $240,000 in interest expense. The tax rate is 21% and the dividend payout ratio is 35%. What is the amount that was paid out in dividends?

Accepted Answer

A) $315,000 
B) $350,000 
C) $382,500 
D) $414,750 
E) $470,000 
A) $315,000 
B) $350,000 
C) $382,500 
D) $414,750 
E) $470,000

Question 11

Behrend Corporation has annual sales of $4.5 million, depreciation of $425,000, operating expenses of $679,000, cost of goods sold of $2.3 million, and interest expense of $230,000. What is the operating income?

Accepted Answer

A) $1,096,000 
B) $2,036,000 
C) $3,525,000 
D) $4,000,000 
E) $4,811,000 
A) $1,096,000 
B) $2,036,000 
C) $3,525,000 
D) $4,000,000 
E) $4,811,000

Question 12

Which one of the following statements is correct?

Accepted Answer

A) Pretax income is equal to gross profit minus interest expense. 
B) Gross profit is equal to sales minus costs of goods sold and depreciation. 
C) Operating expenses are indirect costs. 
D) Costs that vary directly with production are classified as operating expenses. 
E) The change in retained earnings is equal to net income plus dividends paid. 
A) Pretax income is equal to gross profit minus interest expense. 
B) Gross profit is equal to sales minus costs of goods sold and depreciation. 
C) Operating expenses are indirect costs. 
D) Costs that vary directly with production are classified as operating expenses. 
E) The change in retained earnings is equal to net income plus dividends paid.

Question 13

Your company has pretax income of $52,000 on sales of $506,000. Sales are expected to increase by 6% next year and the tax rate is 21%. What is the expected net income for next year if your firm uses the percentage of sales approach when compiling pro forma statements?

Accepted Answer

A) $28,938 
B) $31,835 
C) $33,072 
D) $35,582 
E) $43,545 
A) $28,938 
B) $31,835 
C) $33,072 
D) $35,582 
E) $43,545

Question 14

A firm has earnings per share of $3.50 and cash flow per share of $3.84. The price-earnings ratio is 24.1. What is the price-cash flow ratio?

Accepted Answer

A) 19.8 
B) 20.1 
C) 22.0 
D) 26.0 
E) 27.1 
A) 19.8 
B) 20.1 
C) 22.0 
D) 26.0 
E) 27.1

Question 15

Sweet Tree Cookies has current net income of $268,000 of which $110,000 was paid out in dividends. The remaining $158,000 will be shown in which account on the firm's financial statements for next year?

Accepted Answer

A) long-term debt 
B) common stock 
C) net income 
D) retained earnings 
E) paid in surplus 
A) long-term debt 
B) common stock 
C) net income 
D) retained earnings 
E) paid in surplus

Question 16

Sales minus cost of goods sold are equal to which one of the following?

Accepted Answer

A) net sales 
B) operating income 
C) gross profit 
D) pretax income 
E) net income 
A) net sales 
B) operating income 
C) gross profit 
D) pretax income 
E) net income

Question 17

Which one of the following is an intangible fixed asset?

Accepted Answer

A) accounts receivable 
B) patent 
C) inventory 
D) equipment 
E) building 
A) accounts receivable 
B) patent 
C) inventory 
D) equipment 
E) building

Question 18

The DeSoto Container Company has sales of $3.6 million and operating expenses of $225,000. The firm uses the percentage of sales approach and estimates next year's sales at $3.8 million. What are the operating expenses expected to be next year?

Accepted Answer

A) $221,231 
B) $225,123 
C) $229,400 
D) $232,549 
E) $237,500 
A) $221,231 
B) $225,123 
C) $229,400 
D) $232,549 
E) $237,500

Question 19

A firm has a price-cash flow ratio of 12.5 and a price-book value ratio of 7.6. If the cash flow per share is $4.67, what is the book value per share?

Accepted Answer

A) $2.84 
B) $3.55 
C) $4.44 
D) $6.45 
E) $7.68 
A) $2.84 
B) $3.55 
C) $4.44 
D) $6.45 
E) $7.68

Question 20

Wilson's Clothing has a loan payable to a bank which is due 18 months from now. How is this loan classified on the firm's financial statements?

Accepted Answer

A) fixed asset 
B) current liability 
C) long-term debt 
D) equity 
E) expense 
A) fixed asset 
B) current liability 
C) long-term debt 
D) equity 
E) expense

Exam 19: Projecting Cash Flow and Earnings

Which one of the following is an accounting statement that provides information on a firm's revenues and expenses?

What is the operating cash flow, given the following information? Net income \7 40 Depreciation \4 0 Issuance of new stock \2 0 Repayment of dept \3 5 Sale of old equipment \4 0 Purchase of new equipment \6 0 Dividend payments \6 5 Interest payments \8 0

ABC Construction, Inc., has buildings and equipment of $315,600, long-term debt of $154,700, accounts payable of $52,000, cash of $9,800, accounts receivable of $18,300, inventory of $62,000, and retained earnings of $147,000. What is the total equity of the firm?

Return on equity is equal to which one of the following?

The summation of the operating, investment, and financing cash flows for a stated period of time must equal which one of the following for the same time period?

Marley Enterprises has financing cash flow of −$45,200 and investment cash flow of $24,500 for the year. The beginning cash balance was $64,200 and the ending cash balance was $55,100. What was the operating cash flow for the period?

Which one of the following ratios indicates the amount of assets a firm needs to generate $1 in sales?

Which one of the following is defined as anything a firm owns that has value?

Better Products just filed its quarterly report with the SEC. This report is referred to as which one of the following?

Eagle Tactical, Inc., has taxable income of $1,500,000. The company paid out $240,000 in interest expense. The tax rate is 21% and the dividend payout ratio is 35%. What is the amount that was paid out in dividends?

Behrend Corporation has annual sales of $4.5 million, depreciation of $425,000, operating expenses of $679,000, cost of goods sold of $2.3 million, and interest expense of $230,000. What is the operating income?

Which one of the following statements is correct?

Your company has pretax income of $52,000 on sales of $506,000. Sales are expected to increase by 6% next year and the tax rate is 21%. What is the expected net income for next year if your firm uses the percentage of sales approach when compiling pro forma statements?

A firm has earnings per share of $3.50 and cash flow per share of $3.84. The price-earnings ratio is 24.1. What is the price-cash flow ratio?

Sweet Tree Cookies has current net income of $268,000 of which $110,000 was paid out in dividends. The remaining $158,000 will be shown in which account on the firm's financial statements for next year?

Sales minus cost of goods sold are equal to which one of the following?

Which one of the following is an intangible fixed asset?

The DeSoto Container Company has sales of $3.6 million and operating expenses of $225,000. The firm uses the percentage of sales approach and estimates next year's sales at $3.8 million. What are the operating expenses expected to be next year?

A firm has a price-cash flow ratio of 12.5 and a price-book value ratio of 7.6. If the cash flow per share is $4.67, what is the book value per share?

Wilson's Clothing has a loan payable to a bank which is due 18 months from now. How is this loan classified on the firm's financial statements?

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