Question 1

Which one of the following statements is correct for a corporation with a negative net income in both the present and the last fiscal year?

Accepted Answer

A) this year's loss can be carried back, but last year's loss cannot be used. 
B) neither of the losses can be used to reduce taxes. 
C) both losses can be carried forward but not backward. 
D) both losses can be carried forward and backward, within certain time limits. 
A) this year's loss can be carried back, but last year's loss cannot be used. 
B) neither of the losses can be used to reduce taxes. 
C) both losses can be carried forward but not backward. 
D) both losses can be carried forward and backward, within certain time limits.

Question 2

In which of the following asset accounts are you least likely to find a difference between market value and book value?

Accepted Answer

A) cash 
B) inventory 
C) land 
D) shareholders' equity 
A) cash 
B) inventory 
C) land 
D) shareholders' equity

Question 3

A reduction in accounts receivable uses cash, reducing the firm's net cash balance.

Accepted Answer

A) True 
 B)False

Question 4

What is the overall change in cash resulting from: $300 increase in inventories, $150 increase in accounts payable, $120 decrease in accounts receivable, $60 decrease in other current assets, $150 decrease in other current liabilities?

Accepted Answer

A) -$120 
B) -$240 
C) $180 
D) $120 
A) -$120 
B) -$240 
C) $180 
D) $120

Question 5

Assume a single taxpayer is taxed at 10% on the first $9,075 of taxable income, 15% on the next $27,825 of income, and at 25% for the following $52,450 of income.What is the average tax rate for that individual if her taxable income is $41,350?

Accepted Answer

A) 14.98% 
B) 16.67% 
C) 16.13% 
D) 19.98% 
A) 14.98% 
B) 16.67% 
C) 16.13% 
D) 19.98%

Question 6

Which one of these will increase a firm's cash balance?

Accepted Answer

A) an increase in inventory 
B) a decrease in accounts payable 
C) an increase in common stock 
D) an increase in new equipment 
A) an increase in inventory 
B) a decrease in accounts payable 
C) an increase in common stock 
D) an increase in new equipment

Question 7

Accounting practices are currently standardized across all countries.

Accepted Answer

A) True 
 B)False

Question 8

Book values are "forward-looking" measures of value.

Accepted Answer

A) True 
 B)False

Question 9

The principal reason for excluding many intangible assets from the balance sheet is that they are difficult to value.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following categories of a statement of cash flows is affected by the payment of interest expense?

Accepted Answer

A) cash flows from operations 
B) cash flows from noncash expenses 
C) cash flows from investments 
D) cash flows from financing 
A) cash flows from operations 
B) cash flows from noncash expenses 
C) cash flows from investments 
D) cash flows from financing

Question 11

Based on generally accepted accounting principles, assets are recorded on the balance at their current market value.

Accepted Answer

A) True 
 B)False

Question 12

Accrual accounting aims to provide a fairer measure of the firm's profitability.

Accepted Answer

A) True 
 B)False

Question 13

Dividends paid are treated as a financing activity on the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 14

Perhaps the best method for estimating the market value of shareholders' equity is to:

Accepted Answer

A) review the firm's balance sheet. 
B) review the firm's income statement. 
C) multiply number of shares outstanding by the current price of each share. 
D) add the retained earnings to the total liabilities. 
A) review the firm's balance sheet. 
B) review the firm's income statement. 
C) multiply number of shares outstanding by the current price of each share. 
D) add the retained earnings to the total liabilities.

Question 15

An increase in depreciation expense will (other things equal):

Accepted Answer

A) increase net income. 
B) decrease net income. 
C) increase taxable income. 
D) decrease the market value of assets. 
A) increase net income. 
B) decrease net income. 
C) increase taxable income. 
D) decrease the market value of assets.

Question 16

Which of the following statements about net working capital (NWC) is correct?

Accepted Answer

A) NWC is positive for all firms. 
B) as NWC decreases, potential liquidity increases. 
C) NWC excludes inventory, which is deemed illiquid. 
D) decrease in NWC can increase the firm's risk of bankruptcy. 
A) NWC is positive for all firms. 
B) as NWC decreases, potential liquidity increases. 
C) NWC excludes inventory, which is deemed illiquid. 
D) decrease in NWC can increase the firm's risk of bankruptcy.

Question 17

If net income is positive, then cash flow from operations must be positive for that period.

Accepted Answer

A) True 
 B)False

Question 18

According to the Canadian tax code at the beginning of 2019, the highest marginal combined provincial and federal tax rate for personal taxpayers is:

Accepted Answer

A) 25.0%. 
B) 28.5%. 
C) 15.0%. 
D) 31%. 
A) 25.0%. 
B) 28.5%. 
C) 15.0%. 
D) 31%.

Question 19

Professor Diehard found an effective antibiotic for the DEPRESS bacteria, and patented the drug.He believes that he can sell the patent for $20 million.He then formed a corporation and invested $400,000 in setting up a production plant.There are 2 million shares of stock outstanding.If the professor's belief is correct, what would be the price per share and the book value per share?

Accepted Answer

A) $10.20; $.20 
B) $10.00; $.20 
C) $9.80; $.40 
D) $9.80; $.20 
A) $10.20; $.20 
B) $10.00; $.20 
C) $9.80; $.40 
D) $9.80; $.20

Question 20

A company may deduct the interest paid to debtholders and the dividends paid to shareholders when calculating its taxable income.

Accepted Answer

A) True 
 B)False

Exam 3: Accounting and Finance

Which one of the following statements is correct for a corporation with a negative net income in both the present and the last fiscal year?

In which of the following asset accounts are you least likely to find a difference between market value and book value?

A reduction in accounts receivable uses cash, reducing the firm's net cash balance.

What is the overall change in cash resulting from: $300 increase in inventories, $150 increase in accounts payable, $120 decrease in accounts receivable, $60 decrease in other current assets, $150 decrease in other current liabilities?

Assume a single taxpayer is taxed at 10% on the first $9,075 of taxable income, 15% on the next $27,825 of income, and at 25% for the following $52,450 of income.What is the average tax rate for that individual if her taxable income is $41,350?

Which one of these will increase a firm's cash balance?

Accounting practices are currently standardized across all countries.

Book values are "forward-looking" measures of value.

The principal reason for excluding many intangible assets from the balance sheet is that they are difficult to value.

Which of the following categories of a statement of cash flows is affected by the payment of interest expense?

Based on generally accepted accounting principles, assets are recorded on the balance at their current market value.

Accrual accounting aims to provide a fairer measure of the firm's profitability.

Dividends paid are treated as a financing activity on the statement of cash flows.

Perhaps the best method for estimating the market value of shareholders' equity is to:

An increase in depreciation expense will (other things equal):

Which of the following statements about net working capital (NWC) is correct?

If net income is positive, then cash flow from operations must be positive for that period.

According to the Canadian tax code at the beginning of 2019, the highest marginal combined provincial and federal tax rate for personal taxpayers is:

A company may deduct the interest paid to debtholders and the dividends paid to shareholders when calculating its taxable income.

Goals and Governance of the Firm

Financial Markets and Institutions

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, Ipos, and Seasoned Offerings

Debt Policy

Leasing

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Cash and Inventory Management

Credit Management and Collection

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters