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

Which of the following changes in working capital will result in an increase in cash flows?

Accepted Answer

A)  increase in accounts payable 
B)  increase in inventories 
C)  increase in accounts receivable 
D)  decrease in other current liabilities 
A)  increase in accounts payable 
B)  increase in inventories 
C)  increase in accounts receivable 
D)  decrease in other current liabilities

Question 3

Calculate the EBIT (Operating Income)for a firm with $4 million total revenues,$3.5 million cost of goods sold,$500,000 depreciation expense,and $120,000 interest expense.

Accepted Answer

A)  $500,000 
B)  $380,000 
C)  $0 
D)  ($120,000) 
A)  $500,000 
B)  $380,000 
C)  $0 
D)  ($120,000)

Question 4

One reason for the difference between profits and cash is that the cost of capital equipment is spread over the forecast life.

Accepted Answer

A) True 
 B)False

Question 5

Current period depreciation expense is listed:

Accepted Answer

A)  on the balance sheet. 
B)  in the investment section of the cash flow statement. 
C)  on the income statement. 
D)  on neither the balance sheet nor the income statement; it is a noncash expense. 
A)  on the balance sheet. 
B)  in the investment section of the cash flow statement. 
C)  on the income statement. 
D)  on neither the balance sheet nor the income statement; it is a noncash expense.

Question 6

Market-value balance sheets differ from book-value balance sheets in that market values:

Accepted Answer

A)  are higher than book values. 
B)  are lower than book values. 
C)  conform more to GAAP accounting. 
D)  conform to investors' expectations. 
A)  are higher than book values. 
B)  are lower than book values. 
C)  conform more to GAAP accounting. 
D)  conform to investors' expectations.

Question 7

Assume a firm generates $2,000 in sales and has a $500 increase in accounts receivable during an accounting period.Based solely on this information,cash flow will increase by:

Accepted Answer

A)  $2,500. 
B)  $2,000. 
C)  $1,500. 
D)  $500. 
A)  $2,500. 
B)  $2,000. 
C)  $1,500. 
D)  $500.

Question 8

Interest expense appears in the operations section of the statement of cash flows because:

Accepted Answer

A)  firms cannot operate without incurring interest expense. 
B)  its payment is not within managerial discretion. 
C)  it is paid to finance a firm's inventory. 
D)  None of these; interest expense appears in the financing section of the statement of cash flows. 
A)  firms cannot operate without incurring interest expense. 
B)  its payment is not within managerial discretion. 
C)  it is paid to finance a firm's inventory. 
D)  None of these; interest expense appears in the financing section of the statement of cash flows.

Question 9

ABC Corp.'s balance sheet shows its long-term debt to be $20 million.The debt was issued with a 10% interest rate,and the current interest rate is 7%.Based on this information alone,the market value of this debt is most likely:

Accepted Answer

A)  less than $20 million. 
B)  more than $20 million. 
C)  equal to $20 million. 
D)  unknown without knowing the maturity of the debt. 
A)  less than $20 million. 
B)  more than $20 million. 
C)  equal to $20 million. 
D)  unknown without knowing the maturity of the debt.

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?

Which of the following changes in working capital will result in an increase in cash flows?

Calculate the EBIT (Operating Income)for a firm with $4 million total revenues,$3.5 million cost of goods sold,$500,000 depreciation expense,and $120,000 interest expense.

One reason for the difference between profits and cash is that the cost of capital equipment is spread over the forecast life.

Current period depreciation expense is listed:

Market-value balance sheets differ from book-value balance sheets in that market values:

Assume a firm generates $2,000 in sales and has a $500 increase in accounts receivable during an accounting period.Based solely on this information,cash flow will increase by:

Interest expense appears in the operations section of the statement of cash flows because:

ABC Corp.'s balance sheet shows its long-term debt to be $20 million.The debt was issued with a 10% interest rate,and the current interest rate is 7%.Based on this information alone,the market value of this debt is most likely:

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 and Payout 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

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?

Which of the following changes in working capital will result in an increase in cash flows?

Calculate the EBIT (Operating Income)for a firm with $4 million total revenues,$3.5 million cost of goods sold,$500,000 depreciation expense,and $120,000 interest expense.

One reason for the difference between profits and cash is that the cost of capital equipment is spread over the forecast life.

Current period depreciation expense is listed:

Market-value balance sheets differ from book-value balance sheets in that market values:

Assume a firm generates $2,000 in sales and has a $500 increase in accounts receivable during an accounting period.Based solely on this information,cash flow will increase by:

Interest expense appears in the operations section of the statement of cash flows because:

ABC Corp.'s balance sheet shows its long-term debt to be $20 million.The debt was issued with a 10% interest rate,and the current interest rate is 7%.Based on this information alone,the market value of this debt is most likely:

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 and Payout 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