Question 1

When making financial decisions related to assets,you should

Accepted Answer

A) place primary emphasis on historical costs. 
B) place more emphasis on book values than on market values. 
C) rely primarily on the value of assets as shown on the balance sheet. 
D) always consider market values. 
E) only consider market values if they are less than book values. 
A) place primary emphasis on historical costs. 
B) place more emphasis on book values than on market values. 
C) rely primarily on the value of assets as shown on the balance sheet. 
D) always consider market values. 
E) only consider market values if they are less than book values.

Question 2

Frederick Antiques has the following balance sheets:
 
What is the change in net working capital?

Accepted Answer

A) -$118 
B) $34 
C) $12 
D) $144 
E) -$112 
A) -$118 
B) $34 
C) $12 
D) $144 
E) -$112

Question 3

________ refers to the cash flow resulting from a firm's ongoing,normal business activities.

Accepted Answer

A) Cash flow from assets 
B) Net working capital 
C) Capital spending 
D) Cash flow from operating activities 
E) Cash flow from investing activities 
A) Cash flow from assets 
B) Net working capital 
C) Capital spending 
D) Cash flow from operating activities 
E) Cash flow from investing activities

Question 4

Peggy Grey's Cookies has net income of $2,918.The firm pays out 35 percent of the net income to its shareholders as dividends.During the year,the company sold $150 worth of common stock.What is the cash flow to the stockholders?

Accepted Answer

A) $1,171.30 
B) $871.30 
C) $2,046.70 
D) $1,224.20 
E) $1,746.70 
A) $1,171.30 
B) $871.30 
C) $2,046.70 
D) $1,224.20 
E) $1,746.70

Question 5

Liquidity is

Accepted Answer

A) a measure of the use of debt in a firm's capital structure. 
B) equal to current assets minus current liabilities. 
C) equal to the market value of a firm's total assets minus its current liabilities. 
D) generally associated with intangible assets. 
E) valuable to a firm even though liquid assets tend to be less profitable to own. 
A) a measure of the use of debt in a firm's capital structure. 
B) equal to current assets minus current liabilities. 
C) equal to the market value of a firm's total assets minus its current liabilities. 
D) generally associated with intangible assets. 
E) valuable to a firm even though liquid assets tend to be less profitable to own.

Question 6

Expenses are recorded on an income statement based on

Accepted Answer

A) their payment dates. 
B) the date the expenses are expected. 
C) the matching principle. 
D) their invoice dates. 
E) the average time principle. 
A) their payment dates. 
B) the date the expenses are expected. 
C) the matching principle. 
D) their invoice dates. 
E) the average time principle.

Question 7

Current assets include

Accepted Answer

A) inventory and accounts receivable. 
B) accounts payable and cash. 
C) cash and intangible assets. 
D) inventory and accounts payable. 
E) buildings and equipment. 
A) inventory and accounts receivable. 
B) accounts payable and cash. 
C) cash and intangible assets. 
D) inventory and accounts payable. 
E) buildings and equipment.

Question 8

________ refers to a firm's dividend payments minus any net new equity raised.

Accepted Answer

A) Operating cash flow 
B) Capital spending 
C) Net working capital 
D) Cash flow to stockholders 
E) Cash flow from creditors 
A) Operating cash flow 
B) Capital spending 
C) Net working capital 
D) Cash flow to stockholders 
E) Cash flow from creditors

Question 9

When you are making a financial decision,the most relevant tax rate is the ________ rate.

Accepted Answer

A) average 
B) fixed 
C) marginal 
D) total 
E) variable 
A) average 
B) fixed 
C) marginal 
D) total 
E) variable

Question 10

You have compiled the following information on Winslow,Inc.:
 
What is the cash flow of the firm,or CF(A),for 2017?

Accepted Answer

A) -$1,273 
B) -$3,581 
C) $1,273 
D) $2,160 
E) $3,414 
A) -$1,273 
B) -$3,581 
C) $1,273 
D) $2,160 
E) $3,414

Question 11

Which one of these is both a product cost and a fixed cost in the short run?

Accepted Answer

A) Monthly electric bill for manufacturing facility 
B) Salary for company CEO 
C) Overtime pay for production employees 
D) Sales commission paid based on monthly sales 
E) Monthly lease payment for production equipment 
A) Monthly electric bill for manufacturing facility 
B) Salary for company CEO 
C) Overtime pay for production employees 
D) Sales commission paid based on monthly sales 
E) Monthly lease payment for production equipment

Question 12

The tax rates are as shown.Your firm currently has taxable income of $73,900.How much additional tax will the firm owe if it increases its taxable income by $10,000?

Accepted Answer

A) $3,400 
B) $3,500 
C) $2,500 
D) $2,950 
E) $3,301 
A) $3,400 
B) $3,500 
C) $2,500 
D) $2,950 
E) $3,301

Question 13

You have compiled the following information on Winslow,Inc.:
 
What is the cash flow to creditors for 2017?

Accepted Answer

A) $3,650 
B) -$4,040 
C) $3,350 
D) -$4,270 
E) -$3,810 
A) $3,650 
B) -$4,040 
C) $3,350 
D) -$4,270 
E) -$3,810

Question 14

The tax rates are as shown.Lasseter's currently has taxable income of $163,400.What is the firm's average tax rate?

Accepted Answer

A) 34.00% 
B) 36.03% 
C) 28.75% 
D) 39.00% 
E) 30.32% 
A) 34.00% 
B) 36.03% 
C) 28.75% 
D) 39.00% 
E) 30.32%

Question 15

The cash flow to creditors increases when

Accepted Answer

A) cash is used to reduce accounts payable. 
B) new shares of stock are sold for cash. 
C) interest is paid on outstanding debt. 
D) an asset is sold for cash. 
E) a long-term debt is incurred. 
A) cash is used to reduce accounts payable. 
B) new shares of stock are sold for cash. 
C) interest is paid on outstanding debt. 
D) an asset is sold for cash. 
E) a long-term debt is incurred.

Question 16

The cash flow from operating activities decreases when

Accepted Answer

A) fixed assets are sold. 
B) interest expense increases. 
C) dividends increase. 
D) depreciation increases. 
E) accounts receivables decrease. 
A) fixed assets are sold. 
B) interest expense increases. 
C) dividends increase. 
D) depreciation increases. 
E) accounts receivables decrease.

Question 17

Noncash items refer to

Accepted Answer

A) the credit sales of a firm. 
B) the accounts payable of a firm. 
C) all accounts on the balance sheet other than cash on hand. 
D) the costs incurred for the purchase of intangible fixed assets. 
E) expenses charged against revenues that do not directly affect cash flow. 
A) the credit sales of a firm. 
B) the accounts payable of a firm. 
C) all accounts on the balance sheet other than cash on hand. 
D) the costs incurred for the purchase of intangible fixed assets. 
E) expenses charged against revenues that do not directly affect cash flow.

Question 18

You have compiled the following information on the Shoe Store:
 
What is the amount of the net capital spending for 2017?

Accepted Answer

A) $224 
B) $639 
C) -$224 
D) $362 
E) $191 
A) $224 
B) $639 
C) -$224 
D) $362 
E) $191

Question 19

Stockholders' equity is equal to

Accepted Answer

A) net working capital plus long-term liabilities. 
B) current assets plus fixed assets minus long-term liabilities. 
C) total assets plus total liabilities. 
D) current assets minus total liabilities plus fixed assets. 
E) net working capital plus total fixed assets. 
A) net working capital plus long-term liabilities. 
B) current assets plus fixed assets minus long-term liabilities. 
C) total assets plus total liabilities. 
D) current assets minus total liabilities plus fixed assets. 
E) net working capital plus total fixed assets.

Question 20

A firm starts its year with positive net working capital.During the year,the firm acquires more short-term debt than it does short-term assets.This means that

Accepted Answer

A) the ending net working capital might be positive,negative,or equal to zero. 
B) both accounts receivable and inventory decreased during the year. 
C) the beginning current assets were less than the beginning current liabilities. 
D) accounts payable increased and inventory decreased during the year. 
E) the ending net working capital will be negative. 
A) the ending net working capital might be positive,negative,or equal to zero. 
B) both accounts receivable and inventory decreased during the year. 
C) the beginning current assets were less than the beginning current liabilities. 
D) accounts payable increased and inventory decreased during the year. 
E) the ending net working capital will be negative.

Exam 2: Financial Statements and Cash Flow

When making financial decisions related to assets,you should

Frederick Antiques has the following balance sheets: What is the change in net working capital?

________ refers to the cash flow resulting from a firm's ongoing,normal business activities.

Peggy Grey's Cookies has net income of $2,918.The firm pays out 35 percent of the net income to its shareholders as dividends.During the year,the company sold $150 worth of common stock.What is the cash flow to the stockholders?

Liquidity is

Expenses are recorded on an income statement based on

Current assets include

________ refers to a firm's dividend payments minus any net new equity raised.

When you are making a financial decision,the most relevant tax rate is the ________ rate.

You have compiled the following information on Winslow,Inc.: What is the cash flow of the firm,or CF(A),for 2017?

Which one of these is both a product cost and a fixed cost in the short run?

The tax rates are as shown.Your firm currently has taxable income of $73,900.How much additional tax will the firm owe if it increases its taxable income by $10,000?

You have compiled the following information on Winslow,Inc.: What is the cash flow to creditors for 2017?

The tax rates are as shown.Lasseter's currently has taxable income of $163,400.What is the firm's average tax rate?

The cash flow to creditors increases when

The cash flow from operating activities decreases when

Noncash items refer to

You have compiled the following information on the Shoe Store: What is the amount of the net capital spending for 2017?

Stockholders' equity is equal to

A firm starts its year with positive net working capital.During the year,the firm acquires more short-term debt than it does short-term assets.This means that

Introduction to Corporate Finance

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return: Lessons From Market History

Return and Risk: The Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividends and Other Payouts

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

International Corporate Finance

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