Question 1

Assume a firm increases its revenue by $100 while increasing its cost of goods sold by $85. How much additional tax will the firm owe if its marginal tax rate is 25%?

Accepted Answer

A)  $3.75 
B)  $7.50 
C)  $13.75 
D) $25.00 
A)  $3.75 
B)  $7.50 
C)  $13.75 
D) $25.00 A

Question 2

The existence of goodwill on a corporate balance sheet indicates that the corporation has:

Accepted Answer

A)  been profitable in the past. 
B)  depreciated its tangible assets. 
C)  intangible assets from past acquisitions. 
D) retained earnings resulting from past income. 
A)  been profitable in the past. 
B)  depreciated its tangible assets. 
C)  intangible assets from past acquisitions. 
D) retained earnings resulting from past income. C

Question 3

In general, what is changing as you read down the left-hand side of a balance sheet?

Accepted Answer

A)  The assets are becoming more fully depreciated. 
B)  The assets are increasing in value. 
C)  The assets are increasing in maturity. 
D) The assets are becoming less liquid. 
A)  The assets are becoming more fully depreciated. 
B)  The assets are increasing in value. 
C)  The assets are increasing in maturity. 
D) The assets are becoming less liquid. D

Question 4

A firm spends $200 to produce goods in period 1. In period 2, it sells half of those goods for $150, but doesn't collect payment until one period later. In period 3, it sells the other half of the goods for $150, and collects on these sales in period 4. Construct tables that depict the derivation of the profits and cash flows for the firm for periods 1 through 4. Ignore taxes.

Accepted Answer

Profits: @#IMG-DLM&

Question 5

Which of the following items should not be included in a listing of current assets?

Accepted Answer

A)  Marketable securities 
B)  Accounts payable 
C)  Accounts receivable 
D) Inventories 
A)  Marketable securities 
B)  Accounts payable 
C)  Accounts receivable 
D) Inventories

Question 6

Assume tax rates on single individuals are 10% on taxable income up to $9,075, 15% on income of $9,076 to $36,900 and 25% on income of $36,901 to $89,350. What is the tax liability for a single individual with $52,000 of taxable income, which includes $2,000 of dividends?

Accepted Answer

A)  $8,856.25 
B)  $9,103.50 
C)  $8,603.50 
D) $8,356.25 
A)  $8,856.25 
B)  $9,103.50 
C)  $8,603.50 
D) $8,356.25

Question 7

Which one of the following is an intangible asset?

Accepted Answer

A)  Goodwill 
B)  Retained earnings 
C)  Deferred income taxes 
D) Treasury stock 
A)  Goodwill 
B)  Retained earnings 
C)  Deferred income taxes 
D) Treasury stock

Question 8

If the market value of assets is high, then the market value of liabilities must be high also.

Accepted Answer

A) True 
 B)False

Question 9

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 10

A balance sheet portrays the value of a firm's assets and liabilities:

Accepted Answer

A)  over an annual period. 
B)  over any stated period of time. 
C)  at any stated point in time. 
D) only at the end of the calendar year. 
A)  over an annual period. 
B)  over any stated period of time. 
C)  at any stated point in time. 
D) only at the end of the calendar year.

Question 11

Which of the following statements about depreciation is correct?

Accepted Answer

A)  Depreciation is subtracted from cost of goods sold to calculate net income. 
B)  When depreciation expense is incurred, cash balances are reduced. 
C)  Depreciation expense does not affect net income. 
D) Depreciation reduces the book value of assets. 
A)  Depreciation is subtracted from cost of goods sold to calculate net income. 
B)  When depreciation expense is incurred, cash balances are reduced. 
C)  Depreciation expense does not affect net income. 
D) Depreciation reduces the book value of assets.

Question 12

Who pays taxes on earnings distributed as dividends?

Accepted Answer

A)  The issuing corporation 
B)  The shareholder receiving the dividend 
C)  Both the issuing corporation and the shareholder 
D) Neither the issuing corporation nor the shareholder 
A)  The issuing corporation 
B)  The shareholder receiving the dividend 
C)  Both the issuing corporation and the shareholder 
D) Neither the issuing corporation nor the shareholder

Question 13

What is the highest marginal rate at which corporate income is taxed?

Accepted Answer

A)  15% 
B)  34% 
C)  35% 
D) 39% 
A)  15% 
B)  34% 
C)  35% 
D) 39%

Question 14

If depreciation is a method of allocating cost rather than an actual cash flow, discuss how depreciation impacts the income statement and overall cash flows.

Accepted Answer

Depreciation appears on the income state

Question 15

There is generally a bigger difference between the book value and the market value of fixed assets as compared to cash.

Accepted Answer

A) True 
 B)False

Question 16

Describe the information contained in the balance sheet, income statement, and statement of cash flows.

Accepted Answer

The balance sheet provides a snapshot of

Question 17

Which of the following cannot be used to reduce taxable corporate income?

Accepted Answer

A)  Cash dividends 
B)  Depreciation expense 
C)  Interest expense 
D) Administrative expenses 
A)  Cash dividends 
B)  Depreciation expense 
C)  Interest expense 
D) Administrative expenses

Question 18

To calculate free cash flow, you must deduct capital expenditures from the cash flow from operations.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

An increase in inventories uses cash, reducing the firm's net cash balance.

Accepted Answer

A) True 
 B)False

Exam 3: Accounting and Finance

Assume a firm increases its revenue by $100 while increasing its cost of goods sold by $85. How much additional tax will the firm owe if its marginal tax rate is 25%?

The existence of goodwill on a corporate balance sheet indicates that the corporation has:

In general, what is changing as you read down the left-hand side of a balance sheet?

Which of the following items should not be included in a listing of current assets?

Assume tax rates on single individuals are 10% on taxable income up to $9,075, 15% on income of $9,076 to $36,900 and 25% on income of $36,901 to $89,350. What is the tax liability for a single individual with $52,000 of taxable income, which includes $2,000 of dividends?

Which one of the following is an intangible asset?

If the market value of assets is high, then the market value of liabilities must be high also.

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:

A balance sheet portrays the value of a firm's assets and liabilities:

Which of the following statements about depreciation is correct?

Who pays taxes on earnings distributed as dividends?

What is the highest marginal rate at which corporate income is taxed?

If depreciation is a method of allocating cost rather than an actual cash flow, discuss how depreciation impacts the income statement and overall cash flows.

There is generally a bigger difference between the book value and the market value of fixed assets as compared to cash.

Describe the information contained in the balance sheet, income statement, and statement of cash flows.

Which of the following cannot be used to reduce taxable corporate income?

To calculate free cash flow, you must deduct capital expenditures from the cash flow from operations.

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

An increase in inventories uses cash, reducing the firm's net cash balance.

Goals and Governance of the Corporation

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

How Corporations Raise Venture Capital and Issue Securities

Debt Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Working Capital Management

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

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