Question 1

Which of the following cash outflows does not reduce a firm's net income?

Accepted Answer

A)  Income taxes 
B)  Interest expense 
C)  Dividends 
D) Depreciation expense 
A)  Income taxes 
B)  Interest expense 
C)  Dividends 
D) Depreciation expense

Question 2

Which of the following assets is likely to be considered the most liquid?

Accepted Answer

A)  Marketable securities 
B)  Net fixed assets 
C)  Accounts payable 
D) Inventories 
A)  Marketable securities 
B)  Net fixed assets 
C)  Accounts payable 
D) Inventories

Question 3

Determine the net cash flows for periods 1 through 3 for a firm with the following transactions: $1,000 spent in period 1 and $2,000 spent in period 2 to produce goods to be sold in the following periods-sales of $2,000 in period 2 and $4,000 in period 3.One-half of all sales are in cash with the other half collected in the following period.

Accepted Answer

The answer of Determine the net cash flows for periods...

Question 4

Purchases of marketable securities are not considered to be cash used by investments on the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 5

The net income figure on an income statement is calculated before deducting:

Accepted Answer

A)  interest expense. 
B)  depreciation expense. 
C)  cash dividends. 
D) tax liability. 
A)  interest expense. 
B)  depreciation expense. 
C)  cash dividends. 
D) tax liability.

Question 6

What happens to the market value of a firm's equity as the book value of the firm's equity increases?

Accepted Answer

A)  It increases by the same amount. 
B)  It decreases by the same amount. 
C)  It remains constant. 
D) There is no set relationship to determine this outcome. 
A)  It increases by the same amount. 
B)  It decreases by the same amount. 
C)  It remains constant. 
D) There is no set relationship to determine this outcome.

Question 7

If a firm's net income is positive and its noncash expenses are positive,which of the following could account for a negative amount of cash provided by operations?

Accepted Answer

A)  Current assets decrease more than current liabilities decrease. 
B)  Current assets increase more than current liabilities increase. 
C)  Current assets decrease more than current liabilities increase. 
D) A large addition is made to plant and equipment. 
A)  Current assets decrease more than current liabilities decrease. 
B)  Current assets increase more than current liabilities increase. 
C)  Current assets decrease more than current liabilities increase. 
D) A large addition is made to plant and equipment.

Question 8

The balance sheet presents a snapshot of the firm's assets and liabilities at one particular moment.

Accepted Answer

A) True 
 B)False

Question 9

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

Question 10

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 11

What is the marginal tax rate for a corporation with $60,000 taxable income and an average tax rate of 16.67% if the next-lowest marginal tax rate of 15% covers taxable incomes up to $50,000?

Accepted Answer

A)  15.00% 
B)  16.67% 
C)  18.34% 
D) 25.00% 
A)  15.00% 
B)  16.67% 
C)  18.34% 
D) 25.00%

Question 12

Which of the following values would most likely interest a shareholder?

Accepted Answer

A)  Book value of equity 
B)  Market value of equity 
C)  Historical cost of equity 
D) none of these 
A)  Book value of equity 
B)  Market value of equity 
C)  Historical cost of equity 
D) none of these

Question 13

If the value of a firm's net fixed assets equals the value of the accumulated depreciation,from an accounting context the fixed assets are:

Accepted Answer

A)  new. 
B)  fully depreciated. 
C)  one-half depreciated. 
D) equal in value to the firm's current assets 
A)  new. 
B)  fully depreciated. 
C)  one-half depreciated. 
D) equal in value to the firm's current assets

Question 14

What is the overall change in working capital resulting from the following changes? $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

The answer of What is the overall change in working...

Question 15

The difference between the market values of assets and liabilities is the market value of the shareholders' equity claim.

Accepted Answer

A) True 
 B)False

Question 16

Depreciation charge is a cash payment.

Accepted Answer

A) True 
 B)False

Question 17

Congress passed the Sarbanes-Oxley Act in 2001.The act attempts to ensure that the firm's financial reports accurately represent its financial condition.However,general consensus thinks that accounting rules still give firms considerable leeway when preparing their financial statements.List three examples of gray areas that allow for judgment calls.

Accepted Answer

• Cookie-jar reserves.Firms know that in

Question 18

What occurs when the value of a firm's debt exceeds the value of shareholders' equity?

Accepted Answer

A)  The firm is bankrupt. 
B)  The firm's assets have no value. 
C)  A high rate of interest is being paid on the debt. 
D) The firm is financed more through debt than through equity 
A)  The firm is bankrupt. 
B)  The firm's assets have no value. 
C)  A high rate of interest is being paid on the debt. 
D) The firm is financed more through debt than through equity

Question 19

An individual's income for the year includes both dividend and interest payments.Which of the following statements will be correct concerning that individual's tax liability?

Accepted Answer

A)  Dividends are taxed; tax on interest payments is paid at the corporate level. 
B)  Interest is taxed; tax on dividend payments is paid at the corporate level. 
C)  Both dividend and interest payments are taxed at the personal level. 
D) All taxes on dividend and interest payments are paid at the corporate level 
A)  Dividends are taxed; tax on interest payments is paid at the corporate level. 
B)  Interest is taxed; tax on dividend payments is paid at the corporate level. 
C)  Both dividend and interest payments are taxed at the personal level. 
D) All taxes on dividend and interest payments are paid at the corporate level

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 3: Accounting and Finance

Which of the following cash outflows does not reduce a firm's net income?

Which of the following assets is likely to be considered the most liquid?

Purchases of marketable securities are not considered to be cash used by investments on the statement of cash flows.

The net income figure on an income statement is calculated before deducting:

What happens to the market value of a firm's equity as the book value of the firm's equity increases?

If a firm's net income is positive and its noncash expenses are positive,which of the following could account for a negative amount of cash provided by operations?

The balance sheet presents a snapshot of the firm's assets and liabilities at one particular moment.

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

Which of the following statements about depreciation is correct?

What is the marginal tax rate for a corporation with $60,000 taxable income and an average tax rate of 16.67% if the next-lowest marginal tax rate of 15% covers taxable incomes up to $50,000?

Which of the following values would most likely interest a shareholder?

If the value of a firm's net fixed assets equals the value of the accumulated depreciation,from an accounting context the fixed assets are:

What is the overall change in working capital resulting from the following changes? $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.

The difference between the market values of assets and liabilities is the market value of the shareholders' equity claim.

Depreciation charge is a cash payment.

What occurs when the value of a firm's debt exceeds the value of shareholders' equity?

An individual's income for the year includes both dividend and interest payments.Which of the following statements will be correct concerning that individual's tax liability?

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

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

Risk, Return, and Capital Budgeting

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

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