Question 1

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 2

Which of the following expense categories is subtracted from total revenues to help arrive at a firm's EBIT?

Accepted Answer

A)  Cash dividends 
B)  Depreciation expense 
C)  Interest expense 
D) Tax liability 
A)  Cash dividends 
B)  Depreciation expense 
C)  Interest expense 
D) Tax liability

Question 3

According to accrual accounting,when goods are not sold until the period after they were produced,then the cost of goods sold:

Accepted Answer

A)  will be recognized in the first period. 
B)  will be recognized in the second period. 
C)  will be recognized when payment is received. 
D) will be split between both periods 
A)  will be recognized in the first period. 
B)  will be recognized in the second period. 
C)  will be recognized when payment is received. 
D) will be split between both periods

Question 4

Net working capital is a measure of the company's:

Accepted Answer

A)  goodwill. 
B)  short-term liabilities. 
C)  estimated liquidity. 
D) shareholders' equity. 
A)  goodwill. 
B)  short-term liabilities. 
C)  estimated liquidity. 
D) shareholders' equity.

Question 5

What happens to a firm's net worth as it uses cash to repay accounts payable?

Accepted Answer

A)  Net worth increases. 
B)  Net worth decreases. 
C)  Net worth remains constant. 
D) Net worth decreases temporarily, until cash is replenished. 
A)  Net worth increases. 
B)  Net worth decreases. 
C)  Net worth remains constant. 
D) Net worth decreases temporarily, until cash is replenished.

Question 6

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 7

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

Question 8

Businesses that aggressively exploit any means to increase current earnings may cross over into fraudulent account practices.

Accepted Answer

A) True 
 B)False

Question 9

The purchase of new equipment is a use of cash,and it reduces the firm's net cash balance.

Accepted Answer

A) True 
 B)False

Question 10

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 11

If market interest rates have increased since a company last borrowed long-term funds,the market value of these long-term funds will likely be:

Accepted Answer

A)  greater than their book value. 
B)  less than their book value. 
C)  equal to their book value. 
D) unknown without knowing the maturity of the debt. 
A)  greater than their book value. 
B)  less than their book value. 
C)  equal to their book value. 
D) unknown without knowing the maturity of the debt.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Which of the following will occur in a statement of cash flows as a result of paying cash dividends?

Accepted Answer

A)  Cash flows from operations will increase. 
B)  Cash flows from investments will decrease. 
C)  Cash flows from financing will decrease. 
D) Cash balances will not be affected. 
A)  Cash flows from operations will increase. 
B)  Cash flows from investments will decrease. 
C)  Cash flows from financing will decrease. 
D) Cash balances will not be affected.

Question 14

All items in the common-size balance sheet are expressed as a percentage of total assets.

Accepted Answer

A) True 
 B)False

Question 15

Why does accounting income differ from cash flow?

Accepted Answer

Income is not the same as cash flow.Ther

Question 16

Net working capital is calculated by taking the difference between:

Accepted Answer

A)  total assets and total liabilities. 
B)  inventory and accounts payable. 
C)  current assets and current liabilities. 
D) cash and long-term debt 
A)  total assets and total liabilities. 
B)  inventory and accounts payable. 
C)  current assets and current liabilities. 
D) cash and long-term debt

Question 17

The payment of interest expense is considered cash flow from financing on the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 18

Balance sheets have traditionally recorded amounts in terms of market values.

Accepted Answer

A) True 
 B)False

Question 19

What balancing entry is most likely to be called for if previously excluded intangible assets were added to a firm's balance sheet?

Accepted Answer

A)  Increase accumulated depreciation 
B)  Decrease long-term debt 
C)  Increase shareholders' equity 
D) Decrease current assets 
A)  Increase accumulated depreciation 
B)  Decrease long-term debt 
C)  Increase shareholders' equity 
D) Decrease current assets

Question 20

Which of the following statements appears 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

Exam 3: Accounting and Finance

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

Which of the following expense categories is subtracted from total revenues to help arrive at a firm's EBIT?

According to accrual accounting,when goods are not sold until the period after they were produced,then the cost of goods sold:

Net working capital is a measure of the company's:

What happens to a firm's net worth as it uses cash to repay accounts payable?

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

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

Businesses that aggressively exploit any means to increase current earnings may cross over into fraudulent account practices.

The purchase of new equipment is a use of cash,and it reduces the firm's net cash balance.

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

If market interest rates have increased since a company last borrowed long-term funds,the market value of these long-term funds will likely be:

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

Which of the following will occur in a statement of cash flows as a result of paying cash dividends?

All items in the common-size balance sheet are expressed as a percentage of total assets.

Why does accounting income differ from cash flow?

Net working capital is calculated by taking the difference between:

The payment of interest expense is considered cash flow from financing on the statement of cash flows.

Balance sheets have traditionally recorded amounts in terms of market values.

What balancing entry is most likely to be called for if previously excluded intangible assets were added to a firm's balance sheet?

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

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

Filters