Question 1

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. D

Question 2

Assume a single taxpayer is taxed at 10% on the first $9,275 of taxable income,15% on the next $28,375 of income,and at 25% for the following $53,500 of income.What is the average tax rate for that individual if her taxable income is $42,000?

Accepted Answer

A)  14.93% 
B)  16.67% 
C)  16.13% 
D)  25% 
A)  14.93% 
B)  16.67% 
C)  16.13% 
D)  25% A

Question 3

In which of the following balance-sheet entries are you least likely to find a difference between market value and book value?

Accepted Answer

A)  Cash 
B)  Inventory 
C)  Land 
D)  Shareholders' equity 
A)  Cash 
B)  Inventory 
C)  Land 
D)  Shareholders' equity A

Question 4

Assume a company pays tax at a rate of 15% on its first $50,000 of income.Any income above $50,000 is taxed at 25%.If a company has $75,000 of taxable income,which of the following statements is correct?

Accepted Answer

A)  Its marginal tax rate is 15%. 
B)  Its average tax rate is 25%. 
C)  Its marginal tax rate is 18.33%. 
D)  Its average tax rate is 18.33%. 
A)  Its marginal tax rate is 15%. 
B)  Its average tax rate is 25%. 
C)  Its marginal tax rate is 18.33%. 
D)  Its average tax rate is 18.33%.

Question 5

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 6

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 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

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 9

Depreciation expense is used to:

Accepted Answer

A)  allocate costs to all departments of the firm. 
B)  determine when an asset is fully paid off. 
C)  allocate historical cost over the life of an asset. 
D)  equate the historical cost and market values of an asset. 
A)  allocate costs to all departments of the firm. 
B)  determine when an asset is fully paid off. 
C)  allocate historical cost over the life of an asset. 
D)  equate the historical cost and market values of an asset.

Question 10

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 11

Amy wants to know if inventory is increasing as a percentage of total assets.Which one of these statements most easily provides the information she is seeking?

Accepted Answer

A)  Statement of cash flows 
B)  Balance sheet 
C)  Common-size balance sheet 
D)  Income statement 
A)  Statement of cash flows 
B)  Balance sheet 
C)  Common-size balance sheet 
D)  Income statement

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

According to the U.S.tax code at the beginning of 2016,the highest marginal tax rate for personal taxpayers is:

Accepted Answer

A)  25.0%. 
B)  28.5%. 
C)  35.0%. 
D)  39.6%. 
A)  25.0%. 
B)  28.5%. 
C)  35.0%. 
D)  39.6%.

Question 14

Which of the following statements about net working capital (NWC)is correct?

Accepted Answer

A)  NWC is positive for all firms. 
B)  As NWC decreases, potential liquidity increases. 
C)  NWC excludes inventory, which is deemed illiquid. 
D)  NWC is negative if current liabilities exceed current assets. 
A)  NWC is positive for all firms. 
B)  As NWC decreases, potential liquidity increases. 
C)  NWC excludes inventory, which is deemed illiquid. 
D)  NWC is negative if current liabilities exceed current assets.

Question 15

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 16

Which one of the following will reduce the cash flow during an accounting period?

Accepted Answer

A)  High depreciation expense 
B)  Reduction of inventory levels 
C)  Acquisition of equipment 
D)  Increase in accounts payable 
A)  High depreciation expense 
B)  Reduction of inventory levels 
C)  Acquisition of equipment 
D)  Increase in accounts payable

Question 17

Which of the following statements is true for a corporation with $1 million market value of equity,$2 million market value of assets,and 1,000 shares of outstanding stock?

Accepted Answer

A)  Market value of liabilities exceeds book value of liabilities. 
B)  Market value of liabilities equals $1 million. 
C)  Book value per share equals $1,000. 
D)  Market value per share equals $2,000. 
A)  Market value of liabilities exceeds book value of liabilities. 
B)  Market value of liabilities equals $1 million. 
C)  Book value per share equals $1,000. 
D)  Market value per share equals $2,000.

Question 18

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

Accepted Answer

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

Question 19

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 20

Which one of the following 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

Exam 3: Accounting and Finance

Which of the following statements about depreciation is correct?

Assume a single taxpayer is taxed at 10% on the first $9,275 of taxable income,15% on the next $28,375 of income,and at 25% for the following $53,500 of income.What is the average tax rate for that individual if her taxable income is $42,000?

In which of the following balance-sheet entries are you least likely to find a difference between market value and book value?

Assume a company pays tax at a rate of 15% on its first $50,000 of income.Any income above $50,000 is taxed at 25%.If a company has $75,000 of taxable income,which of the following statements is correct?

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

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

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:

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?

Depreciation expense is used to:

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

Amy wants to know if inventory is increasing as a percentage of total assets.Which one of these statements most easily provides the information she is seeking?

Who pays taxes on earnings distributed as dividends?

According to the U.S.tax code at the beginning of 2016,the highest marginal tax rate for personal taxpayers is:

Which of the following statements about net working capital (NWC)is correct?

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

Which one of the following will reduce the cash flow during an accounting period?

Which of the following statements is true for a corporation with $1 million market value of equity,$2 million market value of assets,and 1,000 shares of outstanding stock?

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

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

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

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 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

Filters