Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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 3

Both the dividends and interest payments that companies make to individuals are subject to personal tax.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following categories of a statement of cash flows is affected by the payment of interest expense?

Accepted Answer

A)  Cash flows from operations 
B)  Cash flows from noncash expenses 
C)  Cash flows from investments 
D)  Cash flows from financing 
A)  Cash flows from operations 
B)  Cash flows from noncash expenses 
C)  Cash flows from investments 
D)  Cash flows from financing

Question 5

What is the marginal corporate tax rate for large companies?

Accepted Answer

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

Question 6

Perhaps the best method for estimating the market value of shareholders' equity is to:

Accepted Answer

A)  review the firm's balance sheet. 
B)  review the firm's income statement. 
C)  multiply number of shares outstanding by the price of each share. 
D)  add the retained earnings to the total liabilities. 
A)  review the firm's balance sheet. 
B)  review the firm's income statement. 
C)  multiply number of shares outstanding by the price of each share. 
D)  add the retained earnings to the total liabilities.

Question 7

According to GAAP,assets and liabilities are typically recorded on the balance sheet at:

Accepted Answer

A)  historical cost plus depreciation. 
B)  market value. 
C)  salvage value. 
D)  historical cost less depreciation. 
A)  historical cost plus depreciation. 
B)  market value. 
C)  salvage value. 
D)  historical cost less depreciation.

Question 8

Which one of these would not be paid from free cash flow?

Accepted Answer

A)  Cash dividends 
B)  Repayment of principal on a long-term debt 
C)  Repurchase of outstanding shares of common stock 
D)  New equipment purchase 
A)  Cash dividends 
B)  Repayment of principal on a long-term debt 
C)  Repurchase of outstanding shares of common stock 
D)  New equipment purchase

Question 9

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

Accepted Answer

A)  recognized when the goods are produced. 
B)  recognized when the goods are sold. 
C)  recognized when payment is received. 
D)  split between the production and the sale periods. 
A)  recognized when the goods are produced. 
B)  recognized when the goods are sold. 
C)  recognized when payment is received. 
D)  split between the production and the sale periods.

Question 10

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

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

You have gathered this information on a firm: $500,000 sales,$10,000 cash dividends,$300,000 cost of goods sold,$20,000 administrative expense,$20,000 depreciation expense,$40,000 interest expense,$10,000 purchase of productive equipment,no changes in working capital,and a tax rate of 35%.What is the free cash flow?

Accepted Answer

A)  $141,000 
B)  $168,000 
C)  $128,000 
D)  $142,000 
A)  $141,000 
B)  $168,000 
C)  $128,000 
D)  $142,000

Question 13

If the balance sheet of a firm indicates that total assets exceed current liabilities plus shareholders' equity,then the firm has:

Accepted Answer

A)  no retained earnings. 
B)  long-term debt. 
C)  no accumulated depreciation. 
D)  current assets. 
A)  no retained earnings. 
B)  long-term debt. 
C)  no accumulated depreciation. 
D)  current assets.

Question 14

According to the statement of cash flows,cash flows from financing could be positive if:

Accepted Answer

A)  the firm repaid more debt than it added. 
B)  the firm added more debt than it repaid. 
C)  interest rates were low on outstanding debt. 
D)  the firm sold portions of its plant and equipment. 
A)  the firm repaid more debt than it added. 
B)  the firm added more debt than it repaid. 
C)  interest rates were low on outstanding debt. 
D)  the firm sold portions of its plant and equipment.

Question 15

Which of the following statements is more likely if cash and marketable securities increase by $5,000 during a period in which cash provided by operations increases by $1,000 and cash used by investments decreases by $500?

Accepted Answer

A)  Cash provided by financing increases by $6,500. 
B)  Cash used by financing decreases by $1,000. 
C)  Debt increases by more than cash dividends paid. 
D)  Debt is reduced by more than cash dividends paid. 
A)  Cash provided by financing increases by $6,500. 
B)  Cash used by financing decreases by $1,000. 
C)  Debt increases by more than cash dividends paid. 
D)  Debt is reduced by more than cash dividends paid.

Question 16

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 17

What are the average and marginal tax rates for a corporation that has $97,648 of taxable income? The tax rates are as follows:

Accepted Answer

A)  21.97%; 25% 
B)  21.97%; 34% 
C)  23.08%; 34% 
D)  34%; 34% 
A)  21.97%; 25% 
B)  21.97%; 34% 
C)  23.08%; 34% 
D)  34%; 34%

Question 18

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 19

If a firm's statement of cash flows shows that cash was used for investments,which of the following would seem most likely?

Accepted Answer

A)  The inventory balance increased. 
B)  Common stock was repurchased. 
C)  New machines were acquired. 
D)  Cash dividends were paid. 
A)  The inventory balance increased. 
B)  Common stock was repurchased. 
C)  New machines were acquired. 
D)  Cash dividends were paid.

Question 20

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 accounts payable. 
A)  total assets and total liabilities. 
B)  inventory and accounts payable. 
C)  current assets and current liabilities. 
D)  cash and accounts payable.

Exam 3: Accounting and Finance

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

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

Both the dividends and interest payments that companies make to individuals are subject to personal tax.

Which of the following categories of a statement of cash flows is affected by the payment of interest expense?

What is the marginal corporate tax rate for large companies?

Perhaps the best method for estimating the market value of shareholders' equity is to:

According to GAAP,assets and liabilities are typically recorded on the balance sheet at:

Which one of these would not be paid from free cash flow?

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

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%?

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

If the balance sheet of a firm indicates that total assets exceed current liabilities plus shareholders' equity,then the firm has:

According to the statement of cash flows,cash flows from financing could be positive if:

Which of the following statements is more likely if cash and marketable securities increase by $5,000 during a period in which cash provided by operations increases by $1,000 and cash used by investments decreases by $500?

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

What are the average and marginal tax rates for a corporation that has $97,648 of taxable income? The tax rates are as follows:

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

If a firm's statement of cash flows shows that cash was used for investments,which of the following would seem most likely?

Net working capital is calculated by taking the difference between:

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