Question 1

Noncash items refer to:

Accepted Answer

A) accrued expenses. 
B) inventory items purchased using credit. 
C) the ownership of intangible assets such as patents. 
D) expenses which do not directly affect cash flows. 
E) sales which are made using store credit. 
A) accrued expenses. 
B) inventory items purchased using credit. 
C) the ownership of intangible assets such as patents. 
D) expenses which do not directly affect cash flows. 
E) sales which are made using store credit.

Question 2

Which one of the following is true according to Generally Accepted Accounting Principles?

Accepted Answer

A) Depreciation may or may not be recorded at management's discretion. 
B) Income is recorded based on the matching principle. 
C) Costs are recorded based on the realization principle. 
D) Depreciation is recorded based on the recognition principle. 
E) Costs of goods sold are recorded based on the matching principle. 
A) Depreciation may or may not be recorded at management's discretion. 
B) Income is recorded based on the matching principle. 
C) Costs are recorded based on the realization principle. 
D) Depreciation is recorded based on the recognition principle. 
E) Costs of goods sold are recorded based on the matching principle.

Question 3

Which one of the following statements related to taxes is correct?

Accepted Answer

A) The marginal tax rate must be equal to or lower than the average tax rate for a firm. 
B) The tax for a firm is computed by multiplying the firm's current marginal tax rate times the taxable income. 
C) Additional income is taxed at a firm's average tax rate. 
D) Given the corporate tax structure in 2012, the highest marginal tax rate is equal to the highest average tax rate. 
E) The marginal tax rate for a firm can be either higher than or the same as the average tax rate. 
A) The marginal tax rate must be equal to or lower than the average tax rate for a firm. 
B) The tax for a firm is computed by multiplying the firm's current marginal tax rate times the taxable income. 
C) Additional income is taxed at a firm's average tax rate. 
D) Given the corporate tax structure in 2012, the highest marginal tax rate is equal to the highest average tax rate. 
E) The marginal tax rate for a firm can be either higher than or the same as the average tax rate.

Question 4

The Lakeside Inn had operating cash flow of $48,450.Depreciation was $6,700 and interest paid was $2,480.A net total of $2,620 was paid on long-term debt.The firm spent $24,000 on fixed assets and decreased net working capital by $1,330.What is the amount of the cash flow to stockholders?

Accepted Answer

A) $5,100 
B) $7,830 
C) $18,020 
D) $19,998 
E) $20,680 
A) $5,100 
B) $7,830 
C) $18,020 
D) $19,998 
E) $20,680

Question 5

Nielsen Auto Parts had beginning net fixed assets of $218,470 and ending net fixed assets of $209,411.During the year,assets with a combined book value of $6,943 were sold.Depreciation for the year was $42,822.What is the amount of net capital spending?

Accepted Answer

A) $33,763 
B) $40,706 
C) $58,218 
D) $65,161 
E) $67,408 
A) $33,763 
B) $40,706 
C) $58,218 
D) $65,161 
E) $67,408

Question 6

Which one of the following statements concerning net working capital is correct?

Accepted Answer

A) Net working capital increases when inventory is purchased with cash. 
B) Net working capital must be a positive value. 
C) Total assets must increase if net working capital increases. 
D) A decrease in the cash balance may or may not decrease net working capital. 
E) Net working capital is the amount of cash a firm currently has available for spending. 
A) Net working capital increases when inventory is purchased with cash. 
B) Net working capital must be a positive value. 
C) Total assets must increase if net working capital increases. 
D) A decrease in the cash balance may or may not decrease net working capital. 
E) Net working capital is the amount of cash a firm currently has available for spending.

Question 7

The 2010 balance sheet of Global Tours showed current assets of $1,360 and current liabilities of $940.The 2011 balance sheet showed current assets of $1,640 and current liabilities of $1,140.What was the change in net working capital for 2011?

Accepted Answer

A) $80 
B) $170 
C) $190 
D) $880 
E) $920 
A) $80 
B) $170 
C) $190 
D) $880 
E) $920

Question 8

Your firm has total assets of $4,900,fixed assets of $3,200,long-term debt of $2,900,and short-term debt of $1,400.What is the amount of net working capital?

Accepted Answer

A) -$100 
B) $300 
C) $600 
D) $1,700 
E) $1,800 
A) -$100 
B) $300 
C) $600 
D) $1,700 
E) $1,800

Question 9

Jensen Enterprises paid $1,300 in dividends and $920 in interest this past year.Common stock increased by $1,200 and retained earnings decreased by $310.What is the net income for the year?

Accepted Answer

A) -$210 
B) $990 
C) $1,610 
D) $1,910 
E) $2,190 
A) -$210 
B) $990 
C) $1,610 
D) $1,910 
E) $2,190

Question 10

Winston Industries had sales of $843,800 and costs of $609,900.The firm paid $38,200 in interest and $18,000 in dividends.It also increased retained earnings by $62,138 for the year.The depreciation was $76,400.What is the average tax rate?

Accepted Answer

A) 32.83 percent 
B) 33.33 percent 
C) 38.17 percent 
D) 43.39 percent 
E) 48.87 percent 
A) 32.83 percent 
B) 33.33 percent 
C) 38.17 percent 
D) 43.39 percent 
E) 48.87 percent

Question 11

Andre's Bakery has sales of $687,000 with costs of $492,000.Interest expense is $26,000 and depreciation is $42,000.The tax rate is 35 percent.What is the net income?

Accepted Answer

A) $42,750 
B) $44,450 
C) $82,550 
D) $86,450 
E) $124,550 
A) $42,750 
B) $44,450 
C) $82,550 
D) $86,450 
E) $124,550

Question 12

Which of the following are included in current liabilities?
I.note payable to a supplier in eight months
II.amount due from a customer next month
III.account payable to a supplier that is due next week
IV.loan payable to the bank in fourteen months

Accepted Answer

A) I and III only 
B) II and III only 
C) I, II, and III only 
D) I, III, and IV only 
E) I, II, III, and IV 
A) I and III only 
B) II and III only 
C) I, II, and III only 
D) I, III, and IV only 
E) I, II, III, and IV

Question 13

A firm has $520 in inventory,$1,860 in fixed assets,$190 in accounts receivables,$210 in accounts payable,and $70 in cash.What is the amount of the current assets?

Accepted Answer

A) $710 
B) $780 
C) $990 
D) $2,430 
E) $2,640 
A) $710 
B) $780 
C) $990 
D) $2,430 
E) $2,640

Question 14

At the beginning of the year,a firm had current assets of $121,306 and current liabilities of $124,509.At the end of the year,the current assets were $122,418 and the current liabilities were $103,718.What is the change in net working capital?

Accepted Answer

A) -$19,679 
B) -$11,503 
C) -$9,387 
D) $1,809 
E) $21,903 
A) -$19,679 
B) -$11,503 
C) -$9,387 
D) $1,809 
E) $21,903

Question 15

The percentage of the next dollar you earn that must be paid in taxes is referred to as the _____ tax rate.

Accepted Answer

A) mean 
B) residual 
C) total 
D) average 
E) marginal 
A) mean 
B) residual 
C) total 
D) average 
E) marginal

Question 16

Which of the following is (are)included in the market value of a firm but are excluded from the firm's book value?
I.value of management skills
II.value of a copyright
III.value of the firm's reputation
IV.value of employee's experience

Accepted Answer

A) I only 
B) II only 
C) III and IV only 
D) I, II, and III only 
E) I, III, and IV only 
A) I only 
B) II only 
C) III and IV only 
D) I, II, and III only 
E) I, III, and IV only

Question 17

The 2010 balance sheet of The Sports Store showed $800,000 in the common stock account and $6.7 million in the additional paid-in surplus account.The 2011 balance sheet showed $872,000 and $8 million in the same two accounts,respectively.The company paid out $600,000 in cash dividends during 2011.What is the cash flow to stockholders for 2011?

Accepted Answer

A) -$1,372,000 
B) -$772,000 
C) -$628,000 
D) $372,000 
E) $1,972,000 
A) -$1,372,000 
B) -$772,000 
C) -$628,000 
D) $372,000 
E) $1,972,000

Question 18

An increase in the depreciation expense will do which of the following?
I.increase net income
II.decrease net income
III.increase the cash flow from assets
IV.decrease the cash flow from assets

Accepted Answer

A) I only 
B) II only 
C) I and III only 
D) II and III only 
E) II and IV only 
A) I only 
B) II only 
C) I and III only 
D) II and III only 
E) II and IV only

Question 19

For a tax-paying firm,an increase in _____ will cause the cash flow from assets to increase.

Accepted Answer

A) depreciation 
B) net capital spending 
C) change in net working capital 
D) taxes 
E) production costs 
A) depreciation 
B) net capital spending 
C) change in net working capital 
D) taxes 
E) production costs

Question 20

Four years ago,Velvet Purses purchased a mailing machine at a cost of $176,000.This equipment is currently valued at $64,500 on today's balance sheet but could actually be sold for $58,900.This is the only fixed asset the firm owns.Net working capital is $57,200 and long-term debt is $111,300.What is the book value of shareholders' equity?

Accepted Answer

A) $4,800 
B) $7,700 
C) $10,400 
D) $222,600 
E) $233,000 
A) $4,800 
B) $7,700 
C) $10,400 
D) $222,600 
E) $233,000

Exam 2: Financial Statements, Taxes, and Cash Flow

Noncash items refer to:

Which one of the following is true according to Generally Accepted Accounting Principles?

Which one of the following statements related to taxes is correct?

The Lakeside Inn had operating cash flow of $48,450.Depreciation was $6,700 and interest paid was $2,480.A net total of $2,620 was paid on long-term debt.The firm spent $24,000 on fixed assets and decreased net working capital by $1,330.What is the amount of the cash flow to stockholders?

Nielsen Auto Parts had beginning net fixed assets of $218,470 and ending net fixed assets of $209,411.During the year,assets with a combined book value of $6,943 were sold.Depreciation for the year was $42,822.What is the amount of net capital spending?

Which one of the following statements concerning net working capital is correct?

The 2010 balance sheet of Global Tours showed current assets of $1,360 and current liabilities of $940.The 2011 balance sheet showed current assets of $1,640 and current liabilities of $1,140.What was the change in net working capital for 2011?

Your firm has total assets of $4,900,fixed assets of $3,200,long-term debt of $2,900,and short-term debt of $1,400.What is the amount of net working capital?

Jensen Enterprises paid $1,300 in dividends and $920 in interest this past year.Common stock increased by $1,200 and retained earnings decreased by $310.What is the net income for the year?

Winston Industries had sales of $843,800 and costs of $609,900.The firm paid $38,200 in interest and $18,000 in dividends.It also increased retained earnings by $62,138 for the year.The depreciation was $76,400.What is the average tax rate?

Andre's Bakery has sales of $687,000 with costs of $492,000.Interest expense is $26,000 and depreciation is $42,000.The tax rate is 35 percent.What is the net income?

Which of the following are included in current liabilities? I.note payable to a supplier in eight months II.amount due from a customer next month III.account payable to a supplier that is due next week IV.loan payable to the bank in fourteen months

A firm has $520 in inventory,$1,860 in fixed assets,$190 in accounts receivables,$210 in accounts payable,and $70 in cash.What is the amount of the current assets?

At the beginning of the year,a firm had current assets of $121,306 and current liabilities of $124,509.At the end of the year,the current assets were $122,418 and the current liabilities were $103,718.What is the change in net working capital?

The percentage of the next dollar you earn that must be paid in taxes is referred to as the _____ tax rate.

Which of the following is (are)included in the market value of a firm but are excluded from the firm's book value? I.value of management skills II.value of a copyright III.value of the firm's reputation IV.value of employee's experience

An increase in the depreciation expense will do which of the following? I.increase net income II.decrease net income III.increase the cash flow from assets IV.decrease the cash flow from assets

For a tax-paying firm,an increase in _____ will cause the cash flow from assets to increase.

Introduction to Corporate Finance

Working With Financial Statements

Long-Term Financial Planning and Growth

Introduction to Valuation: The Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Project Analysis and Evaluation

Some Lessons From Capital Market History

Return, Risk, and the Security Market Line

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Payout Policy

Short-Term Finance and Planning

Cash and Liquidity Management

Credit and Inventory Management

International Corporate Finance

Behavioral Finance: Implications for Financial Management

Enterprise Risk Management

Options and Corporate Finance

Option Valuation

Mergers and Acquisitions

Leasing

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