Question 1

Finished goods held for sale are inventory,but raw materials to be used in the production process are considered other assets.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following accounts does NOT belong on the asset side of a balance sheet?

Accepted Answer

A) accounts receivable 
B) accumulated depreciation 
C) cash 
D) accruals 
A) accounts receivable 
B) accumulated depreciation 
C) cash 
D) accruals

Question 3

Corporation A decides to borrow $1,000,000 and use the money to buy back $1,000,000 of its common stock.The corporation pays 6% interest on its borrowed funds which exactly equals the amount of the dividend it used to pay on the common stock it repurchased.Therefore

Accepted Answer

A) Corporation A's operating income will decrease due to higher interest expense. 
B) Corporation A's net income will increase due to the tax deductibility of interest expense. 
C) Corporation A will have no change in its operating income since the interest expense exactly offsets the prior dividend payment. 
D) Corporation A's gross profit will decrease. 
A) Corporation A's operating income will decrease due to higher interest expense. 
B) Corporation A's net income will increase due to the tax deductibility of interest expense. 
C) Corporation A will have no change in its operating income since the interest expense exactly offsets the prior dividend payment. 
D) Corporation A's gross profit will decrease.

Question 4

Earnings before taxes,or taxable income,is equal to operating income minus financing costs.

Accepted Answer

A) True 
 B)False

Question 5

Gross profit is equal to

Accepted Answer

A) profits plus depreciation. 
B) revenues - expenses. 
C) earnings before taxes minus taxes payable. 
D) sales - cost of goods sold. 
A) profits plus depreciation. 
B) revenues - expenses. 
C) earnings before taxes minus taxes payable. 
D) sales - cost of goods sold.

Question 6

Two companies have identical assets and operating activities.Which of the follow statements is true?

Accepted Answer

A) Both companies have the same net income. 
B) The company with more debt will have lower operating income due to interest expense. 
C) The company with more debt will have higher operating income due to leverage. 
D) The company with more debt will have lower net income due to interest expense. 
A) Both companies have the same net income. 
B) The company with more debt will have lower operating income due to interest expense. 
C) The company with more debt will have higher operating income due to leverage. 
D) The company with more debt will have lower net income due to interest expense.

Question 7

Prepare a balance sheet using the information given below.Make sure to identify current assets,net fixed assets,total assets,current liabilities,long-term debt,total equity,and total liabilities and equity.

Accepted Answer

The answer of Prepare a balance sheet using the information...

Question 8

A balance sheet reflects the current market value of a firm's assets and liabilities.

Accepted Answer

A) True 
 B)False

Question 9

The income statement describes the financial position of a firm on a given date.

Accepted Answer

A) True 
 B)False

Question 10

Is it possible for a company that has negative net income and negative operating cash flow to end the year with an increase in cash and an increase in stock price? Explain your answer.

Accepted Answer

Yes! Many start-up companies or research

Question 11

Please refer to Table 3-2 for the following questions.
Table 3-2
Enigma has the following financial information:
   No changes were made in interest payable or taxes payable.
-Based on the information in Table 3-2,what is Enigma's cash flow from operations?

Accepted Answer

A) $85,000 
B) $100,000 
C) $105,000 
D) $75,000 
A) $85,000 
B) $100,000 
C) $105,000 
D) $75,000

Question 12

Universal Financial,Inc.has total current assets of $1,200,000; long-term debt of $600,000; total current liabilities of $500,000; and long-term assets of $800,000.How much is the firm's net working capital?

Accepted Answer

A) $1,000,000 
B) $900,000 
C) $600,000 
D) $700,000 
A) $1,000,000 
B) $900,000 
C) $600,000 
D) $700,000

Question 13

Company A and Company B both report the same level of sales and net income.Therefore

Accepted Answer

A) both A and B will report the same Earnings Per Share. 
B) both A and B will report the same Gross Profit Margin. 
C) both A and B will report the same Net Profit Margin. 
D) both A and C are true. 
A) both A and B will report the same Earnings Per Share. 
B) both A and B will report the same Gross Profit Margin. 
C) both A and B will report the same Net Profit Margin. 
D) both A and C are true.

Question 14

What information does a firm's income statement provide to the viewing public?

Accepted Answer

A) an itemization of all of a firm's assets and liabilities for a defined period of time 
B) a complete listing of all of a firm's cash receipts and cash expenditures for a defined period of time 
C) a report of revenues and expenses for a defined period of time 
D) a report of investments made and their cost for a specific period of time 
A) an itemization of all of a firm's assets and liabilities for a defined period of time 
B) a complete listing of all of a firm's cash receipts and cash expenditures for a defined period of time 
C) a report of revenues and expenses for a defined period of time 
D) a report of investments made and their cost for a specific period of time

Question 15

Please refer to Table 3-1 for the following questions.
Table 3-1
Jones Company
Financial Information
  
-The December 31,2009 balance sheet shows net fixed assets of $150,000 and the December 31,2010 balance sheet shows net fixed assets of $250,000.Depreciation expense for 2009 is $25,000 and depreciation expense for 2010 is $35,000.Based on this information,the cost of fixed assets purchased during 2010 is

Accepted Answer

A) $100,000. 
B) $110,000. 
C) $135,000. 
D) $160,000. 
A) $100,000. 
B) $110,000. 
C) $135,000. 
D) $160,000.

Question 16

California Retailing Inc.has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000.What is California Retailing's EBIT?

Accepted Answer

A) $850,000 
B) $875,000 
C) $900,000 
D) $1,300,000 
A) $850,000 
B) $875,000 
C) $900,000 
D) $1,300,000

Question 17

Siskiyou,Inc.has total current assets of $1,200,000; total current liabilities of $500,000; long-term assets of $800,000; and long-term debt of $600,000.How much is the firm's total equity?

Accepted Answer

A) $1,200,000 
B) $800,000 
C) $900,000 
D) $2,000,000 
A) $1,200,000 
B) $800,000 
C) $900,000 
D) $2,000,000

Finished goods held for sale are inventory,but raw materials to be used in the production process are considered other assets.

Which of the following accounts does NOT belong on the asset side of a balance sheet?

Corporation A decides to borrow $1,000,000 and use the money to buy back $1,000,000 of its common stock.The corporation pays 6% interest on its borrowed funds which exactly equals the amount of the dividend it used to pay on the common stock it repurchased.Therefore

Earnings before taxes,or taxable income,is equal to operating income minus financing costs.

Gross profit is equal to

Two companies have identical assets and operating activities.Which of the follow statements is true?

Prepare a balance sheet using the information given below.Make sure to identify current assets,net fixed assets,total assets,current liabilities,long-term debt,total equity,and total liabilities and equity.

A balance sheet reflects the current market value of a firm's assets and liabilities.

The income statement describes the financial position of a firm on a given date.

Is it possible for a company that has negative net income and negative operating cash flow to end the year with an increase in cash and an increase in stock price? Explain your answer.

Please refer to Table 3-2 for the following questions. Table 3-2 Enigma has the following financial information: No changes were made in interest payable or taxes payable. -Based on the information in Table 3-2,what is Enigma's cash flow from operations?

Universal Financial,Inc.has total current assets of $1,200,000; long-term debt of $600,000; total current liabilities of $500,000; and long-term assets of $800,000.How much is the firm's net working capital?

Company A and Company B both report the same level of sales and net income.Therefore

What information does a firm's income statement provide to the viewing public?

California Retailing Inc.has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000.What is California Retailing's EBIT?

Siskiyou,Inc.has total current assets of $1,200,000; total current liabilities of $500,000; long-term assets of $800,000; and long-term debt of $600,000.How much is the firm's total equity?

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

Filters

Exam 3: Understanding Financial Statements and Cash Flows

Finished goods held for sale are inventory,but raw materials to be used in the production process are considered other assets.

Which of the following accounts does NOT belong on the asset side of a balance sheet?

Corporation A decides to borrow $1,000,000 and use the money to buy back $1,000,000 of its common stock.The corporation pays 6% interest on its borrowed funds which exactly equals the amount of the dividend it used to pay on the common stock it repurchased.Therefore

Earnings before taxes,or taxable income,is equal to operating income minus financing costs.

Gross profit is equal to

Two companies have identical assets and operating activities.Which of the follow statements is true?

Prepare a balance sheet using the information given below.Make sure to identify current assets,net fixed assets,total assets,current liabilities,long-term debt,total equity,and total liabilities and equity.

A balance sheet reflects the current market value of a firm's assets and liabilities.

The income statement describes the financial position of a firm on a given date.

Is it possible for a company that has negative net income and negative operating cash flow to end the year with an increase in cash and an increase in stock price? Explain your answer.

Please refer to Table 3-2 for the following questions. Table 3-2 Enigma has the following financial information: No changes were made in interest payable or taxes payable. -Based on the information in Table 3-2,what is Enigma's cash flow from operations?

Universal Financial,Inc.has total current assets of $1,200,000; long-term debt of $600,000; total current liabilities of $500,000; and long-term assets of $800,000.How much is the firm's net working capital?

Company A and Company B both report the same level of sales and net income.Therefore

What information does a firm's income statement provide to the viewing public?

California Retailing Inc.has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000.What is California Retailing's EBIT?

Siskiyou,Inc.has total current assets of $1,200,000; total current liabilities of $500,000; long-term assets of $800,000; and long-term debt of $600,000.How much is the firm's total equity?

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

Filters