Question 1

The basic format of an income statement is

Accepted Answer

A)  Sales - Expenses = Profits. 
B)  Income - Expenses = EBIT. 
C)  Sales - Liabilities = Profits. 
D)  Assets - Liabilities = Profits. 
A)  Sales - Expenses = Profits. 
B)  Income - Expenses = EBIT. 
C)  Sales - Liabilities = Profits. 
D)  Assets - Liabilities = Profits. A

Question 2

Under current accounting rules,the plant and equipment account shows the historical cost (purchase price)of,plus any subsequent improvements to,the plant and equipment.

Accepted Answer

A) True 
 B)False  True

Question 3

Net profit margin is equal to the gross profit margin times the operating profit margin.

Accepted Answer

A) True 
 B)False  False

Question 4

The more debt a company uses to finance its assets,the lower will be its operating income due to higher interest expense.

Accepted Answer

A) True 
 B)False

Question 5

Accounting rules specify that assets on the balance sheet must be reported at current market value,because this is the valuation most useful to potential investors.

Accepted Answer

A) True 
 B)False

Question 6

Fixed assets are assets whose balances will remain the same throughout the year.

Accepted Answer

A) True 
 B)False

Question 7

All of the following are income statement items except:

Accepted Answer

A)  accrued expenses. 
B)  depreciation expense. 
C)  cost of goods sold. 
D)  interest expense. 
A)  accrued expenses. 
B)  depreciation expense. 
C)  cost of goods sold. 
D)  interest expense.

Question 8

What information does a firm's balance sheet provide to the viewing public?

Accepted Answer

A)  a report of investments made and their cost for a specific 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)  an itemization of all of a firm's assets, liabilities, and equity as of the balance sheet date 
A)  a report of investments made and their cost for a specific 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)  an itemization of all of a firm's assets, liabilities, and equity as of the balance sheet date

Question 9

The two principal sources of financing for corporations are

Accepted Answer

A)  debt and accounts payable. 
B)  debt and equity. 
C)  common equity and preferred equity. 
D)  cash and common equity. 
A)  debt and accounts payable. 
B)  debt and equity. 
C)  common equity and preferred equity. 
D)  cash and common equity.

Question 10

Intangible assets such as copyrights and goodwill are not included on the balance sheet because they are impossible to value objectively.

Accepted Answer

A) True 
 B)False

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.
-A firm has after-tax cash flow from operations equal to $100,000.Operating working capital increased by $20,000,and the firm purchased $30,000 of fixed assets.The firm's free cash flow was:

Accepted Answer

A)  $50,000. 
B)  $90,000. 
C)  $110,000. 
D)  $150,000. 
A)  $50,000. 
B)  $90,000. 
C)  $110,000. 
D)  $150,000.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Common stockholders' equity equals common stock issued minus treasury stock.

Accepted Answer

A) True 
 B)False

Question 14

Jones Finance Company had a cash balance of $3 million at the beginning of 2010.During 2010,Sales were $8 million and expenses were $7 million.Therefore,

Accepted Answer

A)  the cash balance at the end of 2010 is $4 million. 
B)  the cash balance at the end of 2010 must be greater than $3 million. 
C)  the cash balance at the end of 2010 must be less than $11 million. 
D)  the cash balance at the end of 2010 cannot be determined from the information given. 
A)  the cash balance at the end of 2010 is $4 million. 
B)  the cash balance at the end of 2010 must be greater than $3 million. 
C)  the cash balance at the end of 2010 must be less than $11 million. 
D)  the cash balance at the end of 2010 cannot be determined from the information given.

Question 15

Given the following financial statements for ACME Corporation,what amount did the company pay in dividends for 2010?

Accepted Answer

A)  $45,000 
B)  $25,000 
C)  $100,000 
D)  $80,000 
A)  $45,000 
B)  $25,000 
C)  $100,000 
D)  $80,000

Question 16

Racing Horse Corporation reported net income for 2010 of $200,000,sales of $540,000,expenses (excluding depreciation)of $180,000,and depreciation expense of $60,000.The company's accounts receivable balance increased by $40,000 during the year and its accounts payable balance remained the same.The company's change in cash for the year is estimated to be

Accepted Answer

A)  $100,000. 
B)  $160,000. 
C)  $220,000. 
D)  $380,000. 
A)  $100,000. 
B)  $160,000. 
C)  $220,000. 
D)  $380,000.

Question 17

Common-sized balance sheets show each account as a percentage of total sales to help analysts in comparing companies of difference sizes.

Accepted Answer

A) True 
 B)False

Question 18

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 19

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 20

Common-sized income statements restate the numbers in the income statement as a percentage of sales to assist in the comparison of a firm's financial performance across time and with competitors.

Accepted Answer

A) True 
 B)False

The basic format of an income statement is

Under current accounting rules,the plant and equipment account shows the historical cost (purchase price)of,plus any subsequent improvements to,the plant and equipment.

Net profit margin is equal to the gross profit margin times the operating profit margin.

The more debt a company uses to finance its assets,the lower will be its operating income due to higher interest expense.

Accounting rules specify that assets on the balance sheet must be reported at current market value,because this is the valuation most useful to potential investors.

Fixed assets are assets whose balances will remain the same throughout the year.

All of the following are income statement items except:

What information does a firm's balance sheet provide to the viewing public?

The two principal sources of financing for corporations are

Intangible assets such as copyrights and goodwill are not included on the balance sheet because they are impossible to value objectively.

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

Common stockholders' equity equals common stock issued minus treasury stock.

Jones Finance Company had a cash balance of $3 million at the beginning of 2010.During 2010,Sales were $8 million and expenses were $7 million.Therefore,

Given the following financial statements for ACME Corporation,what amount did the company pay in dividends for 2010?

Common-sized balance sheets show each account as a percentage of total sales to help analysts in comparing companies of difference sizes.

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?

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.

Common-sized income statements restate the numbers in the income statement as a percentage of sales to assist in the comparison of a firm's financial performance across time and with competitors.

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

Current Asset Management

International Business Finance

Filters

Exam 3: Understanding Financial Statements and Cash Flows

The basic format of an income statement is

Under current accounting rules,the plant and equipment account shows the historical cost (purchase price)of,plus any subsequent improvements to,the plant and equipment.

Net profit margin is equal to the gross profit margin times the operating profit margin.

The more debt a company uses to finance its assets,the lower will be its operating income due to higher interest expense.

Accounting rules specify that assets on the balance sheet must be reported at current market value,because this is the valuation most useful to potential investors.

Fixed assets are assets whose balances will remain the same throughout the year.

All of the following are income statement items except:

What information does a firm's balance sheet provide to the viewing public?

The two principal sources of financing for corporations are

Intangible assets such as copyrights and goodwill are not included on the balance sheet because they are impossible to value objectively.

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

Common stockholders' equity equals common stock issued minus treasury stock.

Jones Finance Company had a cash balance of $3 million at the beginning of 2010.During 2010,Sales were $8 million and expenses were $7 million.Therefore,

Given the following financial statements for ACME Corporation,what amount did the company pay in dividends for 2010?

Common-sized balance sheets show each account as a percentage of total sales to help analysts in comparing companies of difference sizes.

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?

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.

Common-sized income statements restate the numbers in the income statement as a percentage of sales to assist in the comparison of a firm's financial performance across time and with competitors.

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

Current Asset Management

International Business Finance

Filters