Question 1

An asset that can be quickly converted into cash without significant loss in value is referred to as being:

Accepted Answer

A) marketable. 
B) tangible. 
C) intangible. 
D) liquid. 
E) fixed. 
A) marketable. 
B) tangible. 
C) intangible. 
D) liquid. 
E) fixed.

Question 2

Which term defines the tax rate that applies to the next dollar of taxable income earned?

Accepted Answer

A) Deductible 
B) Residual 
C) Total 
D) Average 
E) Marginal 
A) Deductible 
B) Residual 
C) Total 
D) Average 
E) Marginal

Question 3

For a firm with long-term debt,net income must be equal to:

Accepted Answer

A) Pretax income − Interest expense − Taxes. 
B) EBIT − Taxes. 
C) Taxes + Addition to retained earnings. 
D) Operating income × (1 − Marginal tax rate). 
E) Dividends + Addition to retained earnings. 
A) Pretax income − Interest expense − Taxes. 
B) EBIT − Taxes. 
C) Taxes + Addition to retained earnings. 
D) Operating income × (1 − Marginal tax rate). 
E) Dividends + Addition to retained earnings.

Question 4

Awnings Inc.has beginning net fixed assets of $234,100 and ending net fixed assets of $243,600.Assets valued at $42,500 were sold during the year.Depreciation was $62,500.What is the amount of net capital spending?

Accepted Answer

A) −$42,500 
B) $9,500 
C) $72,000 
D) $53,000 
E) $29,500 
A) −$42,500 
B) $9,500 
C) $72,000 
D) $53,000 
E) $29,500

Question 5

A firm has $820 in inventory,$3,200 in fixed assets,$1,210 in accounts receivable,$890 in accounts payable,and $360 in cash.What is the amount of the net working capital?

Accepted Answer

A) $4,700 
B) $5,590 
C) $3,600 
D) $2,390 
E) $1,500 
A) $4,700 
B) $5,590 
C) $3,600 
D) $2,390 
E) $1,500

Question 6

An increase in treasury stock:

Accepted Answer

A) increases the total equity of the firm. 
B) is the result of a firm issuing new shares of stock to the federal government. 
C) increases the number of shares outstanding. 
D) results from a repurchase of outstanding shares of stock. 
E) requires repayment at some point in the future. 
A) increases the total equity of the firm. 
B) is the result of a firm issuing new shares of stock to the federal government. 
C) increases the number of shares outstanding. 
D) results from a repurchase of outstanding shares of stock. 
E) requires repayment at some point in the future.

Question 7

Earnings per share:

Accepted Answer

A) will increase if net income increases and the number of shares outstanding decreases. 
B) will increase if net income decreases and the number of shares outstanding increases. 
C) is defined as the addition to retained earnings divided by the number of shares outstanding. 
D) is the total amount of dividends paid per year on a per share basis. 
E) must increase at the same rate as the net income. 
A) will increase if net income increases and the number of shares outstanding decreases. 
B) will increase if net income decreases and the number of shares outstanding increases. 
C) is defined as the addition to retained earnings divided by the number of shares outstanding. 
D) is the total amount of dividends paid per year on a per share basis. 
E) must increase at the same rate as the net income.

Question 8

Given the personal income tax rates as shown,what is the average tax rate for an individual with taxable income of $118,700?

Accepted Answer

A) 24.00 percent 
B) 22.36 percent 
C) 19.00 percent 
D) 21.94 percent 
E) 21.00 percent 
A) 24.00 percent 
B) 22.36 percent 
C) 19.00 percent 
D) 21.94 percent 
E) 21.00 percent

Question 9

The General Store has total revenue of $4,116,depreciation of $319,selling and administrative expenses of $554,interest expense of $162,dividends of $75,cost of goods sold of $2,354,and taxes of $186.What is the operating cash flow?

Accepted Answer

A) $1,118 
B) $795 
C) $1,147 
D) $1,022 
E) $720 
A) $1,118 
B) $795 
C) $1,147 
D) $1,022 
E) $720

Question 10

Noncash items refer to:

Accepted Answer

A) the credit sales of a firm. 
B) the accounts payable of a firm. 
C) the costs incurred for the purchase of intangible fixed assets. 
D) expenses charged against revenues that do not directly affect cash flow. 
E) all accounts on the balance sheet other than cash on hand. 
A) the credit sales of a firm. 
B) the accounts payable of a firm. 
C) the costs incurred for the purchase of intangible fixed assets. 
D) expenses charged against revenues that do not directly affect cash flow. 
E) all accounts on the balance sheet other than cash on hand.

Question 11

This year,Johnson Mills has annual revenue of $37,800,cost of goods sold of $23,200,and administrative expenses of $6,300.The firm paid $700 in dividends,$280 in interest,and has a total tax rate of 21 percent.The firm will add $2,810 to retained earnings.What is the depreciation expense?

Accepted Answer

A) $2,300 
B) $3,709 
C) $2,640 
D) $780 
E) $3,577 
A) $2,300 
B) $3,709 
C) $2,640 
D) $780 
E) $3,577

Question 12

As of 2018,the U.S.corporate tax rate is:

Accepted Answer

A) based on a progressive tax rate schedule. 
B) based on a tiered,multi-rate flat tax. 
C) a flat tax of 34 percent. 
D) zero with all corporate taxable income passed to shareholders. 
E) a flat rate of 21 percent. 
A) based on a progressive tax rate schedule. 
B) based on a tiered,multi-rate flat tax. 
C) a flat tax of 34 percent. 
D) zero with all corporate taxable income passed to shareholders. 
E) a flat rate of 21 percent.

Question 13

An increase in total assets:

Accepted Answer

A) means that net working capital is also increasing. 
B) requires an investment in fixed assets. 
C) means that stockholders' equity must also increase. 
D) must be offset by an equal increase in liabilities and stockholders' equity. 
E) can only occur when a firm has positive net income. 
A) means that net working capital is also increasing. 
B) requires an investment in fixed assets. 
C) means that stockholders' equity must also increase. 
D) must be offset by an equal increase in liabilities and stockholders' equity. 
E) can only occur when a firm has positive net income.

Question 14

Foxglove Interiors has net fixed assets of $38,215,long-term debt of $22,400,cash of $560,accounts payable $4,611,inventory of $11,408,and accounts receivable of $3,462.How much net working capital does the firm have?

Accepted Answer

A) $11,634 
B) $26,634 
C) $13,117 
D) $10,819 
E) $14,736 
A) $11,634 
B) $26,634 
C) $13,117 
D) $10,819 
E) $14,736

Question 15

A debt-free firm has total sales of $22,980,costs of $14,715,and depreciation of $6,045.What is the operating cash flow at a tax rate of 23 percent?

Accepted Answer

A) $1,465.20 
B) $2,410.80 
C) $8,340.00 
D) $7,754.40 
E) $9,019.80 
A) $1,465.20 
B) $2,410.80 
C) $8,340.00 
D) $7,754.40 
E) $9,019.80

Question 16

Which one of these is related to an increase in the book value of the stockholders' equity in a profitable,non-dividend paying firm? Assume no shares of stock are repurchased or sold.

Accepted Answer

A) A decrease in the book value of inventory 
B) An increase in earnings per share 
C) An increase in the market value of the firm's buildings 
D) An increase in the market value of the firm's long-term debt 
E) An increase in non-cash expenses 
A) A decrease in the book value of inventory 
B) An increase in earnings per share 
C) An increase in the market value of the firm's buildings 
D) An increase in the market value of the firm's long-term debt 
E) An increase in non-cash expenses

Question 17

Book value:

Accepted Answer

A) is equivalent to market value for firms with fixed assets. 
B) is based on historical cost. 
C) generally tends to exceed market value when fixed assets are included. 
D) is more of a financial than an accounting valuation. 
E) is adjusted whenever the market value of an asset changes. 
A) is equivalent to market value for firms with fixed assets. 
B) is based on historical cost. 
C) generally tends to exceed market value when fixed assets are included. 
D) is more of a financial than an accounting valuation. 
E) is adjusted whenever the market value of an asset changes.

Question 18

Note that in all of our computations to determine the cash flows of a firm,we never include the addition to retained earnings.Why not? Is this an oversight?

Accepted Answer

The addition to retained earnings is not

Question 19

Which one of these equations is an accurate expression of the balance sheet?

Accepted Answer

A) Assets ≡ Liabilities − Stockholders' equity 
B) Stockholders' equity ≡ Assets + Liabilities 
C) Liabilities ≡ Stockholders' equity − Assets 
D) Assets ≡ Stockholders' equity − Liabilities 
E) Stockholders' equity ≡ Assets − Liabilities 
A) Assets ≡ Liabilities − Stockholders' equity 
B) Stockholders' equity ≡ Assets + Liabilities 
C) Liabilities ≡ Stockholders' equity − Assets 
D) Assets ≡ Stockholders' equity − Liabilities 
E) Stockholders' equity ≡ Assets − Liabilities

Question 20

In the accounting statement of cash flows,which one of these is calculated by adding back noncash expenses to net income and adjusting for changes in current assets and liabilities?

Accepted Answer

A) Cash flow from investing activities 
B) Cash flow from financing activities 
C) Net working capital 
D) Cash flow from operations 
E) Cash flow to investors 
A) Cash flow from investing activities 
B) Cash flow from financing activities 
C) Net working capital 
D) Cash flow from operations 
E) Cash flow to investors

Exam 2: Financial Statements and Cash Flow

An asset that can be quickly converted into cash without significant loss in value is referred to as being:

Which term defines the tax rate that applies to the next dollar of taxable income earned?

For a firm with long-term debt,net income must be equal to:

Awnings Inc.has beginning net fixed assets of $234,100 and ending net fixed assets of $243,600.Assets valued at $42,500 were sold during the year.Depreciation was $62,500.What is the amount of net capital spending?

A firm has $820 in inventory,$3,200 in fixed assets,$1,210 in accounts receivable,$890 in accounts payable,and $360 in cash.What is the amount of the net working capital?

An increase in treasury stock:

Earnings per share:

Given the personal income tax rates as shown,what is the average tax rate for an individual with taxable income of $118,700?

The General Store has total revenue of $4,116,depreciation of $319,selling and administrative expenses of $554,interest expense of $162,dividends of $75,cost of goods sold of $2,354,and taxes of $186.What is the operating cash flow?

Noncash items refer to:

This year,Johnson Mills has annual revenue of $37,800,cost of goods sold of $23,200,and administrative expenses of $6,300.The firm paid $700 in dividends,$280 in interest,and has a total tax rate of 21 percent.The firm will add $2,810 to retained earnings.What is the depreciation expense?

As of 2018,the U.S.corporate tax rate is:

An increase in total assets:

Foxglove Interiors has net fixed assets of $38,215,long-term debt of $22,400,cash of $560,accounts payable $4,611,inventory of $11,408,and accounts receivable of $3,462.How much net working capital does the firm have?

A debt-free firm has total sales of $22,980,costs of $14,715,and depreciation of $6,045.What is the operating cash flow at a tax rate of 23 percent?

Which one of these is related to an increase in the book value of the stockholders' equity in a profitable,non-dividend paying firm? Assume no shares of stock are repurchased or sold.

Book value:

Note that in all of our computations to determine the cash flows of a firm,we never include the addition to retained earnings.Why not? Is this an oversight?

Which one of these equations is an accurate expression of the balance sheet?

In the accounting statement of cash flows,which one of these is calculated by adding back noncash expenses to net income and adjusting for changes in current assets and liabilities?

Introduction to Corporate Finance

Financial Statements and Cash Flow

Discounted Cash Flow Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, real Options, and Capital Budgeting

Interest Rates and Bond Valuation

Stock Valuation

Lessons From Market History

Return, risk, and the Capital Asset Pricing Model Capm

An Alternative View of Risk and Return: the Arbitrage Pricing Theory

Risk, cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Long-Term Financing

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividends and Other Payouts

Raising Capital

Leasing

Options and Corporate Finance

Options and Corporate Finance: Extensions and Applications

Warrants and Convertibles

Derivatives and Hedging Risk

Short-Term Finance and Planning

Cash Management

Credit and Inventory Management

Mergers,acquisitions,and Divestitures

Financial Distress

International Corporate Finance

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