Question 1

From a financial perspective,why is interest expense excluded from the operating cash flow?

Accepted Answer

Operating cash flow is designed to repre

Question 2

Which one of the following accounts is included in stockholders' equity?

Accepted Answer

A) Long-term debt 
B) Deferred taxes 
C) Plant and equipment 
D) Accumulated retained earnings 
E) Dividends paid 
A) Long-term debt 
B) Deferred taxes 
C) Plant and equipment 
D) Accumulated retained earnings 
E) Dividends paid

Question 3

JK Meadows has beginning current liabilities of $14,602 and total liabilities of $35,418.At the end of the year,the current liabilities are $15,311 and the total liabilities are $37,604.During the year,the firm paid $680 in dividends and $1,320 in interest.What is the cash flow to creditors?

Accepted Answer

A) $3,230 
B) $2,797 
C) $3,135 
D) −$157 
E) −$267 
A) $3,230 
B) $2,797 
C) $3,135 
D) −$157 
E) −$267

Question 4

The cash flow of the firm must be equal to the:

Accepted Answer

A) cash flow to stockholders minus the cash flow to creditors. 
B) cash flow to creditors minus the cash flow to stockholders. 
C) cash flow to governments plus the cash flow to stockholders. 
D) cash flow to stockholders plus the cash flow to creditors. 
E) aftertax operating cash flow. 
A) cash flow to stockholders minus the cash flow to creditors. 
B) cash flow to creditors minus the cash flow to stockholders. 
C) cash flow to governments plus the cash flow to stockholders. 
D) cash flow to stockholders plus the cash flow to creditors. 
E) aftertax operating cash flow.

Question 5

The cash flow to stockholders must be positive when:

Accepted Answer

A) the dividends paid are less than the amount of net new equity raised. 
B) the net sale of common stock exceeds the amount of dividends paid. 
C) no income is distributed but new shares of stock are sold. 
D) the cash flow from assets is positive and exceeds the cash flow to creditors. 
E) both the cash flow to assets and the cash flow to creditors are positive. 
A) the dividends paid are less than the amount of net new equity raised. 
B) the net sale of common stock exceeds the amount of dividends paid. 
C) no income is distributed but new shares of stock are sold. 
D) the cash flow from assets is positive and exceeds the cash flow to creditors. 
E) both the cash flow to assets and the cash flow to creditors are positive.

Question 6

For a tax-paying firm,an increase in the depreciation expense of $1 will:

Accepted Answer

A) reduce net income by $1. 
B) increase net income by $1. 
C) reduce net income by more than $1. 
D) reduce net income by less than $1. 
E) increase net income by less than $1. 
A) reduce net income by $1. 
B) increase net income by $1. 
C) reduce net income by more than $1. 
D) reduce net income by less than $1. 
E) increase net income by less than $1.

Question 7

For a given year,Rogers Express paid $318 in interest,$460 in dividends,and $368 in taxes.The firm had a net income of $1,220,depreciation of $1,560,an increase in net working capital of $220,an increase in net fixed assets of $950,and a decrease in long-term debt of $260.There were no changes in the equity accounts other than the change in retained earnings.What is the annual cash flow of the firm?

Accepted Answer

A) $3,148 
B) $1,610 
C) $2,780 
D) $1,038 
E) $50 
A) $3,148 
B) $1,610 
C) $2,780 
D) $1,038 
E) $50

Question 8

Which one of the following assets is generally the most liquid?

Accepted Answer

A) Inventory 
B) Buildings 
C) Accounts receivable 
D) Equipment 
E) Patents 
A) Inventory 
B) Buildings 
C) Accounts receivable 
D) Equipment 
E) Patents

Question 9

Total equity is $1,620,fixed assets are $1,810,long-term debt is $650,and short-term debt is $300.What is the amount of current assets?

Accepted Answer

A) $760 
B) $360 
C) $1,140 
D) $480 
E) $790 
A) $760 
B) $360 
C) $1,140 
D) $480 
E) $790

Question 10

At the beginning of this year,Blauser Industries had net fixed assets of $21,506 and total assets of $32,687.At year's end,net fixed assets are $20,492 and total assets are $32,915.The annual depreciation expense is $1,520.What is net capital spending for this year?

Accepted Answer

A) −$850 
B) $506 
C) −$1,292 
D) −$2,534 
E) $1,748 
A) −$850 
B) $506 
C) −$1,292 
D) −$2,534 
E) $1,748

Question 11

Under Generally Accepted Accounting Principles (GAAP),a firm's assets are reported at:

Accepted Answer

A) market value. 
B) liquidation value. 
C) market value less accumulated depreciation. 
D) historical cost less accumulated depreciation. 
E) liquidation value less accumulated depreciation. 
A) market value. 
B) liquidation value. 
C) market value less accumulated depreciation. 
D) historical cost less accumulated depreciation. 
E) liquidation value less accumulated depreciation.

Question 12

A firm's dividend payments less any net new equity raised is referred to as the firm's:

Accepted Answer

A) operating cash flow. 
B) capital spending. 
C) net working capital. 
D) cash flow from creditors. 
E) cash flow to stockholders. 
A) operating cash flow. 
B) capital spending. 
C) net working capital. 
D) cash flow from creditors. 
E) cash flow to stockholders.

Question 13

Cash flow from assets:

Accepted Answer

A) equals net income plus non-cash items. 
B) can be positive,negative,or equal to zero. 
C) equals operating cash flow minus net capital spending. 
D) equals the addition to retained earnings. 
E) equals operating cash flow minus the cash flow to creditors. 
A) equals net income plus non-cash items. 
B) can be positive,negative,or equal to zero. 
C) equals operating cash flow minus net capital spending. 
D) equals the addition to retained earnings. 
E) equals operating cash flow minus the cash flow to creditors.

Question 14

At the beginning of the year,long-term debt of a firm is $2,400 and total debt is $3,150.At the end of the year,long-term debt is $2,800 and total debt is $4,370.The interest paid is $40.What is the amount of the cash flow to creditors?

Accepted Answer

A) $440 
B) −$40 
C) $1,260 
D) $1,180 
E) −$360 
A) $440 
B) −$40 
C) $1,260 
D) $1,180 
E) −$360

Question 15

The accounting statement of cash flows consists of the cash flows from:

Accepted Answer

A) operations,investing activities,and financing activities. 
B) operations,investing activities,and divesting activities. 
C) internal activities,external activities,and financing activities. 
D) balance sheet accounts only. 
E) income statement accounts only. 
A) operations,investing activities,and financing activities. 
B) operations,investing activities,and divesting activities. 
C) internal activities,external activities,and financing activities. 
D) balance sheet accounts only. 
E) income statement accounts only.

Question 16

Depreciation is classified as a noncash item because no cash is spent when depreciation is recorded.Why are expenses that have been accrued,but not yet paid,not also considered to be noncash items and therefore excluded from operating cash flow just as depreciation is excluded?

Accepted Answer

Accrued expenses will appear in accounts

Question 17

Which one of these accounts appears on the right-hand side of a balance sheet?

Accepted Answer

A) Property,plant,and equipment 
B) Accumulated retained earnings 
C) Accumulated depreciation 
D) Cash and equivalents 
E) Intangible assets 
A) Property,plant,and equipment 
B) Accumulated retained earnings 
C) Accumulated depreciation 
D) Cash and equivalents 
E) Intangible assets

Question 18

Assets are listed on the balance sheet in order of:

Accepted Answer

A) decreasing liquidity. 
B) acquisition. 
C) increasing size. 
D) market value relative to book value. 
E) book value. 
A) decreasing liquidity. 
B) acquisition. 
C) increasing size. 
D) market value relative to book value. 
E) book value.

Question 19

If you sell an asset,you are most apt to receive which value for that asset?

Accepted Answer

A) Market value 
B) Original cost minus accumulated depreciation 
C) Historical value 
D) Book value 
E) Carrying value 
A) Market value 
B) Original cost minus accumulated depreciation 
C) Historical value 
D) Book value 
E) Carrying value

Question 20

Which one of the following is a current liability?

Accepted Answer

A) Amount due to a supplier in 18 months 
B) Note payable in nine months 
C) Estimated taxes just paid 
D) Loan payment due in 13 months 
E) Amount due from a customer in 30 days 
A) Amount due to a supplier in 18 months 
B) Note payable in nine months 
C) Estimated taxes just paid 
D) Loan payment due in 13 months 
E) Amount due from a customer in 30 days

Exam 2: Financial Statements and Cash Flow

From a financial perspective,why is interest expense excluded from the operating cash flow?

Which one of the following accounts is included in stockholders' equity?

JK Meadows has beginning current liabilities of $14,602 and total liabilities of $35,418.At the end of the year,the current liabilities are $15,311 and the total liabilities are $37,604.During the year,the firm paid $680 in dividends and $1,320 in interest.What is the cash flow to creditors?

The cash flow of the firm must be equal to the:

The cash flow to stockholders must be positive when:

For a tax-paying firm,an increase in the depreciation expense of $1 will:

Which one of the following assets is generally the most liquid?

Total equity is $1,620,fixed assets are $1,810,long-term debt is $650,and short-term debt is $300.What is the amount of current assets?

At the beginning of this year,Blauser Industries had net fixed assets of $21,506 and total assets of $32,687.At year's end,net fixed assets are $20,492 and total assets are $32,915.The annual depreciation expense is $1,520.What is net capital spending for this year?

Under Generally Accepted Accounting Principles (GAAP),a firm's assets are reported at:

A firm's dividend payments less any net new equity raised is referred to as the firm's:

Cash flow from assets:

At the beginning of the year,long-term debt of a firm is $2,400 and total debt is $3,150.At the end of the year,long-term debt is $2,800 and total debt is $4,370.The interest paid is $40.What is the amount of the cash flow to creditors?

The accounting statement of cash flows consists of the cash flows from:

Depreciation is classified as a noncash item because no cash is spent when depreciation is recorded.Why are expenses that have been accrued,but not yet paid,not also considered to be noncash items and therefore excluded from operating cash flow just as depreciation is excluded?

Which one of these accounts appears on the right-hand side of a balance sheet?

Assets are listed on the balance sheet in order of:

If you sell an asset,you are most apt to receive which value for that asset?

Which one of the following is a current liability?

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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