Question 1

Which of the following would NOT be included as a liability in a corporate balance sheet?

Accepted Answer

A)  Notes payable 
B)  Accounts payable 
C)  Bonds 
D)  Accumulated Depreciation 
A)  Notes payable 
B)  Accounts payable 
C)  Bonds 
D)  Accumulated Depreciation

Question 2

The income statement represents a snapshot of account balances at one point in time.

Accepted Answer

A) True 
 B)False

Question 3

Stock that is repurchased by the issuing company is called

Accepted Answer

A)  paid in capital. 
B)  treasury stock. 
C)  retained capital. 
D)  par value stock. 
A)  paid in capital. 
B)  treasury stock. 
C)  retained capital. 
D)  par value stock.

Question 4

In a growing business, negative cash flow from investing activities is normal.

Accepted Answer

A) True 
 B)False

Question 5

Your firm has the following income statement items: sales of $50,250,000; income tax of $1,744,000; operating expenses of $10,115,000; cost of goods sold of $35,025,000; and interest expense of $750,000. What is the amount of the firm's gross profit?

Accepted Answer

A)  $18,000,000 
B)  $15,225,000 
C)  $5,000,110 
D)  $6,632,000 
A)  $18,000,000 
B)  $15,225,000 
C)  $5,000,110 
D)  $6,632,000

Question 6

Which of the following is (are) NOT included in net operating income?

Accepted Answer

A)  Cost of goods sold 
B)  Interest 
C)  Taxes 
D)  Neither B nor C. 
A)  Cost of goods sold 
B)  Interest 
C)  Taxes 
D)  Neither B nor C.

Question 7

Using the information provided, calculate net income for 2017. Assume a tax rate of 35 percent. Year 2017
Inventory $5,000
Revenues 200,000
Depreciation expense 5,000
Cost of goods sold 100,000
Interest expense 10,000
Operating expenses 30,000

Accepted Answer

A)  $35,750 
B)  $44,000 
C)  $50,000 
D)  $19,250 
A)  $35,750 
B)  $44,000 
C)  $50,000 
D)  $19,250

Question 8

Which of the basic financial statements is best used to answer the question, "How profitable is the business?"

Accepted Answer

A)  Balance sheet 
B)  Statement of shareholder's equity 
C)  Income statement 
D)  Accounts receivable aging schedule 
A)  Balance sheet 
B)  Statement of shareholder's equity 
C)  Income statement 
D)  Accounts receivable aging schedule

Question 9

The marginal tax rate would equal the average tax rate for firms with earnings less than $50,000 or more than $18,333,333.

Accepted Answer

A) True 
 B)False

Question 10

Operating cash flow will increase with a decrease in

Accepted Answer

A)  inventories. 
B)  current liabilities. 
C)  depreciation expense. 
D)  capital expenditures. 
A)  inventories. 
B)  current liabilities. 
C)  depreciation expense. 
D)  capital expenditures.

Question 11

Which of the following best describes a balance sheet?

Accepted Answer

A)  Reports cash receipts and cash disbursements for a specific accounting period 
B)  Reports investment activities for a specified accounting period 
C)  Reports revenues and expenses for a specific accounting period 
D)  Reports the amount and composition of assets and liabilities at a specified point in time 
A)  Reports cash receipts and cash disbursements for a specific accounting period 
B)  Reports investment activities for a specified accounting period 
C)  Reports revenues and expenses for a specific accounting period 
D)  Reports the amount and composition of assets and liabilities at a specified point in time

Question 12

The practice of shifting income from good years to poor years in order to show a record of steady growth is

Accepted Answer

A)  is known as earnings management and is considered unethical. 
B)  is highly recommended but not required by GAAP. 
C)  is a basic requirement of accrual accounting. 
D)  is impossible if Generally Accepted Accounting Principles are followed. 
A)  is known as earnings management and is considered unethical. 
B)  is highly recommended but not required by GAAP. 
C)  is a basic requirement of accrual accounting. 
D)  is impossible if Generally Accepted Accounting Principles are followed.

Question 13

Which of the following best represents the stream of income that is available to stockholders?

Accepted Answer

A)  Net profit after tax. 
B)  Earnings before interest, taxes and dividends 
C)  Gross profit 
D)  Operating profit 
A)  Net profit after tax. 
B)  Earnings before interest, taxes and dividends 
C)  Gross profit 
D)  Operating profit

Question 14

Use Shark Enterprises financial statements to determine Enterprise's common stock dividend for 2017.

Accepted Answer

A)  $0 
B)  $400 
C)  $600 
D)  Cannot be determined with available information 
A)  $0 
B)  $400 
C)  $600 
D)  Cannot be determined with available information

Question 15

Which of the following best represents operating income?

Accepted Answer

A)  Income after financing activities 
B)  Earnings before interest and taxes 
C)  Income from capital gains 
D)  Income from discontinued operations 
A)  Income after financing activities 
B)  Earnings before interest and taxes 
C)  Income from capital gains 
D)  Income from discontinued operations

Question 16

Use Bird Industries' financial statements to determine Bird's operating profit margin for 2017.

Accepted Answer

A)  21% 
B)  4.8% 
C)  4.2% 
D)  2.4% 
A)  21% 
B)  4.8% 
C)  4.2% 
D)  2.4%

Question 17

A firm's balance sheet provides a representation of the current market value of the company.

Accepted Answer

A) True 
 B)False

Question 18

When a company pays a dividend on common stock, it appears as

Accepted Answer

A)  an expense on the income statement. 
B)  a reduction in the amount of retained earnings. 
C)  a current liability on the balance sheet. 
D)  dividend payments have no effect on the financial statements. 
A)  an expense on the income statement. 
B)  a reduction in the amount of retained earnings. 
C)  a current liability on the balance sheet. 
D)  dividend payments have no effect on the financial statements.

Question 19

A & K Co. expects to have earnings before taxes of $250,000 to $300,000. The company's marginal tax rate is 39% and its average tax rate about 33%. For every additional dollar of interest expense, A & K's taxes will

Accepted Answer

A)  increase by 39 cents. 
B)  fall by 39 cents. 
C)  be unaffected. 
D)  fall by about 33 cents. 
A)  increase by 39 cents. 
B)  fall by 39 cents. 
C)  be unaffected. 
D)  fall by about 33 cents.

Question 20

Which of the following represents a source of cash?

Accepted Answer

A)  a decrease in accounts payable 
B)  a decrease in accounts receivable 
C)  payment of dividends 
D)  an increase in inventories 
A)  a decrease in accounts payable 
B)  a decrease in accounts receivable 
C)  payment of dividends 
D)  an increase in inventories

Which of the following would NOT be included as a liability in a corporate balance sheet?

The income statement represents a snapshot of account balances at one point in time.

Stock that is repurchased by the issuing company is called

In a growing business, negative cash flow from investing activities is normal.

Your firm has the following income statement items: sales of $50,250,000; income tax of $1,744,000; operating expenses of $10,115,000; cost of goods sold of $35,025,000; and interest expense of $750,000. What is the amount of the firm's gross profit?

Which of the following is (are) NOT included in net operating income?

Using the information provided, calculate net income for 2017. Assume a tax rate of 35 percent. Year 2017 Inventory $5,000 Revenues 200,000 Depreciation expense 5,000 Cost of goods sold 100,000 Interest expense 10,000 Operating expenses 30,000

Which of the basic financial statements is best used to answer the question, "How profitable is the business?"

The marginal tax rate would equal the average tax rate for firms with earnings less than $50,000 or more than $18,333,333.

Operating cash flow will increase with a decrease in

Which of the following best describes a balance sheet?

The practice of shifting income from good years to poor years in order to show a record of steady growth is

Which of the following best represents the stream of income that is available to stockholders?

Use Shark Enterprises financial statements to determine Enterprise's common stock dividend for 2017.

Which of the following best represents operating income?

Use Bird Industries' financial statements to determine Bird's operating profit margin for 2017.

A firm's balance sheet provides a representation of the current market value of the company.

When a company pays a dividend on common stock, it appears as

A & K Co. expects to have earnings before taxes of $250,000 to $300,000. The company's marginal tax rate is 39% and its average tax rate about 33%. For every additional dollar of interest expense, A & K's taxes will

Which of the following represents a source of cash?

Getting Started-Principles of Finance

Firms and the Financial Market

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters

Exam 3: Understanding Financial Statements, Taxes, and Cash Flows

Which of the following would NOT be included as a liability in a corporate balance sheet?

The income statement represents a snapshot of account balances at one point in time.

Stock that is repurchased by the issuing company is called

In a growing business, negative cash flow from investing activities is normal.

Your firm has the following income statement items: sales of $50,250,000; income tax of $1,744,000; operating expenses of $10,115,000; cost of goods sold of $35,025,000; and interest expense of $750,000. What is the amount of the firm's gross profit?

Which of the following is (are) NOT included in net operating income?

Using the information provided, calculate net income for 2017. Assume a tax rate of 35 percent. Year 2017 Inventory $5,000 Revenues 200,000 Depreciation expense 5,000 Cost of goods sold 100,000 Interest expense 10,000 Operating expenses 30,000

Which of the basic financial statements is best used to answer the question, "How profitable is the business?"

The marginal tax rate would equal the average tax rate for firms with earnings less than $50,000 or more than $18,333,333.

Operating cash flow will increase with a decrease in

Which of the following best describes a balance sheet?

The practice of shifting income from good years to poor years in order to show a record of steady growth is

Which of the following best represents the stream of income that is available to stockholders?

Use Shark Enterprises financial statements to determine Enterprise's common stock dividend for 2017.

Which of the following best represents operating income?

Use Bird Industries' financial statements to determine Bird's operating profit margin for 2017.

A firm's balance sheet provides a representation of the current market value of the company.

When a company pays a dividend on common stock, it appears as

A & K Co. expects to have earnings before taxes of $250,000 to $300,000. The company's marginal tax rate is 39% and its average tax rate about 33%. For every additional dollar of interest expense, A & K's taxes will

Which of the following represents a source of cash?

Getting Started-Principles of Finance

Firms and the Financial Market

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters