Question 1

Corporate income statements are usually compiled on an accrual, rather than cash, basis.

Accepted Answer

A) True 
 B)False

Question 2

The interest payments on corporate bonds are tax-deductible.

Accepted Answer

A) True 
 B)False

Question 3

Patriot Corporation purchased manufacturing equipment with an expected useful life of five years. The purchase of the machinery would be shown as

Accepted Answer

A)  an expense on the balance sheet. 
B)  an expense on the income statement. 
C)  an asset on the balance sheet. 
D)  both an expense and an asset. 
A)  an expense on the balance sheet. 
B)  an expense on the income statement. 
C)  an asset on the balance sheet. 
D)  both an expense and an asset.

Question 4

Which of the following does NOT represent cash outflows to the firm?

Accepted Answer

A)  Taxes 
B)  Interest payments 
C)  Dividends 
D)  Depreciation 
A)  Taxes 
B)  Interest payments 
C)  Dividends 
D)  Depreciation

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 income before tax?

Accepted Answer

A)  $4,360,000 
B)  $750,000 
C)  $10,865,000 
D)  $25,115,000 
A)  $4,360,000 
B)  $750,000 
C)  $10,865,000 
D)  $25,115,000

Question 6

Generally Accepted Accounting Principles (GAAP) require companies to smooth earnings by shifting some profits from good years to bad years.

Accepted Answer

A) True 
 B)False

Question 7

Your firm has the following income statement items: sales of $50,250,000; income tax of $1,744,000; operating expenses of $8,750,000; cost of goods sold of $35,025,000; and interest expense of $750,000. What is the amount of the firm's net income?

Accepted Answer

A)  $255,223 
B)  $4,731,000 
C)  $2,616,000 
D)  $7,775,000 
A)  $255,223 
B)  $4,731,000 
C)  $2,616,000 
D)  $7,775,000

Question 8

Firms should compare their gross, operating and net profit margins to past years and other companies in order to

Accepted Answer

A)  evaluate the firm's performance. 
B)  identify expenses that seem to be out-of-line 
C)  better manage the reporting of the firm's earnings. 
D)  Both A and B. 
A)  evaluate the firm's performance. 
B)  identify expenses that seem to be out-of-line 
C)  better manage the reporting of the firm's earnings. 
D)  Both A and B.

Question 9

When a corporation sells common stock to investors, the amount is added to common equity on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 10

Your firm has the following balance sheet statement items: total current liabilities of $805,000; total assets of $2,655,000; fixed and other assets of $1,770,000; and long-term debt of $200,000. What is the amount of the firm's net working capital?

Accepted Answer

A)  $25,000 
B)  $325,000 
C)  $770,000 
D)  $80,000 
A)  $25,000 
B)  $325,000 
C)  $770,000 
D)  $80,000

Question 11

Reducing a firm's debt will increase its cash flow.

Accepted Answer

A) True 
 B)False

Question 12

Based on the information given in Table 1, calculate the dividends paid in 2017.

Accepted Answer

A)  $3,750 
B)  $3,000 
C)  $750 
D)  $2,250 
A)  $3,750 
B)  $3,000 
C)  $750 
D)  $2,250

Question 13

Your firm has the following income statement items: sales of $52,000,000; income tax of $1,880,000; operating expenses of $9,000,000; cost of goods sold of $36,000,000; and interest expense of $800,000. Compute the firm's gross profit margin.

Accepted Answer

A)  13.5% 
B)  8.3% 
C)  30.8% 
D)  69.2% 
A)  13.5% 
B)  8.3% 
C)  30.8% 
D)  69.2%

Question 14

Which of the following represents an attempt to measure the earnings of the firm's operations over a given time period?

Accepted Answer

A)  Balance sheet 
B)  Cash flow statement 
C)  Income statement 
D)  None of the above 
A)  Balance sheet 
B)  Cash flow statement 
C)  Income statement 
D)  None of the above

Question 15

Which of the following is NOT a current asset?

Accepted Answer

A)  Accounts payable 
B)  Cash 
C)  Accounts receivable 
D)  Inventory 
A)  Accounts payable 
B)  Cash 
C)  Accounts receivable 
D)  Inventory

Question 16

Which of the basic financial statements is best used to answer the questions "What does the company own and how is it financed?"

Accepted Answer

A)  Balance sheet 
B)  Statement of shareholder's equity 
C)  Income statement 
D)  Cash flow statement 
A)  Balance sheet 
B)  Statement of shareholder's equity 
C)  Income statement 
D)  Cash flow statement

Question 17

A balance sheet is a statement of the financial position of the firm on a given date, including its asset holdings, liabilities, and equity.

Accepted Answer

A) True 
 B)False

Question 18

The matching principle requires that

Accepted Answer

A)  expenses be recognized in the period when cash payments occurred. 
B)  allows considerable latitude in the timing of expense recognition. 
C)  expenses be recognized in the same period as when the firm became liable for payment. 
D)  all expenses be allocated to some specific source of revenue. 
A)  expenses be recognized in the period when cash payments occurred. 
B)  allows considerable latitude in the timing of expense recognition. 
C)  expenses be recognized in the same period as when the firm became liable for payment. 
D)  all expenses be allocated to some specific source of revenue.

Question 19

Beginning cash balance + cash flow from operations + cash flow from investing activities + cash flow from financing activities = ending cash balance.

Accepted Answer

A) True 
 B)False

Question 20

Under current accounting rules, plant and equipment appear on a company's balance sheet valued at replacement value.

Accepted Answer

A) True 
 B)False

Corporate income statements are usually compiled on an accrual, rather than cash, basis.

The interest payments on corporate bonds are tax-deductible.

Patriot Corporation purchased manufacturing equipment with an expected useful life of five years. The purchase of the machinery would be shown as

Which of the following does NOT represent cash outflows to the firm?

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 income before tax?

Generally Accepted Accounting Principles (GAAP) require companies to smooth earnings by shifting some profits from good years to bad years.

Your firm has the following income statement items: sales of $50,250,000; income tax of $1,744,000; operating expenses of $8,750,000; cost of goods sold of $35,025,000; and interest expense of $750,000. What is the amount of the firm's net income?

Firms should compare their gross, operating and net profit margins to past years and other companies in order to

When a corporation sells common stock to investors, the amount is added to common equity on the balance sheet.

Your firm has the following balance sheet statement items: total current liabilities of $805,000; total assets of $2,655,000; fixed and other assets of $1,770,000; and long-term debt of $200,000. What is the amount of the firm's net working capital?

Reducing a firm's debt will increase its cash flow.

Based on the information given in Table 1, calculate the dividends paid in 2017.

Your firm has the following income statement items: sales of $52,000,000; income tax of $1,880,000; operating expenses of $9,000,000; cost of goods sold of $36,000,000; and interest expense of $800,000. Compute the firm's gross profit margin.

Which of the following represents an attempt to measure the earnings of the firm's operations over a given time period?

Which of the following is NOT a current asset?

Which of the basic financial statements is best used to answer the questions "What does the company own and how is it financed?"

A balance sheet is a statement of the financial position of the firm on a given date, including its asset holdings, liabilities, and equity.

The matching principle requires that

Beginning cash balance + cash flow from operations + cash flow from investing activities + cash flow from financing activities = ending cash balance.

Under current accounting rules, plant and equipment appear on a company's balance sheet valued at replacement value.

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

Corporate income statements are usually compiled on an accrual, rather than cash, basis.

The interest payments on corporate bonds are tax-deductible.

Patriot Corporation purchased manufacturing equipment with an expected useful life of five years. The purchase of the machinery would be shown as

Which of the following does NOT represent cash outflows to the firm?

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 income before tax?

Generally Accepted Accounting Principles (GAAP) require companies to smooth earnings by shifting some profits from good years to bad years.

Your firm has the following income statement items: sales of $50,250,000; income tax of $1,744,000; operating expenses of $8,750,000; cost of goods sold of $35,025,000; and interest expense of $750,000. What is the amount of the firm's net income?

Firms should compare their gross, operating and net profit margins to past years and other companies in order to

When a corporation sells common stock to investors, the amount is added to common equity on the balance sheet.

Your firm has the following balance sheet statement items: total current liabilities of $805,000; total assets of $2,655,000; fixed and other assets of $1,770,000; and long-term debt of $200,000. What is the amount of the firm's net working capital?

Reducing a firm's debt will increase its cash flow.

Based on the information given in Table 1, calculate the dividends paid in 2017.

Your firm has the following income statement items: sales of $52,000,000; income tax of $1,880,000; operating expenses of $9,000,000; cost of goods sold of $36,000,000; and interest expense of $800,000. Compute the firm's gross profit margin.

Which of the following represents an attempt to measure the earnings of the firm's operations over a given time period?

Which of the following is NOT a current asset?

Which of the basic financial statements is best used to answer the questions "What does the company own and how is it financed?"

A balance sheet is a statement of the financial position of the firm on a given date, including its asset holdings, liabilities, and equity.

The matching principle requires that

Beginning cash balance + cash flow from operations + cash flow from investing activities + cash flow from financing activities = ending cash balance.

Under current accounting rules, plant and equipment appear on a company's balance sheet valued at replacement value.

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