Question 1

Stephen's Auto recently purchased Auto Express for $9.8 million.Auto Express had a market value of $9.5 million at the time of acquisition.The additional $0.3 million that Stephen's Auto paid for Auto Express will be treated on Stephen's Auto's balance sheet as which type of account?

Accepted Answer

A)  patent
B)  depreciation
C)  licenses
D)  goodwill
E)  acquisition expense D

Question 2

For the year,Widgets Manufacturing,Inc.increased its current accounts by $52,000,decreased its current liabilities by $38,000,and decreased its fixed assets by $31,000.What is the investment cash flow for the year?

Accepted Answer

A)  -$31,000
B)  -$12,000
C)  $19,000
D)  $31,000
E)  $48,000 D

Question 3

Your company has pretax income of $52,000 on sales of $506,000.Sales are expected to increase by 6 percent next year and the tax rate is 40 percent.What is the expected net income for next year if your firm uses the percentage of sales approach when compiling pro forma statements?

Accepted Answer

A)  $28,938
B)  $31,835
C)  $33,072
D)  $35,582
E)  $44,520 C

Question 4

Material nonpublic information is defined as any information that could reasonably be expected to do which one of the following?

Accepted Answer

A)  affect the price of the firm's securities
B)  cause great embarrassment to the firm
C)  cause one or more of the senior executives of the firm to resign
D)  cause the SEC to halt the trading of the firm's securities should that information become public
E)  affect the manner in which the firm presents its financial information

Question 5

Handy Man Services,Inc.has net income of $525,000.What is the addition to retained earnings if the dividend payout ratio is 40 percent?

Accepted Answer

A)  $123,253
B)  $157,250
C)  $183,750
D)  $221,813
E)  $315,000

Question 6

The Erie Bay Liner Company has sales of $2.6 million and operating expenses of $175,000.The firm uses the percentage of sales approach and estimates next year's sales at $2.8 million.What are the operating expenses expected to be next year?

Accepted Answer

A)  $171,231
B)  $175,123
C)  $179,400
D)  $182,549
E)  $188,462

Question 7

Last year,a firm had net income of $62,000 on sales of $595,000.The projected sales for next year are $654,500.Assume the firm uses the percentage of sales method for pro forma statements.What is the projected net income?

Accepted Answer

A)  $59,500
B)  $65,500
C)  $68,200
D)  $71,500
E)  $71,900

Question 8

What is the operating cash flow,given the following information?

Accepted Answer

A)  $400
B)  $470
C)  $530
D)  $540
E)  $610

Question 9

Why is the expected rate of sales growth so critical to pro forma statements?

Accepted Answer

The answer of Why is the expected rate of sales...

Question 10

The costs of materials used in the production of a product are recorded in which one of the following accounts?

Accepted Answer

A)  net sales
B)  fixed costs
C)  operating income
D)  depreciation
E)  cost of goods sold

Question 11

A company has a price-earnings ratio of 23 and a price-cash flow ratio of 11.5.If the earnings per share are $1.75,what is the cash flow per share?

Accepted Answer

A)  $2.16
B)  $2.51
C)  $3.06
D)  $3.14
E)  $3.50

Question 12

Which one of the following is an intangible fixed asset?

Accepted Answer

A)  accounts receivable
B)  patent
C)  inventory
D)  equipment
E)  building

Question 13

Which one of the following is equal to net income expressed as a percentage of total assets?

Accepted Answer

A)  return on equity
B)  return on the balance sheet
C)  operating yield
D)  net yield
E)  return on assets

Question 14

Return on equity is equal to which one of the following?

Accepted Answer

A)  dividend yield divided by total equity
B)  retained earnings divided by total equity
C)  revenue divided by total equity
D)  net income divided by total equity
E)  operating cash flow divided by total equity

Question 15

Which one of the following is generally used as the basis for computing the cash flow per share?

Accepted Answer

A)  operating cash flow
B)  investment cash flow
C)  financing cash flow
D)  net cash increase
E)  retained cash earnings

Question 16

Which one of the following is the primary difference between operating cash flow and net income?

Accepted Answer

A)  interest expense
B)  indirect costs
C)  taxes
D)  fixed costs
E)  depreciation

Question 17

Which one of the following represents the amounts owed by a firm to other parties?

Accepted Answer

A)  assets
B)  cash inflows
C)  equities
D)  liabilities
E)  expenses

Question 18

What is the operating cash flow,given the following information?

Accepted Answer

A)  $680
B)  $650
C)  $780
D)  $890
E)  $930

Question 19

Which one of the following is the definition of investment cash flow?

Accepted Answer

A)  revenue minus expenses
B)  cash flow from the purchases and sales of fixed assets and investments
C)  cash flow originating from the issuance of securities
D)  cash generated by a firm's normal business activities
E)  pre-tax income

Question 20

A company has the following account balances.How much cash does the firm have assuming there are no other accounts?

Accepted Answer

A)  $27,300
B)  $27,900
C)  $30,900
D)  $47,300
E)  $50,300

Exam 17: Projecting Cash Flow and Earnings

Stephen's Auto recently purchased Auto Express for $9.8 million.Auto Express had a market value of $9.5 million at the time of acquisition.The additional $0.3 million that Stephen's Auto paid for Auto Express will be treated on Stephen's Auto's balance sheet as which type of account?

For the year,Widgets Manufacturing,Inc.increased its current accounts by $52,000,decreased its current liabilities by $38,000,and decreased its fixed assets by $31,000.What is the investment cash flow for the year?

Your company has pretax income of $52,000 on sales of $506,000.Sales are expected to increase by 6 percent next year and the tax rate is 40 percent.What is the expected net income for next year if your firm uses the percentage of sales approach when compiling pro forma statements?

Material nonpublic information is defined as any information that could reasonably be expected to do which one of the following?

Handy Man Services,Inc.has net income of $525,000.What is the addition to retained earnings if the dividend payout ratio is 40 percent?

The Erie Bay Liner Company has sales of $2.6 million and operating expenses of $175,000.The firm uses the percentage of sales approach and estimates next year's sales at $2.8 million.What are the operating expenses expected to be next year?

Last year,a firm had net income of $62,000 on sales of $595,000.The projected sales for next year are $654,500.Assume the firm uses the percentage of sales method for pro forma statements.What is the projected net income?

What is the operating cash flow,given the following information?

Why is the expected rate of sales growth so critical to pro forma statements?

The costs of materials used in the production of a product are recorded in which one of the following accounts?

A company has a price-earnings ratio of 23 and a price-cash flow ratio of 11.5.If the earnings per share are $1.75,what is the cash flow per share?

Which one of the following is an intangible fixed asset?

Which one of the following is equal to net income expressed as a percentage of total assets?

Return on equity is equal to which one of the following?

Which one of the following is generally used as the basis for computing the cash flow per share?

Which one of the following is the primary difference between operating cash flow and net income?

Which one of the following represents the amounts owed by a firm to other parties?

What is the operating cash flow,given the following information?

Which one of the following is the definition of investment cash flow?

A company has the following account balances.How much cash does the firm have assuming there are no other accounts?