Question 1

Bleu Berri Farms had equity of $58,900 at the beginning of the year.During the year, the company earned net income of $8,200 and paid $2,500 in dividends.Also during the year, the company repurchased $3,500 of stock from one of its shareholders.What is the value of the owners' equity at year end?

Accepted Answer

A)  $61,100
B)  $67,600
C)  $64,900
D)  $64,400
E)  $68,100F) A) and B)
G) B) and D)

Question 2

An income statement prepared according to GAAP:

Accepted Answer

A)  reflects the net cash flows of a firm over a stated period of time.
B)  reflects the financial position of a firm as of a particular date.
C)  distinguishes variable costs from fixed costs.
D)  records revenue when payment for a sale is received.
E)  records expenses based on the matching principle.F) None of the above
G) A) and E)

Question 3

The Pretzel Factory has net sales of $821,300 and costs of $698,500.The depreciation expense is $28,400 and the interest paid is $8,400.What is the amount of the firm's operating cash flow if the tax rate is 34 percent?

Accepted Answer

A)  $87,620
B)  $89,540
C)  $91,220
D)  $93,560
E)  $95,240F) A) and B)
G) A) and C)

Question 4

The financial statements of Blue Fin Marina reflect depreciation expenses of $41,600 and interest expenses of $27,900 for the year.The current assets increased by $31,800 and the net fixed assets increased by $28,600.What is the amount of the net capital spending for the year?

Accepted Answer

A)  $13,000
B)  $21,600
C)  $28,600
D)  $60,400
E)  $70,200F) None of the above
G) D) and E)

Question 5

Which one of the following statements concerning the balance sheet is correct?

Accepted Answer

A)  Total assets equal total liabilities minus total equity.
B)  Net working capital is equal total assets minus total liabilities.
C)  Assets are listed in descending order of liquidity.
D)  Current assets are equal to total assets minus net working capital.
E)  Shareholders' equity is equal to net working capital minus net fixed assets plus long-term debt.F) A) and D)
G) A) and C)

Question 6

Which one of the following decreases net income but does not affect the operating cash flow of a firm that owes no taxes for the current year?

Accepted Answer

A)  Indirect cost
B)  Direct cost
C)  Noncash item
D)  Period cost
E)  Variable costF) A) and D)
G) B) and E)

Question 7

Net working capital is defined as:

Accepted Answer

A)  the depreciated book value of a firm's fixed assets.
B)  the value of a firm's current assets.
C)  available cash minus current liabilities.
D)  total assets minus total liabilities.
E)  current assets minus current liabilities.F) None of the above
G) B) and C)

Question 8

Cash flow to creditors is defined as:

Accepted Answer

A)  interest paid minus net new borrowing.
B)  interest paid plus net new borrowing.
C)  operating cash flow minus net capital spending minus the change in net working capital.
D)  dividends paid plus net new borrowing.
E)  cash flow from assets plus net new equity.F) C) and E)
G) A) and D)

Question 9

Kat Outfitting currently has $22,500 in cash.The company owes $49,500 to suppliers for merchandise and $52,500 to the bank for a long-term loan.Customers owe the company $41,000 for their purchases.The inventory has a book value of $76,800 and an estimated market value of $72,000.If the store compiled a balance sheet as of today, what would be the book value of the current assets?

Accepted Answer

A)  $135,500
B)  $79,500 
C)   $86,000
D)  $140,300
E)  $144,000F) B) and D)
G) C) and D)

Question 10

Production equipment is classified as:

Accepted Answer

A)  a net working capital item.
B)  a current liability.
C)  a current asset.
D)  a tangible fixed asset.
E)  an intangible fixed asset.F) D) and E)
G) B) and D)

Question 11

Which one of the following has nearly the same meaning as free cash flow?

Accepted Answer

A)  Net income
B)  Cash flow from assets
C)  Operating cash flow
D)  Cash flow to shareholders
E)  Addition to retained earningsF) D) and E)
G) A) and E)

Question 12

If a firm has a negative cash flow from assets every year for several years, the firm:

Accepted Answer

A)  may be continually increasing in size.
B)  must also have a negative cash flow from operations each year.
C)  is operating at a high level of efficiency.
D)  is repaying debt every year.
E)  has annual net losses.F) C) and D)
G) B) and E)

Question 13

Dockside Warehouse has net working capital of $42,400, total assets of $519,300, and net fixed assets of $380,200.What is the value of the current liabilities?

Accepted Answer

A)  $61,700
B)  $88,40000
C)  $102,900
D)  $96,700
E)  $111,500F) D) and E)
G) B) and E)

Question 14

Which one of the following changes during a year will increase cash flow from assets but not affect the operating cash flow?

Accepted Answer

A)  Increase in depreciation
B)  Increase in accounts receivable
C)  Increase in accounts payable
D)  Decrease in cost of goods sold
E)  Increase in salesF) None of the above
G) A) and B)

Question 15

Joie's Fashions has current liabilities of $45,600 and accounts receivable of $59,700.The firm has total assets of $275,000 and net fixed assets of $205,500.The owners' equity has a book value of $107,500.What is the amount of the net working capital?

Accepted Answer

A)  $121,900
B)  $23,900
C)  $9,800
D)  $83,600
E)  -$35,800F) C) and E)
G) C) and D)

Question 16

AV Sales has net revenue of $513,000 and costs of $406,800.The depreciation expense is $43,800,interest paid is $11,200, and dividends for the year are$4,500.The tax rate is 33 percent.What is the addition to retained earnings?

Accepted Answer

A)  $38,804
B)  $34,304
C)  $28,120
D)  $29,804
E)  $30,450F) A) and B)
G) A) and E)

Question 17

Cash flow to creditors increases when:

Accepted Answer

A)  interest rates on debt decline.
B)  accounts payables decrease.
C)  long-term debt is repaid.
D)  current liabilities are repaid.
E)  new long-term loans are acquired.F) A) and D)
G) A) and B)

Question 18

Net working capital decreases when:

Accepted Answer

A)  a new 3-year loan is obtained with the proceeds used to purchase inventory.
B)  a credit customer pays his or her bill in full.
C)  depreciation increases.
D)  a long-term debt is used to finance a fixed asset purchase.
E)  a dividend is paid to current shareholders.F) A) and E)
G) B) and E)

Question 19

Marcie's has sales of $179,600,depreciation of $14,900, costs of goods sold of $138,200, and other costs of $28,400.The tax rate is 35 percent.What is the net income?

Accepted Answer

A)  -$1,235
B)  $382
C)  $1,204
D)  $14,660
E)  $13,665F) C) and D)
G) A) and D)

Question 20

All else held constant, the book value of owners' equity will decrease when:

Accepted Answer

A)  the market value of inventory increases.
B)  dividends exceed net income for a period.
C)  cash is used to pay an accounts payable.
D)  a long-term debt is repaid.
E)  taxable income increases.F) B) and E)
G) D) and E)

Exam 2: Financial Statements, Taxes, and Cash Flow

An income statement prepared according to GAAP:

Correct Answer
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Net working capital is defined as:

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Cash flow to creditors increases when:

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Which one of the following statements concerning the balance sheet is correct?

Correct Answer
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Correct Answer
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Bleu Berri Farms had equity of $58,900 at the beginning of the year.During the year, the company earned net income of $8,200 and paid $2,500 in dividends.Also during the year, the company repurchased $3,500 of stock from one of its shareholders.What is the value of the owners' equity at year end?

Correct Answer
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Which one of the following decreases net income but does not affect the operating cash flow of a firm that owes no taxes for the current year?

Correct Answer
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Which one of the following changes during a year will increase cash flow from assets but not affect the operating cash flow?

Correct Answer
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Net working capital decreases when:

Correct Answer
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If a firm has a negative cash flow from assets every year for several years, the firm:

Correct Answer
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Dockside Warehouse has net working capital of $42,400, total assets of $519,300, and net fixed assets of $380,200.What is the value of the current liabilities?

Correct Answer
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All else held constant, the book value of owners' equity will decrease when:

Correct Answer
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Production equipment is classified as:

Correct Answer
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Cash flow to creditors is defined as:

Correct Answer
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Marcie's has sales of $179,600,depreciation of $14,900, costs of goods sold of $138,200, and other costs of $28,400.The tax rate is 35 percent.What is the net income?

Correct Answer
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Joie's Fashions has current liabilities of $45,600 and accounts receivable of $59,700.The firm has total assets of $275,000 and net fixed assets of $205,500.The owners' equity has a book value of $107,500.What is the amount of the net working capital?

Correct Answer
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Which one of the following has nearly the same meaning as free cash flow?

Correct Answer
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AV Sales has net revenue of $513,000 and costs of $406,800.The depreciation expense is $43,800,interest paid is $11,200, and dividends for the year are$4,500.The tax rate is 33 percent.What is the addition to retained earnings?

Correct Answer
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The financial statements of Blue Fin Marina reflect depreciation expenses of $41,600 and interest expenses of $27,900 for the year.The current assets increased by $31,800 and the net fixed assets increased by $28,600.What is the amount of the net capital spending for the year?

Correct Answer
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The Pretzel Factory has net sales of $821,300 and costs of $698,500.The depreciation expense is $28,400 and the interest paid is $8,400.What is the amount of the firm's operating cash flow if the tax rate is 34 percent?

Correct Answer
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Exam 2: Financial Statements, Taxes, and Cash Flow

An income statement prepared according to GAAP:

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Net working capital is defined as:

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Cash flow to creditors increases when:

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Which one of the following statements concerning the balance sheet is correct?

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Bleu Berri Farms had equity of $58,900 at the beginning of the year.During the year, the company earned net income of $8,200 and paid $2,500 in dividends.Also during the year, the company repurchased $3,500 of stock from one of its shareholders.What is the value of the owners' equity at year end?

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Which one of the following decreases net income but does not affect the operating cash flow of a firm that owes no taxes for the current year?

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Which one of the following changes during a year will increase cash flow from assets but not affect the operating cash flow?

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Net working capital decreases when:

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If a firm has a negative cash flow from assets every year for several years, the firm:

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Dockside Warehouse has net working capital of $42,400, total assets of $519,300, and net fixed assets of $380,200.What is the value of the current liabilities?

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All else held constant, the book value of owners' equity will decrease when:

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Production equipment is classified as:

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Cash flow to creditors is defined as:

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Marcie's has sales of $179,600,depreciation of $14,900, costs of goods sold of $138,200, and other costs of $28,400.The tax rate is 35 percent.What is the net income?

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Joie's Fashions has current liabilities of $45,600 and accounts receivable of $59,700.The firm has total assets of $275,000 and net fixed assets of $205,500.The owners' equity has a book value of $107,500.What is the amount of the net working capital?

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Which one of the following has nearly the same meaning as free cash flow?

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AV Sales has net revenue of $513,000 and costs of $406,800.The depreciation expense is $43,800,interest paid is $11,200, and dividends for the year are$4,500.The tax rate is 33 percent.What is the addition to retained earnings?

Correct AnswerverifiedShow Answer

The financial statements of Blue Fin Marina reflect depreciation expenses of $41,600 and interest expenses of $27,900 for the year.The current assets increased by $31,800 and the net fixed assets increased by $28,600.What is the amount of the net capital spending for the year?

Correct AnswerverifiedShow Answer

The Pretzel Factory has net sales of $821,300 and costs of $698,500.The depreciation expense is $28,400 and the interest paid is $8,400.What is the amount of the firm's operating cash flow if the tax rate is 34 percent?

Correct AnswerverifiedShow Answer

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