Question 1

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) B) and D)
G) All of the above

Question 2

Shareholders&rsquo; equity is best defined as:

Accepted Answer

A)  the residual value of a firm.
B)  positive net working capital.
C)  the net liquidity of a firm.
D)  cash inflows minus cash outflows.
E)  the cumulative profits of a firm over time.F) None of the above
G) All of the above

Question 3

Which one of these is correct?

Accepted Answer

A)  Depreciation has no effect on taxes.
B)  Interest paid is a noncash item.
C)  Taxable income must be a positive value.
D)  Net income is distributed either to dividends or retained earnings.
E)  Taxable income equals net income &times; (1 + Average tax rate.F) C) and D)
G) A) and D)

Question 4

Paid-in surplus is classified as:

Accepted Answer

A)  owners&rsquo; equity.
B)  net working capital.
C)  a current asset.
D)  a cash expense.
E)  long-term debt.F) B) and C)
G) C) and D)

Question 5

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) None of the above
G) A) and D)

Question 6

A firm&rsquo;s liquidity level decreases when:

Accepted Answer

A)  inventory is purchased with cash.
B)  inventory is sold on credit.
C)  inventory is sold for cash.
D)  an account receivable is collected.
E)  proceeds from a long-term loan are received.F) B) and C)
G) A) and D)

Question 7

The market value:

Accepted Answer

A)  of accounts receivable is generally higher than the book value of those receivables.
B)  of an asset tends to provide a better guide to the actual worth of that asset than does the book value.
C)  of fixed assets will always exceed the book value of those assets.
D)  of an asset is reflected in the balance sheet.
E)  of an asset is lowered each year by the amount of depreciation expensed for that asset.F) A) and E)
G) C) and D)

Question 8

The concept of marginal taxation is best exemplified by which one of the following?

Accepted Answer

A)  Kirby's paid $120,000 in taxes while its primary competitor paid only $80,000 in taxes.
B)  Johnson's Retreat paid only $45,000 on total revenue of $570,000 last year.
C)  Mitchell's Grocer increased its sales by $52,000 last year and had to pay an additional $16,000 in taxes.
D)  Burlington Centre paid no taxes last year due to carryforward losses.
E)  The Blue Moon paid $2.20 in taxes for every $10 of revenue last year.F) None of the above
G) A) and D)

Question 9

Based on the recognition principle,revenue is recorded on the financial statements when the:
I.payment is collected for the sale of a good or service. 
II.earnings process is virtually complete. 
III.value of a sale can be reliably determined. 
IV.product is physically delivered to the buyer.

Accepted Answer

A)  I and II only
B)  I and IV only
C)  II and III only
D)  II and IV only
E)  I and III onlyF) B) and E)
G) A) and B)

Question 10

Blythe Industries reports the following account balances: inventory of $417,600,equipment of $2,028,300,accounts payable of $224,700,cash of $51,900,and accounts receivable of $313,900.What is the amount of the current assets?

Accepted Answer

A)  $46,700
B)  $56,000
C)  $783,400
D)  $975,000
E)  $699,700F) A) and E)
G) C) and D)

Question 11

A firm has earnings before interest and taxes of $27,130,net income of $16,220,and taxes of $5,450 for the year.While the firm paid out $31,600 to pay off existing debt it then later borrowed $42,000.What is the amount of the cash flow to creditors?

Accepted Answer

A)  -$14,040
B)  $0
C)  -$4,660
D)  $14,040
E)  $4,660F) A) and E)
G) D) and E)

Question 12

An increase in which one of the following will increase operating cash flow for a profitable,tax-paying firm?

Accepted Answer

A)  Fixed expenses
B)  Marginal tax rate
C)  Net capital spending
D)  Inventory
E)  DepreciationF) All of the above
G) B) and C)

Question 13

The Underground Cafe has an operating cash flow of $187,000 and a cash flow to creditors of $71,400 for the past year.The firm reduced its net working capital by $28,000 and incurred net capital spending of $47,900.What is the amount of the cash flow to stockholders for the last year?

Accepted Answer

A)  -$171,500
B)  -$86,700
C)  $21,200
D)  $95,700
E)  $39,700F) B) and D)
G) A) and B)

Question 14

Dixie's sales for the year were $1,678,000.Cost of goods sold,administrative and selling expenses,and depreciation expenses were $1,141,000,$304,000,and $143,000,respectively.In addition,the company had an interest expense of $74,000 and a tax rate of 34 percent.What is the operating cash flow for the year?

Accepted Answer

A)  $227,560
B)  $271,420
C)  $223,330
D)  $285,400
E)  $217,700F) A) and C)
G) A) and D)

Question 15

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) None of the above
G) A) and B)

Question 16

Financial leverage:

Accepted Answer

A)  increases as the net working capital increases.
B)  is equal to the market value of a firm divided by the firm's book value.
C)  is inversely related to the level of debt.
D)  is the ratio of a firm's revenues to its fixed expenses.
E)  increases the potential return to the stockholders.F) A) and D)
G) All of the above

Question 17

Rooster&#8217;s currently has $5,200 in cash.The company owes $31,700 to suppliers for merchandise and $41,500 to the bank for a long-term loan.Customers owe the company $26,400 for their purchases.The inventory has a book value of $53,300 and an estimated market value of $56,500.If the store compiled a balance sheet as of today,what would be the book value of the current assets?

Accepted Answer

A)  $46,800
B)  $55,600
C)  $64,700
D)  $84,900
E)  $96,500F) D) and E)
G) None of the above

Question 18

A negative cash flow to stockholders indicates a firm:

Accepted Answer

A)  had a net loss for the year.
B)  had a positive cash flow to creditors.
C)  paid dividends that exceeded the amount of the net new equity.
D)  repurchased more shares than it sold.
E)  received more from selling stock than it paid out to shareholders.F) A) and B)
G) A) and C)

Question 19

Which one of the following indicates that a firm has generated sufficient internal cash flow to finance its entire operations for the period?

Accepted Answer

A)  Positive operating cash flow
B)  Negative cash flow to creditors
C)  Positive cash flow to stockholders
D)  Negative net capital spending
E)  Positive cash flow from assetsF) A) and B)
G) All of the above

Question 20

Gino's Winery has net working capital of $29,800,net fixed assets of $64,800,current liabilities of $34,700,and long-term debt of $23,000.What is the value of the owners' equity?

Accepted Answer

A)  $36,900
B)  $66,700
C)  $71,600
D)  $89,400
E)  $106,300F) C) and E)
G) A) and B)

Exam 2: Financial Statements,Taxes,and Cash Flow

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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Based on the recognition principle,revenue is recorded on the financial statements when the: I.payment is collected for the sale of a good or service. II.earnings process is virtually complete. III.value of a sale can be reliably determined. IV.product is physically delivered to the buyer.

Correct Answer
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Paid-in surplus is classified as:

Correct Answer
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Financial leverage:

Correct Answer
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Correct Answer
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A negative cash flow to stockholders indicates a firm:

Correct Answer
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Gino's Winery has net working capital of $29,800,net fixed assets of $64,800,current liabilities of $34,700,and long-term debt of $23,000.What is the value of the owners' equity?

Correct Answer
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The market value:

Correct Answer
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Correct Answer
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Shareholders’ equity is best defined as:

Correct Answer
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The concept of marginal taxation is best exemplified by which one of the following?

Correct Answer
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Cash flow to creditors increases when:

Correct Answer
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A firm’s liquidity level decreases when:

Correct Answer
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Blythe Industries reports the following account balances: inventory of $417,600,equipment of $2,028,300,accounts payable of $224,700,cash of $51,900,and accounts receivable of $313,900.What is the amount of the current assets?

Correct Answer
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An increase in which one of the following will increase operating cash flow for a profitable,tax-paying firm?

Correct Answer
verified

Which one of these is correct?

Correct Answer
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Which one of the following indicates that a firm has generated sufficient internal cash flow to finance its entire operations for the period?

Correct Answer
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The Underground Cafe has an operating cash flow of $187,000 and a cash flow to creditors of $71,400 for the past year.The firm reduced its net working capital by $28,000 and incurred net capital spending of $47,900.What is the amount of the cash flow to stockholders for the last year?

Correct Answer
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A firm has earnings before interest and taxes of $27,130,net income of $16,220,and taxes of $5,450 for the year.While the firm paid out $31,600 to pay off existing debt it then later borrowed $42,000.What is the amount of the cash flow to creditors?

Correct Answer
verified

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
verified

Exam 2: Financial Statements,Taxes,and Cash Flow

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 AnswerverifiedShow Answer

Based on the recognition principle,revenue is recorded on the financial statements when the: I.payment is collected for the sale of a good or service. II.earnings process is virtually complete. III.value of a sale can be reliably determined. IV.product is physically delivered to the buyer.

Correct AnswerverifiedShow Answer

Paid-in surplus is classified as:

Correct AnswerverifiedShow Answer

Financial leverage:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A negative cash flow to stockholders indicates a firm:

Correct AnswerverifiedShow Answer

Gino's Winery has net working capital of $29,800,net fixed assets of $64,800,current liabilities of $34,700,and long-term debt of $23,000.What is the value of the owners' equity?

Correct AnswerverifiedShow Answer

The market value:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Shareholders’ equity is best defined as:

Correct AnswerverifiedShow Answer

The concept of marginal taxation is best exemplified by which one of the following?

Correct AnswerverifiedShow Answer

Cash flow to creditors increases when:

Correct AnswerverifiedShow Answer

A firm’s liquidity level decreases when:

Correct AnswerverifiedShow Answer

Blythe Industries reports the following account balances: inventory of $417,600,equipment of $2,028,300,accounts payable of $224,700,cash of $51,900,and accounts receivable of $313,900.What is the amount of the current assets?

Correct AnswerverifiedShow Answer

An increase in which one of the following will increase operating cash flow for a profitable,tax-paying firm?

Correct AnswerverifiedShow Answer

Which one of these is correct?

Correct AnswerverifiedShow Answer

Which one of the following indicates that a firm has generated sufficient internal cash flow to finance its entire operations for the period?

Correct AnswerverifiedShow Answer

The Underground Cafe has an operating cash flow of $187,000 and a cash flow to creditors of $71,400 for the past year.The firm reduced its net working capital by $28,000 and incurred net capital spending of $47,900.What is the amount of the cash flow to stockholders for the last year?

Correct AnswerverifiedShow Answer

A firm has earnings before interest and taxes of $27,130,net income of $16,220,and taxes of $5,450 for the year.While the firm paid out $31,600 to pay off existing debt it then later borrowed $42,000.What is the amount of the cash flow to creditors?

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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