Question 1

At the beginning of the year,the long-term debt of a firm was $72,918 and total debt was $138,407.At the end of the year,long-term debt was $68,219 and total debt was $145,838.The interest paid was $6,430.What is the amount of the cash flow to creditors?

Accepted Answer

A)   -$18,348
B)   -$1,001
C)   $11,129
D)   $13,861
E)   $19,172F) B) and E)
G) C) and D)

Question 2

Jensen Enterprises paid $1,300 in dividends and $920 in interest this past year.Common stock increased by $1,200 and retained earnings decreased by $310.What is the net income for the year?

Accepted Answer

A)   -$210
B)   $990
C)   $1,610
D)   $1,910
E)   $2,190F) B) and E)
G) A) and E)

Question 3

An increase in the depreciation expense will do which of the following?
I.increase net income
II.decrease net income
III.increase the cash flow from assets
IV.decrease the cash flow from assets

Accepted Answer

A)   I only
B)   II only
C)   I and III only
D)   II and III only
E)   II and IV onlyF) All of the above
G) C) and D)

Question 4

The higher the degree of financial leverage employed by a firm,the:

Accepted Answer

A)   higher the probability that the firm will encounter financial distress.
B)   lower the amount of debt incurred.
C)   less debt a firm has per dollar of total assets.
D)   higher the number of outstanding shares of stock.
E)   lower the balance in accounts payable.F) A) and B)
G) C) and E)

Question 5

At the beginning of the year,a firm had current assets of $121,306 and current liabilities of $124,509.At the end of the year,the current assets were $122,418 and the current liabilities were $103,718.What is the change in net working capital?

Accepted Answer

A)   -$19,679
B)   -$11,503
C)   -$9,387
D)   $1,809
E)   $21,903F) C) and D)
G) A) and D)

Question 6

Nielsen Auto Parts had beginning net fixed assets of $218,470 and ending net fixed assets of $209,411.During the year,assets with a combined book value of $6,943 were sold.Depreciation for the year was $42,822.What is the amount of net capital spending?

Accepted Answer

A)   $33,763
B)   $40,706
C)   $58,218
D)   $65,161
E)   $67,408F) A) and B)
G) A) and C)

Question 7

Which one of the following statements concerning net working capital is correct?

Accepted Answer

A)   The lower the value of net working capital the greater the ability of a firm to meet its current obligations.
B)   An increase in net working capital must also increase current assets.
C)   Net working capital increases when inventory is sold for cash at a profit.
D)   Firms with equal amounts of net working capital are also equally liquid.
E)   Net working capital is a part of the operating cash flow.F) A) and B)
G) A) and C)

Question 8

Beach Front Industries has sales of $546,000,costs of $295,000,depreciation expense of $37,000,interest expense of $15,000,and a tax rate of 32 percent.The firm paid $59,000 in cash dividends.What is the addition to retained earnings?

Accepted Answer

A)   $76,320
B)   $81,700
C)   $95,200
D)   $103,460
E)   $121,680F) C) and D)
G) A) and B)

Question 9

Adelson's Electric had beginning long-term debt of $42,511 and ending long-term debt of $48,919.The beginning and ending total debt balances were $84,652 and $78,613,respectively.The interest paid was $4,767.What is the amount of the cash flow to creditors?

Accepted Answer

A)   -$1,641
B)   -$1,272
C)   $1,272
D)   $7,418
E)   $11,175F) C) and D)
G) C) and E)

Question 10

Given the tax rates as shown,what is the average tax rate for a firm with taxable income of $311,360?

Accepted Answer

A)   28.25 percent
B)   31.09 percent
C)   33.62 percent
D)   35.48 percent
E)   39.00 percentF) B) and C)
G) D) and E)

Question 11

Which one of the following will increase the value of a firm's net working capital?

Accepted Answer

A)   using cash to pay a supplier
B)   depreciating an asset
C)   collecting an accounts receivable
D)   purchasing inventory on credit
E)   selling inventory at a profitF) A) and B)
G) A) and C)

Question 12

Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time?

Accepted Answer

A)   income statement
B)   balance sheet
C)   statement of cash flows
D)   tax reconciliation statement
E)   market value reportF) A) and B)
G) A) and C)

Question 13

Discuss the difference between book values and market values and explain which one is more important to the financial manager and why.

Accepted Answer

The accounts on the balance sheet are ge...

Question 14

Cash flow to stockholders is defined as:

Accepted Answer

A)   the total amount of interest and dividends paid during the past year.
B)   the change in total equity over the past year.
C)   cash flow from assets plus the cash flow to creditors.
D)   operating cash flow minus the cash flow to creditors.
E)   dividend payments less net new equity raised.F) A) and B)
G) A) and C)

Question 15

For a tax-paying firm,an increase in _____ will cause the cash flow from assets to increase.

Accepted Answer

A)   depreciation
B)   net capital spending
C)   change in net working capital
D)   taxes
E)   production costsF) A) and C)
G) C) and D)

Question 16

Dee Dee's Marina is obligated to pay its creditors $6,400 today.The firm's assets have a current market value of $5,900.What is the current market value of the shareholders' equity?

Accepted Answer

A)   -$600
B)   -$500
C)   $0
D)   $500
E)   $600F) B) and D)
G) B) and C)

Question 17

Which one of the following statements related to liquidity is correct?

Accepted Answer

A)   Liquid assets tend to earn a high rate of return.
B)   Liquid assets are valuable to a firm.
C)   Liquid assets are defined as assets that can be sold quickly regardless of the price obtained.
D)   Inventory is more liquid than accounts receivable because inventory is tangible.
E)   Any asset that can be sold within the next year is considered liquid.F) C) and D)
G) B) and C)

Question 18

Which one of the following statements related to an income statement is correct? Assume accrual accounting is used.

Accepted Answer

A)   The addition to retained earnings is equal to net income plus dividends paid.
B)   Credit sales are recorded on the income statement when the cash from the sale is collected.
C)   The labor costs for producing a product are expensed when the product is sold.
D)   Interest is a non-cash expense.
E)   Depreciation increases the marginal tax rate.F) A) and B)
G) A) and E)

Question 19

Which one of the following statements related to the cash flow to creditors is correct?

Accepted Answer

A)   If the cash flow to creditors is positive then the firm must have borrowed more money than it repaid.
B)   If the cash flow to creditors is negative then the firm must have a negative cash flow from assets.
C)   A positive cash flow to creditors represents a net cash outflow from the firm.
D)   A positive cash flow to creditors means that a firm has increased its long-term debt.
E)   If the cash flow to creditors is zero,then a firm has no long-term debt.F) All of the above
G) None of the above

Question 20

The Lakeside Inn had operating cash flow of $48,450.Depreciation was $6,700 and interest paid was $2,480.A net total of $2,620 was paid on long-term debt.The firm spent $24,000 on fixed assets and decreased net working capital by $1,330.What is the amount of the cash flow to stockholders?

Accepted Answer

A)   $5,100
B)   $7,830
C)   $18,020
D)   $19,998
E)   $20,680F) C) and D)
G) B) and C)

Exam 2: Financial Statements, Taxes, and Cash Flowpart Two: Financial Statements and Long-Term Financial Planning

At the beginning of the year,a firm had current assets of $121,306 and current liabilities of $124,509.At the end of the year,the current assets were $122,418 and the current liabilities were $103,718.What is the change in net working capital?

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Adelson's Electric had beginning long-term debt of $42,511 and ending long-term debt of $48,919.The beginning and ending total debt balances were $84,652 and $78,613,respectively.The interest paid was $4,767.What is the amount of the cash flow to creditors?

Correct AnswerverifiedShow Answer

For a tax-paying firm,an increase in _____ will cause the cash flow from assets to increase.

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Jensen Enterprises paid $1,300 in dividends and $920 in interest this past year.Common stock increased by $1,200 and retained earnings decreased by $310.What is the net income for the year?

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At the beginning of the year,the long-term debt of a firm was $72,918 and total debt was $138,407.At the end of the year,long-term debt was $68,219 and total debt was $145,838.The interest paid was $6,430.What is the amount of the cash flow to creditors?

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Which one of the following statements concerning net working capital is correct?

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Which one of the following will increase the value of a firm's net working capital?

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Beach Front Industries has sales of $546,000,costs of $295,000,depreciation expense of $37,000,interest expense of $15,000,and a tax rate of 32 percent.The firm paid $59,000 in cash dividends.What is the addition to retained earnings?

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Which one of the following statements related to liquidity is correct?

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Which one of the following statements related to the cash flow to creditors is correct?

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Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time?

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The higher the degree of financial leverage employed by a firm,the:

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The Lakeside Inn had operating cash flow of $48,450.Depreciation was $6,700 and interest paid was $2,480.A net total of $2,620 was paid on long-term debt.The firm spent $24,000 on fixed assets and decreased net working capital by $1,330.What is the amount of the cash flow to stockholders?

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Discuss the difference between book values and market values and explain which one is more important to the financial manager and why.

Correct AnswerverifiedThe accounts on the balance sheet are ge...View AnswerShow Answer

Which one of the following statements related to an income statement is correct? Assume accrual accounting is used.

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Given the tax rates as shown,what is the average tax rate for a firm with taxable income of $311,360?

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Nielsen Auto Parts had beginning net fixed assets of $218,470 and ending net fixed assets of $209,411.During the year,assets with a combined book value of $6,943 were sold.Depreciation for the year was $42,822.What is the amount of net capital spending?

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An increase in the depreciation expense will do which of the following? I.increase net income II.decrease net income III.increase the cash flow from assets IV.decrease the cash flow from assets

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Dee Dee's Marina is obligated to pay its creditors $6,400 today.The firm's assets have a current market value of $5,900.What is the current market value of the shareholders' equity?

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Cash flow to stockholders is defined as:

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The accounts on the balance sheet are ge...
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