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Corporate Finance, 3/e

Stephen A. Ross, Massachusetts Institute of Technology
Randolph W. Westerfield, University of Southern California
Jeffrey Jaffe, University of Pennsylvania
Gordon Roberts, York University

Accounting Statements and Cash Flow

Multiple Choice Quiz


1	Of the following assets, which is generally the most liquid?
		A)	Plant and equipment.
		B)	Inventory.
		C)	Goodwill.
		D)	Accounts receivable.
		E)	Accumulated depreciation.


2	Assets that would normally convert to cash within 12 months are called:
		A)	quick assets.
		B)	Current assets.
		C)	Conversion assets.
		D)	Annual assets.


3	Which of the following is not correct, in general?
		A)	Stockholder's equity = Assets - Liabilities.
		B)	Net working capital = Current liabilities - Current assets.
		C)	Cash flow from assets = Cash flow to creditors + Cash flow to stockholders.
		D)	Net additions to Net Working Capital = Sources of Net Working Capital - Uses of Net Working Capital.
		E)	All of the above.


4	Which of the following statements is true?
		A)	Depreciation is a noncash deduction.
		B)	Net income is the same as cash flow to stockholders.
		C)	Net additions to NWC is the same as cash flow from assets.
		D)	Both A and C are true.
		E)	All of the above.


5	In calculating total cash flow to the firm, which of the following is not included?
		A)	Cash dividends.
		B)	Operating cash flow.
		C)	Additions to Net Working Capital.
		D)	Capital spending.
		E)	All of the above are included.


6	Calculate net income based on the following information. Sales = $150.00 Cost of goods sold = $90.00 Depreciation = $15.00 Interest paid = $20.00 Tax rate = 34%
		A)	$16.50
		B)	$26.40
		C)	$34.60
		D)	$4.60
		E)	$39.60


7	From the following income statement information, calculate Oswald's after tax cash flow from operations. Net sales = $ 2,000 Cost of goods sold = $ 850 Operating expenses = $ 395 Depreciation = $ 248 Tax rate = 34%
		A)	$755.00
		B)	$1,150.00
		C)	$977.62
		D)	$582.62
		E)	$746.30


8	Sasha Corp. had an ROA of 8%. Sasha's profit margin was 4% on sales of $150. What were total assets?
		A)	$75.
		B)	$300.
		C)	$ 48.
		D)	$162.
		E)	none of the above.


9	Mirotronic Co. has an average collection period of 91.25 days. Sales are $20,000. What is the average investment in receivables? What is the receivables turnover?
		A)	$5,000.00; 4.000.
		B)	$219.18; 1.665.
		C)	$219.18; 0.416.
		D)	$16.00; 22.8125.
		E)	none of the above.


10	If a firm has a debt ratio of .33, what is its debt-to-equity ratio and its equity multiplier?
		A)	0.66, 1.52.
		B)	0.50, 1.67.
		C)	0.33, 3.00.
		D)	0.50, 1.49.
		E)	none of the above.


11	Logit Co. has a net income of $600. Dividends paid amounted to $400. What is the retention ratio?
		A)	.33.
		B)	.25.
		C)	.75.
		D)	.67.
		E)	none of the above.

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