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1 | |
If a firm's balance sheet indicates that current liabilities and shareholders' equity is exceeded by the total assets, then the firm has: |
| | A) | no accumulated depreciation |
| | B) | negative returned earnings |
| | C) | no long term debt |
| | D) | long term debt |
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2 | |
In seven months a payment of principal is due on a long-term liability, that payment will appear as: |
| | A) | accounts payable |
| | B) | long-term debt |
| | C) | a current liability |
| | D) | shareholders' equity |
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3 | |
For a fully depreciated asset which of the following is correct? |
| | A) | The relationship between market and book values is indeterminable |
| | B) | Book value is greater than market value |
| | C) | Market value is greater than book value |
| | D) | Market value is zero |
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4 | |
Market interest rates have decreased since Company A borrowed long-term funds. The market value of these funds will likely be: |
| | A) | equal to their book value |
| | B) | less than their book value |
| | C) | greater than their book value |
| | D) | unchanged from the amount of the original liability |
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5 | |
Corporation A has $10 million market value of stock, $20 million market value of assets, and 1,000 shares of outstanding stock. Which of the following statements are true: |
| | A) | Market value of liabilities equals $10 million |
| | B) | Market value of liabilities exceeds book value of liabilities |
| | C) | Market value per share equals $500 |
| | D) | Market value per share equals $10,000 |
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6 | |
Where can the current period depreciation expense be found: |
| | A) | on the income statement |
| | B) | on the left side of the balance sheet |
| | C) | on the right side of the balance sheet |
| | D) | on neither the balance sheet or the income statement, since it is a non-cash expense |
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7 | |
Company A generates $500 in sales and has a $150 decrease in accounts receivable during an accounting period. Based on these two categories, Company A's cash flow will increase by: |
| | A) | $450 |
| | B) | $550 |
| | C) | $650 |
| | D) | $750 |
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8 | |
Which of the following categories includes depreciation expenses in a statement of cash flows? |
| | A) | Financing |
| | B) | Investments |
| | C) | Operations |
| | D) | None of the above; depreciation is a non-cash expense |
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9 | |
If cash and marketable securities increase by $1000 during a period in which cash provided by operations increases by $650 and cash used by investments decreases by $300, then which of the following is more likely? |
| | A) | Cash used by financing decreases by $650 |
| | B) | Cash provided by financing increases by $50 |
| | C) | Debt increased by more than cash dividends paid |
| | D) | Debt was reduced by more than cash dividends paid |
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10 | |
The payment of interest expense affects which of the following categories of a statement of cash flows? |
| | A) | Cash flows from investing |
| | B) | Cash flows form financing |
| | C) | Cash flows from operations |
| | D) | Both a and b |
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11 | |
A profitable corporation in the 35% marginal tax bracket incurs an additional dollar of depreciation expense. What is the marginal impact on taxes? |
| | A) | zero impact |
| | B) | an increase of 55 cents |
| | C) | a increase of 35 cents |
| | D) | a decrease of 35 cents |
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12 | |
Who pays the taxes on earnings distributed as dividends? |
| | A) | the corporation |
| | B) | the investor receiving the dividend |
| | C) | neither the corporation or the investor receiving the dividend |
| | D) | both the corporation and the investor receiving the dividend |
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13 | |
Company A's cash flow statement shows that cash was used for investments. Which of the following would seem most likely? |
| | A) | New machines were acquired |
| | B) | The inventory balance increased |
| | C) | Cash dividends were paid |
| | D) | Common stock was repurchased |
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14 | |
Corporation X in the 25% marginal tax bracket incurs $6.00 in labor and materials expense, plus $2.00 in depreciation expense while generating an incremental revenue of $10.00. The tax liability for Corporation X will increase by: |
| | A) | $1.25 |
| | B) | $1.00 |
| | C) | $0.75 |
| | D) | $0.50 |
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15 | |
Which of the following items should not be included in a listing of current assets? |
| | A) | Marketable securities |
| | B) | Accounts payable |
| | C) | Accounts receivable |
| | D) | Inventories |
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