 |
1 | |
If a firm has operating cash flow of $12,000, has a change in net working capital of $8,000, has net capital spending of $12,000, and has cash flow to creditors of $5,000, then cash flow to stockholders must be -$13,000. |
| | A) | True |
| | B) | False |
|
|
2 | |
If a firm has cash flow from assets of $12,000, dividends paid of $4,000 and net new equity sales of $4,000, then cash flow to creditors must be $4,000. |
| | A) | True |
| | B) | False |
|
|
3 | |
Which of the following assets would most likely be considered the least liquid? |
| | A) | A share of common stock in IBM |
| | B) | A bond issued by Microsoft |
| | C) | A share of preferred stock in K-Mart Corp. |
| | D) | A Custer, South Dakota municipal bond |
| | E) | A U.S. Treasury bill |
|
|
4 | |
You are to determine the level of net capital spending made by a firm during 1996. If you have the balance sheet and income statements for the years 1995 and 1996 how would you go about your task? |
| | A) | Ending net fixed assets - beginning net fixed assets + depreciation for 1996 |
| | B) | Beginning net fixed assets + ending net fixed assets - depreciation for 1995 |
| | C) | Ending net fixed assets - beginning net fixed assets - depreciation + taxes for 1996 |
| | D) | Ending net fixed assets - beginning net fixed assets + depreciation - taxes for 1996 |
| | E) | Beginning net fixed assets - ending net fixed assets + depreciation for 1996 |
|
|
5 | |
Consider the following statement: A firm that earns negative net income will quickly find itself in financial distress.
I. This statement is false because it is possible for a firm to have negative profits but still have positive cash flows II. This statement is false because accounting profits do not generally equal cash flow and it is a lack of cash, not profits, that causes financial distress
III. This statement is true because negative profits mean negative cash flows |
| | A) | I only |
| | B) | II only |
| | C) | III only |
| | D) | I and II only |
| | E) | I and III only |
|
|
6 | |
As an investor how would you determine the total market value of a publicly traded corporation such as General Motors?
I. The values of debt and equity as they appear on the most recent financial statements II. The value of debt as it appears on the most recent financial statements plus the current market value of GM's common stock
III. The current market value of GM's stock plus the market value of GM's debt |
| | A) | I only |
| | B) | II only |
| | C) | III only |
| | D) | I and II only |
| | E) | II and III only |
|
|
7 | |
Balance sheet assets
I. always have a value equal to total liabilities minus shareholders' equity II. are listed in order of increasing liquidity
III. represent items acquired with the use of liabilities and equity |
| | A) | I only |
| | B) | II and III only |
| | C) | III only |
| | D) | I and II only |
| | E) | I, II, and III |
|
|
8 | |
Which of the following represents a use of the matching principle in accounting?
I. The cost purchasing a good on account is recorded when the account payable is paid II. Revenues from a sale on account are recorded when the payment on the account receivable is received
III. The costs of producing inventory are recognized along with the revenues from the sale when the sale is made |
| | A) | I only |
| | B) | II only |
| | C) | III only |
| | D) | I and II only |
| | E) | I and III only |
|
|
9 | |
Which of the following is considered a noncash expense on the income statement? |
| | A) | Income taxes |
| | B) | Depreciation |
| | C) | Interest expense |
| | D) | Wages and salaries |
| | E) | Cost of goods sold |
|
|
10 | |
Which of the following is/are true about the balance sheet and income statement?
I. The income statement reflects a summary of activity that occurs over some period of time while the balance sheet is a snapshot taken at a single point in time II. Both represent a summary of activity that occurs over some period of time
III. The two, combined, give a reasonable estimate of the firm's cash flows and market values |
| | A) | I only |
| | B) | II only |
| | C) | III only |
| | D) | I and III only |
| | E) | I, II, and III |
|