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| 1 | |
According to Generally Accepted Accounting Principles (GAAP), assets are carried on the financial statements at the higher of current market value or historical cost. |
| | A) | True |
| | B) | False |
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| 2 | |
Suppose KLM, Inc., just received a patent on a new anti-cholesterol drug. This patent is an intangible fixed asset. |
| | A) | True |
| | B) | False |
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| 3 | |
A noncash item is an expense charged against revenues that does not directly affect the cash flow. |
| | A) | True |
| | B) | False |
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| 4 | |
Operating cash flow is the cash generated from a firm's normal business activities related to production and sales. |
| | A) | True |
| | B) | False |
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| 5 | |
A highly liquid asset is an asset that can be converted into cash quickly by greatly reducing the selling price. |
| | A) | True |
| | B) | False |
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| 6 | |
Net capital spending is equal to: |
| | A) | ending net fixed assets minus beginning net fixed assets plus depreciation. |
| | B) | beginning net fixed assets plus ending net fixed assets minus depreciation. |
| | C) | ending net fixed assets minus beginning net fixed assets minus depreciation plus taxes. |
| | D) | ending net fixed assets minus beginning net fixed assets plus depreciation minus taxes. |
| | E) | beginning net fixed assets minus ending net fixed assets plus depreciation. |
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| 7 | |
Which one of the following statements is true? |
| | A) | Accounting income is generally equal to operating cash flow. |
| | B) | Assets are usually listed on the balance sheet at current market value. |
| | C) | Accounting statements are usually prepared to match the timing of income and expenses. |
| | D) | The balance sheet equity account represents the market value of the firm to shareholders. |
| | E) | The balance sheet tells investors exactly what the firm is worth. |
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| 8 | |
Which one of the following is generally considered the most liquid? |
| | A) | accounts receivable |
| | B) | inventory |
| | C) | net fixed assets |
| | D) | intangible assets |
| | E) | tangible assets |
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| 9 | |
Cash flow to creditors is equal to: |
| | A) | the interest paid. |
| | B) | operating cash flow minus net new borrowing. |
| | C) | interest paid plus changes in short-term debt. |
| | D) | interest paid plus total new debt. |
| | E) | interest paid minus net new borrowing. |
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| 10 | |
Intangible assets: |
| | A) | are generally considered highly liquid. |
| | B) | are listed on the balance sheet just before accounts receivable. |
| | C) | include such things as patents and trademarks. |
| | D) | include any fixed asset that exists physically. |
| | E) | are expensed when acquired. |
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| 11 | |
Paid-in surplus is part of: |
| | A) | net working capital. |
| | B) | long-term debt. |
| | C) | net fixed assets. |
| | D) | owners' equity |
| | E) | short-term debt. |
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| 12 | |
Which one of the following statements is correct? |
| | A) | Stockholders' equity is equal to total assets plus total liabilities. |
| | B) | Net working capital is equal to current liabilities minus current assets. |
| | C) | Cash flow from assets is equal to cash flow to creditors minus cash flow to stockholders. |
| | D) | Additions to net working capital are equal to ending net working capital minus beginning net working capital plus depreciation. |
| | E) | Operating cash flow is equal to EBIT plus depreciation minus taxes. |
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| 13 | |
Use the following tax table to answer this question.
| Taxable Income | | Tax Rate | | $0-50,000 | | 15% | | $50,001-75,000 | | 25% | | $75,001-100,000 | | 34% | | $100,001-335,000 | | 39% |
Pools, Inc., has taxable income of $77,000 for the year. Which one of the following statements is correct concerning Pools' tax situation? |
| | A) | Pools' average tax rate is 18.74 percent. |
| | B) | Pools' average tax rate is 34.00 percent. |
| | C) | Pools' marginal tax rate is 15.00 percent. |
| | D) | Pools' marginal tax rate is 18.74 percent. |
| | E) | Pools' marginal tax rate is 39.00 percent. |
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| 14 | |
Wise, Inc., paid $31,000 in interest last year while long-term debt decreased from $310,000 to $250,000. What was the cash flow to creditors? |
| | A) | -$31,000 |
| | B) | -$29,000 |
| | C) | $31,000 |
| | D) | $60,000 |
| | E) | $91,000 |
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| 15 | |
LaMont Industries had cash flow from operations of $19,300 last year. The depreciation expense was $2,300, interest expense was $600, and taxes were $1,400. They have 40,000 shares of stock outstanding. What is the earnings per share for last year? |
| | A) | $0.31 |
| | B) | $0.37 |
| | C) | $0.41 |
| | D) | $0.46 |
| | E) | $0.48 |
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