 |
| 1 | |
According to Generally Accepted Accounting Principles (GAAP), assets are carried on the financial statements at the greater of the current market value or the historical cost. |
| | A) | True |
| | B) | False |
|
|
|
| 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 |
|
|
|
| 3 | |
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. |
|
|
|
| 4 | |
Which one of the following statements is correct concerning market and book values? |
| | A) | The value of an asset as shown on a balance sheet reflects the market value of that asset. |
| | B) | The goal of financial management is to increase the book value of the firm's stock. |
| | C) | The skill level of a firm's employees is reflected in the book value of a firm. |
| | D) | The book value of a tangible fixed asset generally declines over time. |
| | E) | The book value of a current asset is generally difficult to determine. |
|
|
|
| 5 | |
Which one of the following is the correct formula for computing operating cash flow? |
| | A) | EBIT plus depreciation plus taxes |
| | B) | EBIT plus depreciation minus taxes |
| | C) | EBIT minus depreciation minus taxes |
| | D) | EBIT minus depreciation plus taxes |
| | E) | Taxes minus depreciation plus EBIT |
|
|
|
| 6 | |
Intangible assets: |
| | A) | are generally considered highly liquid. |
| | B) | are listed on the balance sheet just before accounts receivable. |
| | C) | include patents and trademarks. |
| | D) | include any fixed asset that exists physically. |
| | E) | are expensed when acquired. |
|
|
|
| 7 | |
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 |
The total tax due on a taxable income of $116,500 is: |
| | A) | $17,475. |
| | B) | $27,607. |
| | C) | $28,685. |
| | D) | $39,610. |
| | E) | $45,435. |
|
|
|
| 8 | |
Lo-Do, Inc. has a beginning net fixed asset balance of $3.4 million and an ending net fixed asset balance of $2.9 million. The depreciation expense is $750,000 and the interest expense is $218,000. What is the amount of the firm's net capital spending for the period? |
| | A) | $32,000 |
| | B) | $250,000 |
| | C) | $282,000 |
| | D) | $1,218,000 |
| | E) | $1,250,000 |
|
|
|
| 9 | |
Brandy's Candies paid a total of $23 million in dividends last year and repurchased $27 million worth of common stock. What was the cash flow to stockholders for the year? |
| | A) | -$4 million |
| | B) | $4 million |
| | C) | $23 million |
| | D) | $27 million |
| | E) | $50 million |
|
|
|
| 10 | |
CD, Inc., has a negative cash flow from assets. Given this, which one of the following has to be true? |
| | A) | CD's net working capital increased. |
| | B) | CD paid out more dividends and interest to creditors and stockholders than it raised by borrowing from creditors and selling stock. |
| | C) | CD's cash flows to stockholders and creditors are both negative. |
| | D) | CD's operating cash flow was less than the sum of its changes in net working capital and additions to net fixed assets. |
| | E) | If CD does not decrease its dividend payments it will soon incur financial distress. |
|
|
.