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Pre-Test
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1
Net working capital is always a positive value.
A)True
B)False
2
The balance sheet is a financial statement summarizing a firm's performance over a period of time.
A)True
B)False
3
Which one of the following is a noncash expense?
A)taxes
B)accounts payable
C)depreciation
D)interest
E)accounts receivable
4
The tax rate that determines the amount of tax due on an additional dollar of income is called the __________ tax rate.
A)flat
B)average
C)total
D)marginal
E)additional
5
Which one of the following is generally considered the most liquid?
A)accounts receivable
B)inventory
C)equipment
D)patent
E)land
6
Net new equity is equal to the dollar value of the equity sales:
A)minus any equity repurchases.
B)plus retained earnings.
C)plus retained earnings minus dividends paid.
D)plus retained earnings plus dividends paid.
E)plus dividends paid.
7
A current liability is defined as those debts which:
A)have been incurred in the past twelve months.
B)are related to products which have been sold.
C)can be converted to cash within the next twelve months.
D)were incurred to purchase current assets.
E)must be paid within the next twelve months.
8
Bacon Industries has an average tax rate of 22 percent and a marginal tax rate of 34 percent. How much additional tax will the firm owe if they increase their taxable income by $18,600?
A)$547
B)$845
C)$2,232
D)$4,092
E)$6,324
9
Which of the following are components of the cash flow to creditors?
I. dividends paid
II. net new borrowing
III. interest paid
IV. net new equity
A)I and II only
B)I and III only
C)II and IV only
D)I and IV only
E)II and III only
10
Which one of the following statements is true?
A)Depreciation is a cash expense.
B)Net income represents a cash flow to stockholders.
C)Cash flow to stockholders is equal to the interest paid minus net new equity.
D)Dividends are a cash outflow to stockholders.
E)Cash flow to creditors is equal to the interest paid.





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