Question 1

The managers of a firm wish to expand the firm's operations and are trying to determine the amount of debt financing the firm should obtain versus the amount of equity financing that should be raised.The managers have asked you to explain the effects that both of these forms of financing would have on the cash flows of the firm.Write a short response to this request.

Accepted Answer

Debt financing will require cash outflow...

Question 2

A firm has common stock of $6,200,paid-in surplus of $9,100,total liabilities of $8,400,current assets of $5,900,and fixed assets of $21,200.What is the amount of the shareholders' equity?

Accepted Answer

A)  $6,900
B)  $15,300
C)  $18,700
D)  $23,700
E)  $35,500F) A) and E)
G) A) and D)

Question 3

The Lakeside Inn had operating cash flow of $48,450.Depreciation was $6,700 and interest paid was $2,480.A net total of $2,620 was paid on long-term debt.The firm spent $24,000 on fixed assets and decreased net working capital by $1,330.What is the amount of the cash flow to stockholders?

Accepted Answer

A)  $5,100
B)  $7,830
C)  $18,020
D)  $19,998
E)  $20,680F) A) and D)
G) A) and B) E

Question 4

At the beginning of the year,the long-term debt of a firm was $72,918 and total debt was $138,407.At the end of the year,long-term debt was $68,219 and total debt was $145,838.The interest paid was $6,430.What is the amount of the cash flow to creditors?

Accepted Answer

A)  -$18,348
B)  -$1,001
C)  $11,129
D)  $13,861
E)  $19,172F) A) and B)
G) A) and E)

Question 5

An increase in the depreciation expense will do which of the following?
I.increase net income
II.decrease net income
III.increase the cash flow from assets
IV.decrease the cash flow from assets

Accepted Answer

A)  I only
B)  II only
C)  I and III only
D)  II and III only
E)  II and IV onlyF) A) and E)
G) A) and D)

Question 6

The book value of a firm is:

Accepted Answer

A)  equivalent to the firm's market value provided that the firm has some fixed assets.
B)  based on historical cost.
C)  generally greater than the market value when fixed assets are included.
D)  more of a financial than an accounting valuation.
E)  adjusted to the market value whenever the market value exceeds the stated book value.F) A) and C)
G) C) and D)

Question 7

Bonner Collision has shareholders' equity of $141,800.The firm owes a total of $126,000 of which 60 percent is payable within the next year.The firm net fixed assets of $161,900.What is the amount of the net working capital?

Accepted Answer

A)  $25,300
B)  $30,300
C)  $75,600
D)  $86,300
E)  $111,500F) All of the above
G) None of the above

Question 8

Which one of the following is true according to Generally Accepted Accounting Principles?

Accepted Answer

A)  Depreciation may or may not be recorded at management's discretion.
B)  Income is recorded based on the matching principle.
C)  Costs are recorded based on the realization principle.
D)  Depreciation is recorded based on the recognition principle.
E)  Costs of goods sold are recorded based on the matching principle.F) All of the above
G) C) and E)

Question 9

Which one of the following is included in a firm's market value but yet is excluded from the firm's accounting value?

Accepted Answer

A)  real estate investment
B)  good reputation of the company
C)  equipment owned by the firm
D)  money due from a customer
E)  an item held by the firm for future saleF) B) and D)
G) C) and D) B

Question 10

Assume you are a credit manager in charge of approving commercial loans to business firms.Identify three aspects of a firm's cash flows you would review and explain the type of information you hope to gain from reviewing each of those five aspects.

Accepted Answer

Student answers will vary but here are s...

Question 11

For a tax-paying firm,an increase in _____ will cause the cash flow from assets to increase.

Accepted Answer

A)  depreciation
B)  net capital spending
C)  change in net working capital
D)  taxes
E)  production costsF) C) and E)
G) C) and D)

Question 12

Which one of the following statements related to an income statement is correct?

Accepted Answer

A)  Interest expense increases the amount of tax due.
B)  Depreciation does not affect taxes since it is a non-cash expense.
C)  Net income is distributed to dividends and paid-in surplus.
D)  Taxes reduce both net income and operating cash flow.
E)  Interest expense is included in operating cash flow.F) A) and B)
G) C) and E) D

Question 13

A firm has $520 in inventory,$1,860 in fixed assets,$190 in accounts receivables,$210 in accounts payable,and $70 in cash.What is the amount of the current assets?

Accepted Answer

A)  $710
B)  $780
C)  $990
D)  $2,430
E)  $2,640F) A) and B)
G) A) and C)

Question 14

Which one of the following accounts is the most liquid?

Accepted Answer

A)  inventory
B)  building
C)  accounts receivable
D)  equipment
E)  landF) B) and C)
G) B) and D)

Question 15

The common set of standards and procedures by which audited financial statements are prepared is known as the:

Accepted Answer

A)  matching principle.
B)  cash flow identity.
C)  Generally Accepted Accounting Principles.
D)  Financial Accounting Reporting Principles.
E)  Standard Accounting Value Guidelines.F) A) and B)
G) A) and C)

Question 16

A positive cash flow to stockholders indicates which one of the following with certainty?

Accepted Answer

A)  The dividends paid exceeded the net new equity raised.
B)  The amount of the sale of common stock exceeded the amount of dividends paid.
C)  No dividends were distributed but new shares of stock were sold.
D)  Both the cash flow to assets and the cash flow to creditors must be negative.
E)  Both the cash flow to assets and the cash flow to creditors must be positive.F) A) and B)
G) B) and E)

Question 17

Which of the following is (are) included in the market value of a firm but are excluded from the firm's book value?
I.value of management skills
II.value of a copyright
III.value of the firm's reputation
IV.value of employee's experience

Accepted Answer

A)  I only
B)  II only
C)  III and IV only
D)  I, II, and III only
E)  I, III, and IV onlyF) A) and E)
G) A) and B)

Question 18

Which one of the following statements related to an income statement is correct? Assume accrual accounting is used.

Accepted Answer

A)  The addition to retained earnings is equal to net income plus dividends paid.
B)  Credit sales are recorded on the income statement when the cash from the sale is collected.
C)  The labor costs for producing a product are expensed when the product is sold.
D)  Interest is a non-cash expense.
E)  Depreciation increases the marginal tax rate.F) C) and E)
G) A) and B)

Question 19

Which of the following are included in current liabilities?
I.note payable to a supplier in eight months
II.amount due from a customer next month
III.account payable to a supplier that is due next week
IV.loan payable to the bank in fourteen months

Accepted Answer

A)  I and III only
B)  II and III only
C)  I, II, and III only
D)  I, III, and IV only
E)  I, II, III, and IVF) A) and B)
G) A) and C)

Question 20

Which of the following are current assets?
I.patent
II.inventory
III.accounts payable
IV.cash

Accepted Answer

A)  I and III only
B)  II and IV only
C)  I, II, and IV only
D)  I, II and IV only
E)  II, III, and IV onlyF) A) and D)
G) A) and B)

Exam 2: Financial Statements,Taxes,and Cash Flow

Correct Answer
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Debt financing will require cash outflow...
View Answer

A firm has common stock of $6,200,paid-in surplus of $9,100,total liabilities of $8,400,current assets of $5,900,and fixed assets of $21,200.What is the amount of the shareholders' equity?

Correct Answer
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The Lakeside Inn had operating cash flow of $48,450.Depreciation was $6,700 and interest paid was $2,480.A net total of $2,620 was paid on long-term debt.The firm spent $24,000 on fixed assets and decreased net working capital by $1,330.What is the amount of the cash flow to stockholders?

Correct Answer
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E

At the beginning of the year,the long-term debt of a firm was $72,918 and total debt was $138,407.At the end of the year,long-term debt was $68,219 and total debt was $145,838.The interest paid was $6,430.What is the amount of the cash flow to creditors?

Correct Answer
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An increase in the depreciation expense will do which of the following? I.increase net income II.decrease net income III.increase the cash flow from assets IV.decrease the cash flow from assets

Correct Answer
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The book value of a firm is:

Correct Answer
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Bonner Collision has shareholders' equity of $141,800.The firm owes a total of $126,000 of which 60 percent is payable within the next year.The firm net fixed assets of $161,900.What is the amount of the net working capital?

Correct Answer
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Which one of the following is true according to Generally Accepted Accounting Principles?

Correct Answer
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Which one of the following is included in a firm's market value but yet is excluded from the firm's accounting value?

Correct Answer
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B

Assume you are a credit manager in charge of approving commercial loans to business firms.Identify three aspects of a firm's cash flows you would review and explain the type of information you hope to gain from reviewing each of those five aspects.

Correct Answer
verified
Student answers will vary but here are s...
View Answer

For a tax-paying firm,an increase in _____ will cause the cash flow from assets to increase.

Correct Answer
verified

Which one of the following statements related to an income statement is correct?

Correct Answer
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D

A firm has $520 in inventory,$1,860 in fixed assets,$190 in accounts receivables,$210 in accounts payable,and $70 in cash.What is the amount of the current assets?

Correct Answer
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Which one of the following accounts is the most liquid?

Correct Answer
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The common set of standards and procedures by which audited financial statements are prepared is known as the:

Correct Answer
verified

A positive cash flow to stockholders indicates which one of the following with certainty?

Correct Answer
verified

Which of the following is (are) included in the market value of a firm but are excluded from the firm's book value? I.value of management skills II.value of a copyright III.value of the firm's reputation IV.value of employee's experience

Correct Answer
verified

Which one of the following statements related to an income statement is correct? Assume accrual accounting is used.

Correct Answer
verified

Which of the following are included in current liabilities? I.note payable to a supplier in eight months II.amount due from a customer next month III.account payable to a supplier that is due next week IV.loan payable to the bank in fourteen months

Correct Answer
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Which of the following are current assets? I.patent II.inventory III.accounts payable IV.cash

Correct Answer
verified

Exam 2: Financial Statements,Taxes,and Cash Flow

Correct AnswerverifiedDebt financing will require cash outflow...View AnswerShow Answer

A firm has common stock of $6,200,paid-in surplus of $9,100,total liabilities of $8,400,current assets of $5,900,and fixed assets of $21,200.What is the amount of the shareholders' equity?

Correct AnswerverifiedShow Answer

The Lakeside Inn had operating cash flow of $48,450.Depreciation was $6,700 and interest paid was $2,480.A net total of $2,620 was paid on long-term debt.The firm spent $24,000 on fixed assets and decreased net working capital by $1,330.What is the amount of the cash flow to stockholders?

Correct AnswerverifiedE

At the beginning of the year,the long-term debt of a firm was $72,918 and total debt was $138,407.At the end of the year,long-term debt was $68,219 and total debt was $145,838.The interest paid was $6,430.What is the amount of the cash flow to creditors?

Correct AnswerverifiedShow Answer

An increase in the depreciation expense will do which of the following? I.increase net income II.decrease net income III.increase the cash flow from assets IV.decrease the cash flow from assets

Correct AnswerverifiedShow Answer

The book value of a firm is:

Correct AnswerverifiedShow Answer

Bonner Collision has shareholders' equity of $141,800.The firm owes a total of $126,000 of which 60 percent is payable within the next year.The firm net fixed assets of $161,900.What is the amount of the net working capital?

Correct AnswerverifiedShow Answer

Which one of the following is true according to Generally Accepted Accounting Principles?

Correct AnswerverifiedShow Answer

Which one of the following is included in a firm's market value but yet is excluded from the firm's accounting value?

Correct AnswerverifiedB

Assume you are a credit manager in charge of approving commercial loans to business firms.Identify three aspects of a firm's cash flows you would review and explain the type of information you hope to gain from reviewing each of those five aspects.

Correct AnswerverifiedStudent answers will vary but here are s...View AnswerShow Answer

For a tax-paying firm,an increase in _____ will cause the cash flow from assets to increase.

Correct AnswerverifiedShow Answer

Which one of the following statements related to an income statement is correct?

Correct AnswerverifiedD

A firm has $520 in inventory,$1,860 in fixed assets,$190 in accounts receivables,$210 in accounts payable,and $70 in cash.What is the amount of the current assets?

Correct AnswerverifiedShow Answer

Which one of the following accounts is the most liquid?

Correct AnswerverifiedShow Answer

The common set of standards and procedures by which audited financial statements are prepared is known as the:

Correct AnswerverifiedShow Answer

A positive cash flow to stockholders indicates which one of the following with certainty?

Correct AnswerverifiedShow Answer

Which of the following is (are) included in the market value of a firm but are excluded from the firm's book value? I.value of management skills II.value of a copyright III.value of the firm's reputation IV.value of employee's experience

Correct AnswerverifiedShow Answer

Which one of the following statements related to an income statement is correct? Assume accrual accounting is used.

Correct AnswerverifiedShow Answer

Which of the following are included in current liabilities? I.note payable to a supplier in eight months II.amount due from a customer next month III.account payable to a supplier that is due next week IV.loan payable to the bank in fourteen months

Correct AnswerverifiedShow Answer

Which of the following are current assets? I.patent II.inventory III.accounts payable IV.cash

Correct AnswerverifiedShow Answer

Correct Answer
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Debt financing will require cash outflow...
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E

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B

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Student answers will vary but here are s...
View Answer

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D

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