Question 1

Inc.has the following income statement.How much net operating profit after taxes (NOPAT) does the firm have?

Accepted Answer

A) $370.60 
B) $390.11 
C) $410.64 
D) $432.25 
E) $455.00 
A) $370.60 
B) $390.11 
C) $410.64 
D) $432.25 
E) $455.00

Question 2

Interest paid by a corporation is a tax deduction for the paying corporation, but dividends paid are not deductible.This treatment, other things held constant, tends to encourage the use of debt financing by corporations.

Accepted Answer

A) True 
 B)False

Question 3

Inc.reported $12,500 of sales and $7,025 of operating costs The company had $18,750 of investor-supplied operating assets (or capital), the weighted average cost of that capital (the WACC) was 9.5%, and the federal-plus-state income tax rate was 40%.What was HHH's Economic Value Added (EVA), i.e., how much value did management add to stockholders' wealth during the year?

Accepted Answer

A) $1,357.13 
B) $1,428.56 
C) $1,503.75 
D) $1,578.94 
E) $1,657.88 
A) $1,357.13 
B) $1,428.56 
C) $1,503.75 
D) $1,578.94 
E) $1,657.88

Question 4

Assets other than cash are expected to produce cash over time, but the amount of cash they eventually produce could be higher or lower than the values at which these assets are carried on the books.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is CORRECT?

Accepted Answer

A) The primary difference between EVA and accounting net income is that when net income is calculated, a deduction is made to account for the cost of common equity, whereas EVA represents net income before deducting the cost of the equity capital the firm uses. 
B) MVA gives us an idea about how much value a firm's management has added during the last year. 
C) MVA stands for market value added, and it is defined as follows: MVA = (Shares outstanding)(Stock price) + Book value of common equity. 
D) EVA stands for economic value added, and it is defined as follows: EVA = EBIT(1-T) - (Investor-supplied op.capital) x (A-T cost of capital). 
E) EVA gives us an idea about how much value a firm's management has added over the firm's life. 
A) The primary difference between EVA and accounting net income is that when net income is calculated, a deduction is made to account for the cost of common equity, whereas EVA represents net income before deducting the cost of the equity capital the firm uses. 
B) MVA gives us an idea about how much value a firm's management has added during the last year. 
C) MVA stands for market value added, and it is defined as follows: MVA = (Shares outstanding)(Stock price) + Book value of common equity. 
D) EVA stands for economic value added, and it is defined as follows: EVA = EBIT(1-T) - (Investor-supplied op.capital) x (A-T cost of capital). 
E) EVA gives us an idea about how much value a firm's management has added over the firm's life.

Question 6

income statement shows the difference between a firm's income and its costs--i.e., its profits--during a specified period of time.However, not all reported income comes in the form or cash, and reported costs likewise may not correctly reflect cash outlays.Therefore, there may be a substantial difference between a firm's reported profits and its actual cash flow for the same period.

Accepted Answer

A) True 
 B)False

Question 7

Swinnerton Clothing Company's balance sheet showed total current assets of $2,250, all of which were required in operations.Its current liabilities consisted of $575 of accounts payable, $300 of 6% short-term notes payable to the bank, and $145 of accrued wages and taxes.What was its net operating working capital that was financed by investors?

Accepted Answer

A) $1,454 
B) $1,530 
C) $1,607 
D) $1,687 
E) $1,771 
A) $1,454 
B) $1,530 
C) $1,607 
D) $1,687 
E) $1,771

Question 8

Which of the following factors could explain why Dellva Energy had a negative net cash flow last year, even though the cash on its balance sheet increased?

Accepted Answer

A) The company sold a new issue of bonds. 
B) The company made a large investment in new plant and equipment. 
C) The company paid a large dividend. 
D) The company had high amortization expenses. 
E) The company repurchased 20% of its common stock. 
A) The company sold a new issue of bonds. 
B) The company made a large investment in new plant and equipment. 
C) The company paid a large dividend. 
D) The company had high amortization expenses. 
E) The company repurchased 20% of its common stock.

Question 9

Other things held constant, which of the following actions would increase the amount of cash on a company's balance sheet?

Accepted Answer

A) The company repurchases common stock. 
B) The company pays a dividend. 
C) The company issues new common stock. 
D) The company gives customers more time to pay their bills. 
E) The company purchases a new piece of equipment. 
A) The company repurchases common stock. 
B) The company pays a dividend. 
C) The company issues new common stock. 
D) The company gives customers more time to pay their bills. 
E) The company purchases a new piece of equipment.

Question 10

Tibbs Inc.had the following data for the year ending 12/31/07: Net income = $300; Net operating profit after taxes (NOPAT) = $400; Total assets = $2,500; Short-term investments = $200; Stockholders' equity = $1,800; Total debt = $700; and Total operating capital = $2,300.What was its return on invested capital (ROIC)?

Accepted Answer

A) 14.91% 
B) 15.70% 
C) 16.52% 
D) 17.39% 
E) 18.26% 
A) 14.91% 
B) 15.70% 
C) 16.52% 
D) 17.39% 
E) 18.26%

Question 11

Which of the following statements is CORRECT?

Accepted Answer

A) The income of certain small corporations that qualify under the Tax Code is completely exempt from corporate income taxes.Thus, the federal government receives no tax revenue from these businesses. 
B) All businesses, regardless of their legal form of organization, are taxed under the Business Tax Provisions of the Internal Revenue Code. 
C) Small businesses that qualify under the Tax Code can elect not to pay corporate taxes, but then their owners must report their pro rata shares of the firm's income as personal income and pay taxes on that income. 
D) Congress recently changed the tax laws to make dividend income received by individuals exempt from income taxes.Prior to the enactment of that law, corporate income was subject to double taxation, where the firm was first taxed on the income and stockholders were taxed again on the income when it was paid to them as dividends. 
E) All corporations other than non-profit corporations are subject to corporate income taxes, which are 15% for the lowest amounts of income and 35% for the highest amounts of income. 
A) The income of certain small corporations that qualify under the Tax Code is completely exempt from corporate income taxes.Thus, the federal government receives no tax revenue from these businesses. 
B) All businesses, regardless of their legal form of organization, are taxed under the Business Tax Provisions of the Internal Revenue Code. 
C) Small businesses that qualify under the Tax Code can elect not to pay corporate taxes, but then their owners must report their pro rata shares of the firm's income as personal income and pay taxes on that income. 
D) Congress recently changed the tax laws to make dividend income received by individuals exempt from income taxes.Prior to the enactment of that law, corporate income was subject to double taxation, where the firm was first taxed on the income and stockholders were taxed again on the income when it was paid to them as dividends. 
E) All corporations other than non-profit corporations are subject to corporate income taxes, which are 15% for the lowest amounts of income and 35% for the highest amounts of income.

Question 12

Which of the following items cannot be found on a firm's balance sheet under current liabilities?

Accepted Answer

A) Accounts payable. 
B) Short-term notes payable to the bank. 
C) Accrued wages. 
D) Cost of goods sold. 
E) Accrued payroll taxes. 
A) Accounts payable. 
B) Short-term notes payable to the bank. 
C) Accrued wages. 
D) Cost of goods sold. 
E) Accrued payroll taxes.

Question 13

Which of the following statements is CORRECT?

Accepted Answer

A) The four most important financial statements provided in the annual report are the balance sheet, income statement, cash budget, and the statement of stockholders' equity. 
B) The balance sheet gives us a picture of the firm's financial position at a point in time. 
C) The income statement gives us a picture of the firm's financial position at a point in time. 
D) The statement of cash flows tells us how much cash the firm has in the form of currency and demand deposits. 
E) The statement of cash needs tells us how much cash the firm will require during some future period, generally a month or a year. 
A) The four most important financial statements provided in the annual report are the balance sheet, income statement, cash budget, and the statement of stockholders' equity. 
B) The balance sheet gives us a picture of the firm's financial position at a point in time. 
C) The income statement gives us a picture of the firm's financial position at a point in time. 
D) The statement of cash flows tells us how much cash the firm has in the form of currency and demand deposits. 
E) The statement of cash needs tells us how much cash the firm will require during some future period, generally a month or a year.

Question 14

Inc.recently reported net income of $4,750 and depreciation of $885.How much was its net cash flow, assuming it had no amortization expense and sold none of its fixed assets.

Accepted Answer

A) $4,831.31 
B) $5,085.59 
C) $5,353.25 
D) $5,635.00 
E) $5,916.75 
A) $4,831.31 
B) $5,085.59 
C) $5,353.25 
D) $5,635.00 
E) $5,916.75

Question 15

managerial purposes, i.e., making decisions regarding the firm's operations, the standard financial statements as prepared by accountants under Generally Accepted Accounting Principles (GAAP) are often modified and used to create alternative data and metrics that provide a somewhat different picture of a firm's operations.Related to these modifications, which of the following statements is CORRECT?

Accepted Answer

A) The standard statements make adjustments to reflect the effects of inflation on asset values, and these adjustments are normally carried into any adjustment that managers make to the standard statements. 
B) The standard statements focus on accounting income for the entire corporation, not cash flows, and the two can be quite different during any given accounting period.However, for valuation purposes we need to discount cash flows, not accounting income.Moreover, since many firms have a number of separate divisions, and since division managers should be compensated on their divisions' performance, not that of the entire firm, information that focuses on the divisions is needed.These factors have led to the development of information that is focused on cash flows and the operations of individual units. 
C) The standard statements provide useful information on the firm's individual operating units, but management needs more information on the firm's overall operations than the standard statements provide. 
D) The standard statements focus on cash flows, but managers are less concerned with cash flows than with accounting income as defined by GAAP. 
E) The best feature of standard statements is that, if they are prepared under GAAP, the data are always consistent from firm to firm.Thus, under GAAP, there is no room for accountants to "adjust" the results to make earnings look better. 
A) The standard statements make adjustments to reflect the effects of inflation on asset values, and these adjustments are normally carried into any adjustment that managers make to the standard statements. 
B) The standard statements focus on accounting income for the entire corporation, not cash flows, and the two can be quite different during any given accounting period.However, for valuation purposes we need to discount cash flows, not accounting income.Moreover, since many firms have a number of separate divisions, and since division managers should be compensated on their divisions' performance, not that of the entire firm, information that focuses on the divisions is needed.These factors have led to the development of information that is focused on cash flows and the operations of individual units. 
C) The standard statements provide useful information on the firm's individual operating units, but management needs more information on the firm's overall operations than the standard statements provide. 
D) The standard statements focus on cash flows, but managers are less concerned with cash flows than with accounting income as defined by GAAP. 
E) The best feature of standard statements is that, if they are prepared under GAAP, the data are always consistent from firm to firm.Thus, under GAAP, there is no room for accountants to "adjust" the results to make earnings look better.

Inc.has the following income statement.How much net operating profit after taxes (NOPAT) does the firm have?

Interest paid by a corporation is a tax deduction for the paying corporation, but dividends paid are not deductible.This treatment, other things held constant, tends to encourage the use of debt financing by corporations.

Assets other than cash are expected to produce cash over time, but the amount of cash they eventually produce could be higher or lower than the values at which these assets are carried on the books.

Which of the following statements is CORRECT?

Which of the following factors could explain why Dellva Energy had a negative net cash flow last year, even though the cash on its balance sheet increased?

Other things held constant, which of the following actions would increase the amount of cash on a company's balance sheet?

Which of the following statements is CORRECT?

Which of the following items cannot be found on a firm's balance sheet under current liabilities?

Which of the following statements is CORRECT?

Inc.recently reported net income of $4,750 and depreciation of $885.How much was its net cash flow, assuming it had no amortization expense and sold none of its fixed assets.

Overview

Financial Analysis

Time Value of Money

Bonds

Risk and Return

Stocks

Financial Options

Cost of Capital

Capital Budgeting

Cash Flow and Risk

Forecasting

Valuation, Governanc

Dividends

CAP Structure

Working Capital

Multinational

Filters

Exam 2: Statements, CF, Taxes

Inc.has the following income statement.How much net operating profit after taxes (NOPAT) does the firm have?

Interest paid by a corporation is a tax deduction for the paying corporation, but dividends paid are not deductible.This treatment, other things held constant, tends to encourage the use of debt financing by corporations.

Assets other than cash are expected to produce cash over time, but the amount of cash they eventually produce could be higher or lower than the values at which these assets are carried on the books.

Which of the following statements is CORRECT?

Which of the following factors could explain why Dellva Energy had a negative net cash flow last year, even though the cash on its balance sheet increased?

Other things held constant, which of the following actions would increase the amount of cash on a company's balance sheet?

Which of the following statements is CORRECT?

Which of the following items cannot be found on a firm's balance sheet under current liabilities?

Which of the following statements is CORRECT?

Inc.recently reported net income of $4,750 and depreciation of $885.How much was its net cash flow, assuming it had no amortization expense and sold none of its fixed assets.

Overview

Financial Analysis

Time Value of Money

Bonds

Risk and Return

Stocks

Financial Options

Cost of Capital

Capital Budgeting

Cash Flow and Risk

Forecasting

Valuation, Governanc

Dividends

CAP Structure

Working Capital

Multinational

Filters