Question 1

_____ refers to the changes in net capital assets.

Accepted Answer

A) Operating cash ﬂow 
B) Cash ﬂow from investing 
C) Net working capital 
D) Cash ﬂow from assets 
E) Cash ﬂow to creditors 
A) Operating cash ﬂow 
B) Cash ﬂow from investing 
C) Net working capital 
D) Cash ﬂow from assets 
E) Cash ﬂow to creditors

Question 2

At the end of the year, current liabilities of a ﬁrm is €280, current assets is €340 and the inventory is €110.What is the ﬁrms Current and Quick ratios?

Accepted Answer

A) 1.214 and 0.8214 
B) 0.8235 and 0.5 
C) 0.3571 and 0.5294 
D) 1.214 and 0.5294 
E) 0.3571 and 0.8214 
A) 1.214 and 0.8214 
B) 0.8235 and 0.5 
C) 0.3571 and 0.5294 
D) 1.214 and 0.5294 
E) 0.3571 and 0.8214

Question 3

Given the tax rates as shown, what is the average tax rate for a ﬁrm with taxable income of €126,500? $$\begin{array} { | l | l | } 
\hline \text { Taxable Income } & \text { Tax Rate } \
\hline € 0 - 50,000 & 15 \% \
\hline 50,001 - 75,000 & 25 \% \
\hline 75,001 - 100,000 & 34 \% \
\hline 100,001 - 335,000 & 39 \% \
\hline
\end{array}$$

Accepted Answer

A) 21.38% 
B) 23.88% 
C) 25.76% 
D) 34.64% 
E) 39.00% 
A) 21.38% 
B) 23.88% 
C) 25.76% 
D) 34.64% 
E) 39.00%

Question 4

The tax rates are as shown.Your ﬁrm currently has taxable income of €79,400.How much additional tax will you owe if you increase your taxable income by €21,000? $$\begin{array} { | l | l | } 
\hline \text { Taxable Income } & \text { Tax Rate } \
\hline € 0 - 50,000 & 15 \% \
\hline 50,001 - 75,000 & 25 \% \
\hline 75,001 - 100,000 & 34 \% \
\hline 100,001 - 335,000 & 39 \% \
\hline
\end{array}$$

Accepted Answer

A) €7,004 
B) €7,014 
C) €7,140 
D) €7,160 
E) €7,174 
A) €7,004 
B) €7,014 
C) €7,140 
D) €7,160 
E) €7,174

Question 5

The Cash ratio is equal to:

Accepted Answer

A) Cash and cash equivalents divided by Current Liabilities. 
B) Cash and cash equivalents divided by Current Assets 
C) Operating cash ﬂow divided by Current Liabilities. 
D) Operating cash ﬂow divided by Net working capital. 
E) Net working capital divided by Current Liabilities. 
A) Cash and cash equivalents divided by Current Liabilities. 
B) Cash and cash equivalents divided by Current Assets 
C) Operating cash ﬂow divided by Current Liabilities. 
D) Operating cash ﬂow divided by Net working capital. 
E) Net working capital divided by Current Liabilities.

Question 6

Which equality is the basis for the statement of ﬁnancial position?

Accepted Answer

A) Non-current Assets = Shareholder's Equity + Current Assets 
B) Assets = Liabilities + Shareholder's Equity 
C) Assets = Current Non-current liabilities + Retained Earnings 
D) Non-current Assets = Liabilities + Shareholder's Equity 
E) None of the above. 
A) Non-current Assets = Shareholder's Equity + Current Assets 
B) Assets = Liabilities + Shareholder's Equity 
C) Assets = Current Non-current liabilities + Retained Earnings 
D) Non-current Assets = Liabilities + Shareholder's Equity 
E) None of the above.

Question 7

Which of the following statements concerning the income statement is true?

Accepted Answer

A) It measures performance over a speciﬁc period of time. 
B) It determines after-tax income of the ﬁrm. 
C) It includes deferred taxes. 
D) It treats interest as an expense. 
E) All of the above. 
A) It measures performance over a speciﬁc period of time. 
B) It determines after-tax income of the ﬁrm. 
C) It includes deferred taxes. 
D) It treats interest as an expense. 
E) All of the above.

Question 8

What is the net working capital for 2014?

Accepted Answer

A) €345 
B) €405 
C) €805 
D) €812 
E) €1,005 
A) €345 
B) €405 
C) €805 
D) €812 
E) €1,005

Question 9

Which of the following are all components of the statement of cash ﬂows?

Accepted Answer

A) Cash ﬂow from operating activities, cash ﬂow from investing activities, and cash ﬂow from ﬁnancing activities. 
B) Cash ﬂow from operating activities, cash ﬂow from investing activities, and cash ﬂow from divesting activities. 
C) Cash ﬂow from internal activities, cash ﬂow from external activities, and cash ﬂow from ﬁnancing activities. 
D) Cash ﬂow from brokering activities, cash ﬂow from proﬁtable activities, and cash ﬂow from non-proﬁtable
Activities. 
E) None of the above. 
A) Cash ﬂow from operating activities, cash ﬂow from investing activities, and cash ﬂow from ﬁnancing activities. 
B) Cash ﬂow from operating activities, cash ﬂow from investing activities, and cash ﬂow from divesting activities. 
C) Cash ﬂow from internal activities, cash ﬂow from external activities, and cash ﬂow from ﬁnancing activities. 
D) Cash ﬂow from brokering activities, cash ﬂow from proﬁtable activities, and cash ﬂow from non-proﬁtable
Activities. 
E) None of the above.

Question 10

Net capital spending is equal to:

Accepted Answer

A) net additions to net working capital. 
B) the net change in non-current assets plus depreciation for that year. 
C) net income plus depreciation. 
D) total cash ﬂow to shareholders less interest and dividends paid. 
E) the change in total assets. 
A) net additions to net working capital. 
B) the net change in non-current assets plus depreciation for that year. 
C) net income plus depreciation. 
D) total cash ﬂow to shareholders less interest and dividends paid. 
E) the change in total assets.

Question 11

Depreciation:

Accepted Answer

A) is a noncash expense that is recorded on the income statement. 
B) increases the net non-current assets as shown on the statement of ﬁnancial position. 
C) reduces both the net non-current assets and the costs of a ﬁrm. 
D) is a non-cash expense which increases the net operating income. 
E) decreases net non-current assets, net income, and operating cash ﬂows. 
A) is a noncash expense that is recorded on the income statement. 
B) increases the net non-current assets as shown on the statement of ﬁnancial position. 
C) reduces both the net non-current assets and the costs of a ﬁrm. 
D) is a non-cash expense which increases the net operating income. 
E) decreases net non-current assets, net income, and operating cash ﬂows.

Question 12

Cash ﬂows from ﬁnancing activities could include:

Accepted Answer

A) Sales of non-current assets. 
B) Buying back it's own shares.. 
C) Purchase of intangible assets. 
D) Purchase of property, plant and equipment. 
E) Cash generated from operations. 
A) Sales of non-current assets. 
B) Buying back it's own shares.. 
C) Purchase of intangible assets. 
D) Purchase of property, plant and equipment. 
E) Cash generated from operations.

Question 13

Your ﬁrm has net income of £198 on total sales of £1,200.Costs are £715 and depreciation is £145.The tax rate is 34%. The ﬁrm does not have interest expenses.What is the operating cash ﬂow?

Accepted Answer

A) £93 
B) £241 
C) £340 
D) £383 
E) £485 
A) £93 
B) £241 
C) £340 
D) £383 
E) £485

Question 14

What are the sales for 2014?

Accepted Answer

A) £4, 225 
B) £4, 385 
C) £4, 600 
D) £4, 815 
E) £5, 000 
A) £4, 225 
B) £4, 385 
C) £4, 600 
D) £4, 815 
E) £5, 000

Question 15

Which of the following is not included in the computation of operating cash ﬂow?

Accepted Answer

A) Earnings before interest and taxes. 
B) Interest paid. 
C) Depreciation. 
D) Current taxes. 
E) All of the above are included. 
A) Earnings before interest and taxes. 
B) Interest paid. 
C) Depreciation. 
D) Current taxes. 
E) All of the above are included.

Question 16

Free cash ﬂow is:

Accepted Answer

A) without cost to the ﬁrm. 
B) net income plus taxes. 
C) an increase in net working capital. 
D) cash that the ﬁrm is free to distribute to creditors and shareholders. 
E) None of the above. 
A) without cost to the ﬁrm. 
B) net income plus taxes. 
C) an increase in net working capital. 
D) cash that the ﬁrm is free to distribute to creditors and shareholders. 
E) None of the above.

Question 17

Note that we added depreciation back to operating cash ﬂow and to additions to non-current assets.Why add it back twice? Isn't this double-counting?

Accepted Answer

In both cases, depreciation is added bac

Question 18

Operating cash ﬂow must be positive when:

Accepted Answer

A) capital spending exceeds any tax payments due. 
B) the cash ﬂow generated by business activities exceeds any tax payments due. 
C) changes in net working capital exceeds the cash ﬂow generated by business activities. 
D) the cash ﬂows generated by investing activities exceeds the cash ﬂows generated by ﬁnancing activities. 
E) the cash ﬂows generated by ﬁnancing activities exceeds any tax payments due. 
A) capital spending exceeds any tax payments due. 
B) the cash ﬂow generated by business activities exceeds any tax payments due. 
C) changes in net working capital exceeds the cash ﬂow generated by business activities. 
D) the cash ﬂows generated by investing activities exceeds the cash ﬂows generated by ﬁnancing activities. 
E) the cash ﬂows generated by ﬁnancing activities exceeds any tax payments due.

Question 19

The non-current liabilities of a ﬁrm are liabilities:

Accepted Answer

A) that come due within the next 12 months. 
B) that do not come due for at least 12 months. 
C) owed to the ﬁrm's suppliers. 
D) owed to the ﬁrm's shareholders. 
E) the ﬁrm expects to incur within the next 12 months. 
A) that come due within the next 12 months. 
B) that do not come due for at least 12 months. 
C) owed to the ﬁrm's suppliers. 
D) owed to the ﬁrm's shareholders. 
E) the ﬁrm expects to incur within the next 12 months.

Question 20

When making ﬁnancial decisions related to assets, you should:

Accepted Answer

A) always consider market values. 
B) place more emphasis on book values than on market values. 
C) rely primarily on the value of assets as shown on the statement of ﬁnancial position. 
D) place primary emphasis on historical costs. 
E) only consider market values if they are less than book values. 
A) always consider market values. 
B) place more emphasis on book values than on market values. 
C) rely primarily on the value of assets as shown on the statement of ﬁnancial position. 
D) place primary emphasis on historical costs. 
E) only consider market values if they are less than book values.

Exam 3: Financial Statement Analysis

_____ refers to the changes in net capital assets.

At the end of the year, current liabilities of a ﬁrm is €280, current assets is €340 and the inventory is €110.What is the ﬁrms Current and Quick ratios?

Given the tax rates as shown, what is the average tax rate for a ﬁrm with taxable income of €126,500? Taxable Income Tax Rate 0-50,000 15\% 50,001-75,000 25\% 75,001-100,000 34\% 100,001-335,000 39\%

The tax rates are as shown.Your ﬁrm currently has taxable income of €79,400.How much additional tax will you owe if you increase your taxable income by €21,000? Taxable Income Tax Rate 0-50,000 15\% 50,001-75,000 25\% 75,001-100,000 34\% 100,001-335,000 39\%

The Cash ratio is equal to:

Which equality is the basis for the statement of ﬁnancial position?

Which of the following statements concerning the income statement is true?

What is the net working capital for 2014?

Which of the following are all components of the statement of cash ﬂows?

Net capital spending is equal to:

Depreciation:

Cash ﬂows from ﬁnancing activities could include:

Your ﬁrm has net income of £198 on total sales of £1,200.Costs are £715 and depreciation is £145.The tax rate is 34%. The ﬁrm does not have interest expenses.What is the operating cash ﬂow?

What are the sales for 2014?

Which of the following is not included in the computation of operating cash ﬂow?

Free cash ﬂow is:

Note that we added depreciation back to operating cash ﬂow and to additions to non-current assets.Why add it back twice? Isn't this double-counting?

Operating cash ﬂow must be positive when:

The non-current liabilities of a ﬁrm are liabilities:

When making ﬁnancial decisions related to assets, you should:

Introduction to Corporate Finance

Corporate Governance

Discounted Cash Flow Valuation

Bond, Equity and Firm Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options and Capital Budgeting

Risk and Return: Lessons From Market History

Risk and Return: the Capital Asset Pricing Model

Factor Models and the Arbitrage Pricing Theory

Risk, Cost of Capital and Capital Budgeting

Efficient Capital Markets and Behavioural Finance

Long-Term Financing: an Introduction

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividends and Other Payouts

Equity Financing

Debt Financing

Leasing

Options and Corporate Finance

Options and Corporate Finance: Extensions and Applications

Warrants and Convertibles

Financial Risk Management With Derivatives

Short-Term Finance and Planning

Short-Term Capital Management

Mergers and Acquisitions

Financial Distress

International Corporate Finance

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