Question 1

An income statement reports the firm's revenues and expenses for a specific period of time such as one year.

Accepted Answer

A) True 
 B)False

Question 2

The retained earnings balance on IBM's balance sheet at the end of 2010 is equal to IBM's 2010 net income minus dividends paid in 2010.

Accepted Answer

A) True 
 B)False

Question 3

Generally accepted accounting principles (GAAP)require finance statements prepared on a cash basis because these statements are most useful for investors and managers.

Accepted Answer

A) True 
 B)False

Question 4

Corporation A decides to borrow $1,000,000 and use the money to buy back $1,000,000 of its common stock.The corporation pays 6% interest on its borrowed funds which exactly equals the amount of the dividend it used to pay on the common stock it repurchased.Therefore,

Accepted Answer

A)  Corporation A's operating income will decrease due to higher interest expense. 
B)  Corporation A's net income will increase due to the tax deductibility of interest expense. 
C)  Corporation A will have no change in its operating income since the interest expense exactly offsets the prior dividend payment. 
D)  Corporation A's gross profit will decrease. 
A)  Corporation A's operating income will decrease due to higher interest expense. 
B)  Corporation A's net income will increase due to the tax deductibility of interest expense. 
C)  Corporation A will have no change in its operating income since the interest expense exactly offsets the prior dividend payment. 
D)  Corporation A's gross profit will decrease.

Question 5

Please refer to Table 3-2 for the following questions.
Table 3-2
Enigma has the following financial information:
   
No changes were made in interest payable or taxes payable.
-Table 3-3
Marlett Company
Financial Information
   
Based on the information in Table 3-3,prepare a statement of cash flows for 2010.Assume that there were no changes in any other asset or liability accounts,and that the ending cash balance for 2009 was $100.

Accepted Answer

The answer of Please refer to Table 3-2 for the...

Question 6

According to accrual accounting,revenues are recognized when earned and expenses are recognized when incurred.

Accepted Answer

A) True 
 B)False

Question 7

The A corporation has an operating profit margin of 20%,operating expenses of $500,000,and financing costs of $15,000.Therefore,

Accepted Answer

A)  the corporation's gross profit margin is less than 20%. 
B)  the corporation's net profit margin is greater than 20%. 
C)  the corporation's gross profit margin is greater than 20%. 
D)  the corporation's gross profit margin is equal to 20% because gross profit is not affected by operating expenses or financing costs. 
A)  the corporation's gross profit margin is less than 20%. 
B)  the corporation's net profit margin is greater than 20%. 
C)  the corporation's gross profit margin is greater than 20%. 
D)  the corporation's gross profit margin is equal to 20% because gross profit is not affected by operating expenses or financing costs.

Question 8

California Retailing Inc.has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000.The firm's interest expense is $250,000,and the corporate tax rate is 40%.What is California Retailing's net income?

Accepted Answer

A)  $288,000 
B)  $350,000 
C)  $377,000 
D)  $390,000 
A)  $288,000 
B)  $350,000 
C)  $377,000 
D)  $390,000

Question 9

Earnings before taxes,or taxable income,is equal to operating income minus financing costs.

Accepted Answer

A) True 
 B)False

Question 10

Prepare an income statement using the information given below.Make sure to identify gross profit,operating income,and net income.

Accepted Answer

The answer of Prepare an income statement using the information...

Question 11

Please refer to Table 3-1 for the following questions.
Table 3-1
Jones Company
Financial Information
  
-Based on the information in Table 3-1,calculate the after-tax cash flow from operations for 2008 (no assets were disposed of during the year,and there was no change in interest payable or taxes payable).

Accepted Answer

A)  $4,300 
B)  $1,450 
C)  $5,500 
D)  $6,250 
A)  $4,300 
B)  $1,450 
C)  $5,500 
D)  $6,250

Question 12

Which of the following accounts does NOT belong in the liability section of a balance sheet?

Accepted Answer

A)  accruals 
B)  short-term debt 
C)  additional paid-in capital 
D)  long-term debt 
A)  accruals 
B)  short-term debt 
C)  additional paid-in capital 
D)  long-term debt

Question 13

Changes in depreciation expense do not affect operating income because depreciation is a non-cash expense.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following accounts does NOT belong in the equity section of a balance sheet?

Accepted Answer

A)  retained earnings 
B)  paid-in-surplus 
C)  long-term debt 
D)  preferred stock 
A)  retained earnings 
B)  paid-in-surplus 
C)  long-term debt 
D)  preferred stock

Question 15

A company borrows $2,000,000 and uses the money to purchase high technology machinery for its operations.These are examples of

Accepted Answer

A)  cash flow from financing and cash flow from operations. 
B)  cash flow from investing and cash flow from operations. 
C)  cash flow from financing and cash flow from investing. 
D)  cash flow from investing and cash flow from financing. 
A)  cash flow from financing and cash flow from operations. 
B)  cash flow from investing and cash flow from operations. 
C)  cash flow from financing and cash flow from investing. 
D)  cash flow from investing and cash flow from financing.

Question 16

Given the following financial statements for ARGON Corporation,what is the company's after-tax cash flow from operations?

Accepted Answer

A)  $10,000 
B)  $270,000 
C)  $120,000 
D)  $295,000 
A)  $10,000 
B)  $270,000 
C)  $120,000 
D)  $295,000

Question 17

Please refer to Table 3-1 for the following questions.
Table 3-1
Jones Company
Financial Information
  
-Based on the information in Table 3-1,the change in cash for 2010 is

Accepted Answer

A)  $4,000. 
B)  $4,950. 
C)  $5,800. 
D)  $5,500. 
A)  $4,000. 
B)  $4,950. 
C)  $5,800. 
D)  $5,500.

Question 18

International Financial Reporting Standards (IFRS)is a set of principle-based accounting standards that were established by the International Accounting Standards Board (IASB).

Accepted Answer

A) True 
 B)False

Question 19

The basic format of an income statement is

Accepted Answer

A)  Sales - Expenses = Profits. 
B)  Income - Expenses = EBIT. 
C)  Sales - Liabilities = Profits. 
D)  Assets - Liabilities = Profits. 
A)  Sales - Expenses = Profits. 
B)  Income - Expenses = EBIT. 
C)  Sales - Liabilities = Profits. 
D)  Assets - Liabilities = Profits.

Question 20

Under current accounting rules,the plant and equipment account shows the historical cost (purchase price)of,plus any subsequent improvements to,the plant and equipment.

Accepted Answer

A) True 
 B)False

An income statement reports the firm's revenues and expenses for a specific period of time such as one year.

The retained earnings balance on IBM's balance sheet at the end of 2010 is equal to IBM's 2010 net income minus dividends paid in 2010.

Generally accepted accounting principles (GAAP)require finance statements prepared on a cash basis because these statements are most useful for investors and managers.

Corporation A decides to borrow $1,000,000 and use the money to buy back $1,000,000 of its common stock.The corporation pays 6% interest on its borrowed funds which exactly equals the amount of the dividend it used to pay on the common stock it repurchased.Therefore,

According to accrual accounting,revenues are recognized when earned and expenses are recognized when incurred.

The A corporation has an operating profit margin of 20%,operating expenses of $500,000,and financing costs of $15,000.Therefore,

California Retailing Inc.has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000.The firm's interest expense is $250,000,and the corporate tax rate is 40%.What is California Retailing's net income?

Earnings before taxes,or taxable income,is equal to operating income minus financing costs.

Prepare an income statement using the information given below.Make sure to identify gross profit,operating income,and net income.

Which of the following accounts does NOT belong in the liability section of a balance sheet?

Changes in depreciation expense do not affect operating income because depreciation is a non-cash expense.

Which of the following accounts does NOT belong in the equity section of a balance sheet?

A company borrows $2,000,000 and uses the money to purchase high technology machinery for its operations.These are examples of

Given the following financial statements for ARGON Corporation,what is the company's after-tax cash flow from operations?

Please refer to Table 3-1 for the following questions. Table 3-1 Jones Company Financial Information -Based on the information in Table 3-1,the change in cash for 2010 is

International Financial Reporting Standards (IFRS)is a set of principle-based accounting standards that were established by the International Accounting Standards Board (IASB).

The basic format of an income statement is

Under current accounting rules,the plant and equipment account shows the historical cost (purchase price)of,plus any subsequent improvements to,the plant and equipment.

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

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Exam 3: Understanding Financial Statements and Cash Flows

An income statement reports the firm's revenues and expenses for a specific period of time such as one year.

The retained earnings balance on IBM's balance sheet at the end of 2010 is equal to IBM's 2010 net income minus dividends paid in 2010.

Generally accepted accounting principles (GAAP)require finance statements prepared on a cash basis because these statements are most useful for investors and managers.

Corporation A decides to borrow $1,000,000 and use the money to buy back $1,000,000 of its common stock.The corporation pays 6% interest on its borrowed funds which exactly equals the amount of the dividend it used to pay on the common stock it repurchased.Therefore,

According to accrual accounting,revenues are recognized when earned and expenses are recognized when incurred.

The A corporation has an operating profit margin of 20%,operating expenses of $500,000,and financing costs of $15,000.Therefore,

California Retailing Inc.has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000.The firm's interest expense is $250,000,and the corporate tax rate is 40%.What is California Retailing's net income?

Earnings before taxes,or taxable income,is equal to operating income minus financing costs.

Prepare an income statement using the information given below.Make sure to identify gross profit,operating income,and net income.

Which of the following accounts does NOT belong in the liability section of a balance sheet?

Changes in depreciation expense do not affect operating income because depreciation is a non-cash expense.

Which of the following accounts does NOT belong in the equity section of a balance sheet?

A company borrows $2,000,000 and uses the money to purchase high technology machinery for its operations.These are examples of

Given the following financial statements for ARGON Corporation,what is the company's after-tax cash flow from operations?

Please refer to Table 3-1 for the following questions. Table 3-1 Jones Company Financial Information -Based on the information in Table 3-1,the change in cash for 2010 is

International Financial Reporting Standards (IFRS)is a set of principle-based accounting standards that were established by the International Accounting Standards Board (IASB).

The basic format of an income statement is

Under current accounting rules,the plant and equipment account shows the historical cost (purchase price)of,plus any subsequent improvements to,the plant and equipment.

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

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