Question 1

Noncash items refer to:

Accepted Answer

A)  sales which are made on a credit basis. 
B)  inventory items purchased using credit. 
C)  intangible assets such as patents. 
D)  expenses, like depreciation, which do not directly affect cash flows. 
E)  administrative expenses. 
A)  sales which are made on a credit basis. 
B)  inventory items purchased using credit. 
C)  intangible assets such as patents. 
D)  expenses, like depreciation, which do not directly affect cash flows. 
E)  administrative expenses. D

Question 2

JM Case Inc.has a market value of $5 million with 500,000 shares outstanding.The book value of its equity is $1,750,000.What is JM Case's price per share?

Accepted Answer

A)  $3.50 
B)  $5 
C)  $10 
D)  $25 
E)  $50
F) None of the above. 
A)  $3.50 
B)  $5 
C)  $10 
D)  $25 
E)  $50
F) None of the above. C

Question 3

Which of the following statements concerning a firm's cash flows and profits is false?

Accepted Answer

A)  Managers must be at least as concerned with cash flows as with profits. 
B)  A company that sells merchandise at a profit will generate cash soon enough to replenish cash flows required for continued production. 
C)  The cash flows generated in a given time period can differ from the profits reported. 
D)  Profits are no assurance that cash flow will be sufficient to maintain solvency. 
E)  Due to required cash investments in current assets, fast-growing and profitable companies can literally "grow broke". 
A)  Managers must be at least as concerned with cash flows as with profits. 
B)  A company that sells merchandise at a profit will generate cash soon enough to replenish cash flows required for continued production. 
C)  The cash flows generated in a given time period can differ from the profits reported. 
D)  Profits are no assurance that cash flow will be sufficient to maintain solvency. 
E)  Due to required cash investments in current assets, fast-growing and profitable companies can literally "grow broke". B

Question 4

Playdough Products earned net income of $400,000 in 2011.The firm increased its accounts receivable during the year by $250,000.The book value of its assets declined by the year's depreciation charge,which was $180,000,and the market value of its assets increased by $20,000.Based only on this information,how much cash did Playdough Products generate during the year?
 Please ignore taxes for this problem.

Accepted Answer

Playdough Products generated $330,000 of

Question 5

Which of the following tends to cause differences between market values and book values?
I.Accounting often creates a dichotomy between realized and unrealized income.
II.Accountants allocate goodwill when a firm is acquired for more than book value.
III.Many accounting values are transactions-based and hence backward-looking.
IV.The use of fair-value accounting.
V.Accountants refuse to assign a cost to equity capital.

Accepted Answer

A)  I and II only 
B)  I and III only 
C)  II and IV only 
D)  I, III, and IV only 
E)  I, III, and V only
F) I, III, IV, and V only 
A)  I and II only 
B)  I and III only 
C)  II and IV only 
D)  I, III, and IV only 
E)  I, III, and V only
F) I, III, IV, and V only

Question 6

The book value of Little Statistic's total assets is $400,000.Suppose Number Crunching Inc.acquires Little Statistic's assets for $1 million and finances the purchase by selling $600,000 in new stock,$300,000 in new debt,and reducing cash by $100,000.Describe how the acquisition affects Number Crunching's balance sheet.

Accepted Answer

First,let us account for Number Crunchin

Question 7

Assuming that there were no financing cash flows during 2011 and basing your answer solely on the information provided,what were the cash flows from operations (in $ millions)for 2011?

Accepted Answer

A)  45 
B)  106 
C)  15 
D)  76 
E)  31
F) None of the above. 
A)  45 
B)  106 
C)  15 
D)  76 
E)  31
F) None of the above.

Question 8

Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time?

Accepted Answer

A)  income statement 
B)  balance sheet 
C)  cash flow statement 
D)  sources and uses statement 
E)  market value statement 
A)  income statement 
B)  balance sheet 
C)  cash flow statement 
D)  sources and uses statement 
E)  market value statement

Question 9

Selected information about South, Inc., a restaurant chain, follows.
  
-During 2011,what was the cost of goods (in $ millions)produced by the company?

Accepted Answer

A)  223 
B)  194 
C)  252 
D)  228 
E)  218
F) None of the above. 
A)  223 
B)  194 
C)  252 
D)  228 
E)  218
F) None of the above.

Question 10

Which one of the following is the financial statement that shows a financial snapshot,taken at a point in time,of all the assets the company owns and all the claims against those assets?

Accepted Answer

A)  income statement 
B)  creditor's statement 
C)  balance sheet 
D)  cash flow statement 
E)  sources and uses statement 
A)  income statement 
B)  creditor's statement 
C)  balance sheet 
D)  cash flow statement 
E)  sources and uses statement

Question 11

During 2011,Lele Design earned net income of $250,000.The firm neither bought nor sold any capital assets.The book value of its assets declined by the year's depreciation charge of $200,000.The firm's operating cash flow for the year was $450,000.The market value of its assets increased by $300,000.What was Lele Design's economic income for the year?
 Why is this figure different from its accounting income?
 Please ignore taxes for this problem.

Accepted Answer

Lele Design generated economic income eq

Question 12

Which one of the following is a use of cash?

Accepted Answer

A)  increase in notes payable 
B)  increase in inventory 
C)  increase in long-term debt 
D)  decrease in accounts receivable 
E)  increase in common stock 
A)  increase in notes payable 
B)  increase in inventory 
C)  increase in long-term debt 
D)  decrease in accounts receivable 
E)  increase in common stock

Question 13

The sources and uses of cash over a stated period of time are reflected on the:

Accepted Answer

A)  income statement. 
B)  balance sheet. 
C)  shareholders' equity statement. 
D)  cash flow statement. 
E)  statement of operating position. 
A)  income statement. 
B)  balance sheet. 
C)  shareholders' equity statement. 
D)  cash flow statement. 
E)  statement of operating position.

Question 14

Which one of the following is the financial statement that summarizes changes in the company's cash balance over a period of time?

Accepted Answer

A)  income statement 
B)  balance sheet 
C)  cash flow statement 
D)  shareholders' equity statement 
E)  market value statement 
A)  income statement 
B)  balance sheet 
C)  cash flow statement 
D)  shareholders' equity statement 
E)  market value statement

Question 15

Which of the following statements concerning the cash flow production cycle is true?

Accepted Answer

A)  The profits reported in a given time period equal the cash flows generated. 
B)  A company's operations and finances are independent of each other. 
C)  Financial statements have nothing to do with reality. 
D)  The movement of cash to inventory, to accounts receivable, and back to cash is known as the firm's working capital cycle. 
E)  A profitable company will always have sufficient cash to meet its obligations. 
A)  The profits reported in a given time period equal the cash flows generated. 
B)  A company's operations and finances are independent of each other. 
C)  Financial statements have nothing to do with reality. 
D)  The movement of cash to inventory, to accounts receivable, and back to cash is known as the firm's working capital cycle. 
E)  A profitable company will always have sufficient cash to meet its obligations.

Question 16

Assuming the company neither sold nor salvaged any assets during the year,what were the company's capital expenditures during 2011?

Accepted Answer

A)  482 
B)  78 
C)  421 
D)  61 
E)  139
F) None of the above. 
A)  482 
B)  78 
C)  421 
D)  61 
E)  139
F) None of the above.

Question 17

JM Case Inc.has a market value of $5 million with 500,000 shares outstanding.The book value of its equity is $1,750,000.If the company repurchases 20 percent of its shares in the stock market and there are no taxes or transactions costs and all else remains the same,what should the market value of the firm be after the repurchase?

Accepted Answer

A)  $1,000,000 
B)  $1,750,000 
C)  $3,250,000 
D)  $4,000,000 
E)  $5,000,000
F) None of the above. 
A)  $1,000,000 
B)  $1,750,000 
C)  $3,250,000 
D)  $4,000,000 
E)  $5,000,000
F) None of the above.

Question 18

Selected information about South, Inc., a restaurant chain, follows.
  
-During 2011,how much cash (in $ millions)did South collect from sales?

Accepted Answer

A)  364 
B)  277 
C)  404 
D)  324 
E)  451
F) None of the above. 
A)  364 
B)  277 
C)  404 
D)  324 
E)  451
F) None of the above.

Question 19

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. 
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.

Question 20

Which one of the following is a source of cash?

Accepted Answer

A)  increase in accounts receivable 
B)  decrease in notes payable 
C)  decrease in common stock 
D)  increase in inventory 
E)  increase in accounts payable 
A)  increase in accounts receivable 
B)  decrease in notes payable 
C)  decrease in common stock 
D)  increase in inventory 
E)  increase in accounts payable

Noncash items refer to:

JM Case Inc.has a market value of $5 million with 500,000 shares outstanding.The book value of its equity is $1,750,000.What is JM Case's price per share?

Which of the following statements concerning a firm's cash flows and profits is false?

Assuming that there were no financing cash flows during 2011 and basing your answer solely on the information provided,what were the cash flows from operations (in $ millions)for 2011?

Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time?

Selected information about South, Inc., a restaurant chain, follows. -During 2011,what was the cost of goods (in $ millions)produced by the company?

Which one of the following is the financial statement that shows a financial snapshot,taken at a point in time,of all the assets the company owns and all the claims against those assets?

Which one of the following is a use of cash?

The sources and uses of cash over a stated period of time are reflected on the:

Which one of the following is the financial statement that summarizes changes in the company's cash balance over a period of time?

Which of the following statements concerning the cash flow production cycle is true?

Assuming the company neither sold nor salvaged any assets during the year,what were the company's capital expenditures during 2011?

Selected information about South, Inc., a restaurant chain, follows. -During 2011,how much cash (in $ millions)did South collect from sales?

The book value of a firm is:

Which one of the following is a source of cash?

Evaluating Financial Performance

Financial Forecasting

Managing Growth

Financial Instruments and Markets

The Financing Decision

Discounted Cash Flow Techniques

Risk Analysis in Investment Decisions

Business Valuation and Corporate Restructuring

Filters

Exam 1: Interpreting Financial Statements

Noncash items refer to:

JM Case Inc.has a market value of $5 million with 500,000 shares outstanding.The book value of its equity is $1,750,000.What is JM Case's price per share?

Which of the following statements concerning a firm's cash flows and profits is false?

Assuming that there were no financing cash flows during 2011 and basing your answer solely on the information provided,what were the cash flows from operations (in $ millions)for 2011?

Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time?

Selected information about South, Inc., a restaurant chain, follows. -During 2011,what was the cost of goods (in $ millions)produced by the company?

Which one of the following is the financial statement that shows a financial snapshot,taken at a point in time,of all the assets the company owns and all the claims against those assets?

Which one of the following is a use of cash?

The sources and uses of cash over a stated period of time are reflected on the:

Which one of the following is the financial statement that summarizes changes in the company's cash balance over a period of time?

Which of the following statements concerning the cash flow production cycle is true?

Assuming the company neither sold nor salvaged any assets during the year,what were the company's capital expenditures during 2011?

Selected information about South, Inc., a restaurant chain, follows. -During 2011,how much cash (in $ millions)did South collect from sales?

The book value of a firm is:

Which one of the following is a source of cash?

Evaluating Financial Performance

Financial Forecasting

Managing Growth

Financial Instruments and Markets

The Financing Decision

Discounted Cash Flow Techniques

Risk Analysis in Investment Decisions

Business Valuation and Corporate Restructuring

Filters