Question 1

Which of the following is NOT true about treasury stock?

Accepted Answer

A)  It is a firm's own shares repurchased in the market by the firm. 
B)  It can be reissued under stock option and other employee benefit plans. 
C)  It lowers the value of the company. 
D)  It increases the net worth of the company. 
A)  It is a firm's own shares repurchased in the market by the firm. 
B)  It can be reissued under stock option and other employee benefit plans. 
C)  It lowers the value of the company. 
D)  It increases the net worth of the company. C

Question 2

The going concern assumption states that a business will be shutting down its operation in the near future.

Accepted Answer

A) True 
 B)False  False

Question 3

What is the firm's cash flow from financing activities?

Accepted Answer

A)  -$66,405 
B)  $61,656 
C)  -$61,656 
D)  −$182,057 
A)  -$66,405 
B)  $61,656 
C)  -$61,656 
D)  −$182,057 D

Question 4

Cash flows from operations are the net cash flows that support a firm's principal business activities.

Accepted Answer

A) True 
 B)False

Question 5

Simplex Healthcare had net income of $5,411,623 after paying taxes at 34 percent. The firm had revenues of $20,433,770.Its interest expense for the year was $1,122,376, while depreciation expense was $2,079,112. What was the firm's operating expenses excluding depreciation? Round your intermediate calculations and final answer to the nearest dollar.

Accepted Answer

A)  $8,199,429 
B)  $9,032,853 
C)  $9,321,805 
D)  None of the above 
A)  $8,199,429 
B)  $9,032,853 
C)  $9,321,805 
D)  None of the above

Question 6

Which of the following best represents cash flows to investors?

Accepted Answer

A)  Cash flow from operating activity, plus cash flow generated from net working capital 
B)  Earnings before interest and taxes times 1 minus the firm's tax rate 
C)  Net income minus dividends paid to preferred stockholders. 
D)  Cash flow from operating activity minus cash flow invested in net working capital minus cash flow invested in long-term assets. 
A)  Cash flow from operating activity, plus cash flow generated from net working capital 
B)  Earnings before interest and taxes times 1 minus the firm's tax rate 
C)  Net income minus dividends paid to preferred stockholders. 
D)  Cash flow from operating activity minus cash flow invested in net working capital minus cash flow invested in long-term assets.

Question 7

The cost principle calls for the recognition of all accounting transactions at their current market value.

Accepted Answer

The statement in the input question is i

Question 8

Which of the following is the best example of how a market-value balance sheet item differs from the firm's book-value balance sheet item?

Accepted Answer

A)  A firm issued long-term bonds five-years ago that currently sell for par value. 
B)  A firm sold common stock twenty-years ago for $20.00 a share. The firm's common stock is currently selling for $96.50 per share. 
C)  A firm has $5 million of accrued liabilities on the books. 
D)  A firm issued preferred stock ten-years ago. These shares of preferred stock currently are selling for par value. 
A)  A firm issued long-term bonds five-years ago that currently sell for par value. 
B)  A firm sold common stock twenty-years ago for $20.00 a share. The firm's common stock is currently selling for $96.50 per share. 
C)  A firm has $5 million of accrued liabilities on the books. 
D)  A firm issued preferred stock ten-years ago. These shares of preferred stock currently are selling for par value.

Question 9

Tre-Bien Bakeries generated net income of $233,412 this year. At year end, the company had accounts receivables of $47,199, inventory of $63,781, and cash of $21,461. It also had accounts payables of $51,369, short-term notes payables of $11,417, and accrued taxes of $6,145. The net working capital of the firm is

Accepted Answer

A)  $68,931. 
B)  $63,510. 
C)  $69,655. 
D)  None of the above 
A)  $68,931. 
B)  $63,510. 
C)  $69,655. 
D)  None of the above

Question 10

Which of the following statements is NOT a limitation associated with market valuation of balance sheet accounts?

Accepted Answer

A)  It can be difficult to identify the market value of an asset, particularly if there are few transactions involving comparable assets. 
B)  The estimates of market value can involve complex financial modeling, and the resulting numbers can be open to manipulation and abuse. 
C)  Marking to market provides decision makers with a better chance of making the correct economic decision, given the information available. 
D)  Mark-to-market accounting can become inaccurate if market prices deviate from the "fundamental" values of assets and liabilities. 
A)  It can be difficult to identify the market value of an asset, particularly if there are few transactions involving comparable assets. 
B)  The estimates of market value can involve complex financial modeling, and the resulting numbers can be open to manipulation and abuse. 
C)  Marking to market provides decision makers with a better chance of making the correct economic decision, given the information available. 
D)  Mark-to-market accounting can become inaccurate if market prices deviate from the "fundamental" values of assets and liabilities.

Question 11

During rising prices, a company using the FIFO method will sell its newest, highest-cost inventory first.

Accepted Answer

A) True 
 B)False

Question 12

In a balance sheet, assets are listed in order of their liquidity.

Accepted Answer

A) True 
 B)False

Question 13

Galan Associates prepared its financial statement for 2008 based on the information given here. The company had cash worth $1,234, inventory worth $13,480, and accounts receivables worth $7,789. The company's net fixed assets are $42,331, and other assets are $1,822. It had accounts payables of $9,558, notes payables of $2,756, common stock of $22,000, and retained earnings of $14,008. How much long-term debt does the firm have?

Accepted Answer

A)  $54,342 
B)  $76,342 
C)  $12,314 
D)  $18,334 
A)  $54,342 
B)  $76,342 
C)  $12,314 
D)  $18,334

Question 14

Which of the following statements is true?

Accepted Answer

A)  Only 20 percent of interest income is taxable for a corporation. 
B)  Dividend income is fully taxable. 
C)  Interest paid on debt obligations is a tax-deductible business expense. 
D)  Dividends paid to stockholders are a tax-deductible business expense. 
A)  Only 20 percent of interest income is taxable for a corporation. 
B)  Dividend income is fully taxable. 
C)  Interest paid on debt obligations is a tax-deductible business expense. 
D)  Dividends paid to stockholders are a tax-deductible business expense.

Question 15

The realization principle assumes that the parties to a transaction are economically rational and are free to act independently of each other.

Accepted Answer

A) True 
 B)False

Question 16

According to the realization principle, revenue from a sale of a firm's products are recognized:

Accepted Answer

A)  when the products are shipped to the buyer. 
B)  when the buyer orders the goods. 
C)  when cash is realized from the sale of the products. 
D)  at the time of the sale whether or not cash is actually received. 
A)  when the products are shipped to the buyer. 
B)  when the buyer orders the goods. 
C)  when cash is realized from the sale of the products. 
D)  at the time of the sale whether or not cash is actually received.

Question 17

-Triumph Trading Company provided the following information to its auditors. For the year ended March 31, 2008, the company had revenues of $1,122,878, operating expenses (excluding depreciation and leasing expenses) of $612,663, depreciation expenses of $231,415, leasing expenses of $126,193, and interest expenses of $87,125. If the company's average tax rate was 34 percent, what is its net income after taxes? Round your final answer to the nearest dollar.

Accepted Answer

A)  $43,218 
B)  $65,482 
C)  $152,607 
D)  None of the above. 
A)  $43,218 
B)  $65,482 
C)  $152,607 
D)  None of the above.

Question 18

Which of the following presents a summary of the changes in a firm's balance sheet from the beginning of an accounting period to the end of an accounting period?

Accepted Answer

A)  The statement of retained earnings 
B)  The statement of working capital 
C)  The statement of cash flows 
D)  The statement of net worth 
A)  The statement of retained earnings 
B)  The statement of working capital 
C)  The statement of cash flows 
D)  The statement of net worth

Question 19

Trekkers Footwear bought a piece of machinery on January 1, 2006 at a cost of $2.3 million, and the machinery is being depreciated annually at an amount of $230,000 for 10 years. Its market value on December 31, 2008 is $1.75 million. The firm's accountant is preparing its financial statement for the fiscal year end on December 31, 2008. The net value of the asset that should be reported on the balance sheet is:

Accepted Answer

A)  $2.3 million. 
B)  $1.61 million. 
C)  $230,000. 
D)  $1.75 million. 
A)  $2.3 million. 
B)  $1.61 million. 
C)  $230,000. 
D)  $1.75 million.

Question 20

When prices are falling, the value of inventory using the LIFO method rather than FIFO gives:

Accepted Answer

A)  inventory a higher value but lowers net income. 
B)  inventory a lower value and also lowers net income. 
C)  both inventory and net income a higher value. 
D)  inventory a lower value and net income a higher value. 
A)  inventory a higher value but lowers net income. 
B)  inventory a lower value and also lowers net income. 
C)  both inventory and net income a higher value. 
D)  inventory a lower value and net income a higher value.

Which of the following is NOT true about treasury stock?

The going concern assumption states that a business will be shutting down its operation in the near future.

What is the firm's cash flow from financing activities?

Cash flows from operations are the net cash flows that support a firm's principal business activities.

Which of the following best represents cash flows to investors?

The cost principle calls for the recognition of all accounting transactions at their current market value.

Which of the following is the best example of how a market-value balance sheet item differs from the firm's book-value balance sheet item?

Which of the following statements is NOT a limitation associated with market valuation of balance sheet accounts?

During rising prices, a company using the FIFO method will sell its newest, highest-cost inventory first.

In a balance sheet, assets are listed in order of their liquidity.

Which of the following statements is true?

The realization principle assumes that the parties to a transaction are economically rational and are free to act independently of each other.

According to the realization principle, revenue from a sale of a firm's products are recognized:

Which of the following presents a summary of the changes in a firm's balance sheet from the beginning of an accounting period to the end of an accounting period?

When prices are falling, the value of inventory using the LIFO method rather than FIFO gives:

The Financial Manager and the Firm

The Financial System and the Level of Interest Rates

Analyzing Financial Statements

The Time Value of Money

Discounted Cash Flows and Valuation

Risk and Return

Bond Valuation and the Structure of Interest Rates

Stock Valuation

The Fundamentals of Capital Budgeting

Cash Flows and Capital Budgeting

Evaluating Project Economics

The Cost of Capital

Working Capital Management

How Firms Raise Capital

Capital Structure Policy

Dividends, Stock Repurchases, and Payout Policy

Business Formation, Growth, and Valuation

Financial Planning and Managing Growth

Options and Corporate Finance

International Financial Management

Filters

Exam 3: The Financial System and the Level of Interest Rates

Which of the following is NOT true about treasury stock?

The going concern assumption states that a business will be shutting down its operation in the near future.

What is the firm's cash flow from financing activities?

Cash flows from operations are the net cash flows that support a firm's principal business activities.

Which of the following best represents cash flows to investors?

The cost principle calls for the recognition of all accounting transactions at their current market value.

Which of the following is the best example of how a market-value balance sheet item differs from the firm's book-value balance sheet item?

Which of the following statements is NOT a limitation associated with market valuation of balance sheet accounts?

During rising prices, a company using the FIFO method will sell its newest, highest-cost inventory first.

In a balance sheet, assets are listed in order of their liquidity.

Which of the following statements is true?

The realization principle assumes that the parties to a transaction are economically rational and are free to act independently of each other.

According to the realization principle, revenue from a sale of a firm's products are recognized:

Which of the following presents a summary of the changes in a firm's balance sheet from the beginning of an accounting period to the end of an accounting period?

When prices are falling, the value of inventory using the LIFO method rather than FIFO gives:

The Financial Manager and the Firm

The Financial System and the Level of Interest Rates

Analyzing Financial Statements

The Time Value of Money

Discounted Cash Flows and Valuation

Risk and Return

Bond Valuation and the Structure of Interest Rates

Stock Valuation

The Fundamentals of Capital Budgeting

Cash Flows and Capital Budgeting

Evaluating Project Economics

The Cost of Capital

Working Capital Management

How Firms Raise Capital

Capital Structure Policy

Dividends, Stock Repurchases, and Payout Policy

Business Formation, Growth, and Valuation

Financial Planning and Managing Growth

Options and Corporate Finance

International Financial Management

Filters