Question 1

Identify the noncash items that a firm may have on its financial statements and explain their impact on the shareholders of the firm.

Accepted Answer

Several noncash items can be found on a

Question 2

Cash flows from financing activities include all but one of the following:

Accepted Answer

A)  Cash payments on the principal of long-term debt 
B)  Buying and selling bonds or stock of other firms 
C)  Cash purchases of treasury stock 
D)  Cash proceeds from a bank loan 
A)  Cash payments on the principal of long-term debt 
B)  Buying and selling bonds or stock of other firms 
C)  Cash purchases of treasury stock 
D)  Cash proceeds from a bank loan

Question 3

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 4

When prices are falling, valuing 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.

Question 5

The balance sheet identifies the productive resources (assets) that a firm uses to generate income, as well as the sources of funding from creditors (liabilities) and owners (shareholders' equity) that were used to buy the assets.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Centennial Brewery produced revenues of $1,145,227 in 2008. It has expenses (excluding depreciation) of $812,640, depreciation of $131,335, and interest expense of $81,112. It pays an average tax rate of 34 percent. What is the firm's net income after taxes? Round your final answer to the nearest dollar.

Accepted Answer

A)  $120,140 
B)  $248,475 
C)  $79,292 
D)  $40,848 
A)  $120,140 
B)  $248,475 
C)  $79,292 
D)  $40,848

Question 8

The matching principle calls for the accountant of a firm to:

Accepted Answer

A)  identify an asset with each liability of the firm. 
B)  associate the revenue generated from a sale to the costs or expenses incurred to produce the product. 
C)  match each item of inventory with the historical cost at which it was acquired. 
D)  None of the above. 
A)  identify an asset with each liability of the firm. 
B)  associate the revenue generated from a sale to the costs or expenses incurred to produce the product. 
C)  match each item of inventory with the historical cost at which it was acquired. 
D)  None of the above.

Question 9

The generally accepted accounting principles (GAAP) are:

Accepted Answer

A)  rules that outline how a firm can operate ethically. 
B)  rules on how the firm will be valued in the event of a merger. 
C)  rules and procedures that define how companies are to maintain financial records and prepare financial statements. 
D)  rules for how a company can issue stock to raise money. 
A)  rules that outline how a firm can operate ethically. 
B)  rules on how the firm will be valued in the event of a merger. 
C)  rules and procedures that define how companies are to maintain financial records and prepare financial statements. 
D)  rules for how a company can issue stock to raise money.

Question 10

Parrino Corporation has announced that its net income for the year ended June 30, 2008, is $1,824,214. The company had an EBITDA of $5,174,366, and its depreciation and amortization expense was equal to $1,241,790. The company's average tax rate is 34 percent. What is the amount of interest expense for the firm?

Accepted Answer

A)  $2,763,961 
B)  $939,747 
C)  $1,187,720 
D)  $1,168,615 
A)  $2,763,961 
B)  $939,747 
C)  $1,187,720 
D)  $1,168,615

Question 11

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

Question 12

The key financial statement that ties the other three statements together is the statement of cash flows, which summarizes changes in the balance sheet from the beginning of the year to the end.

Accepted Answer

A) True 
 B)False

Question 13

The cost principle states that an asset should be recognized on the balance sheet:

Accepted Answer

A)  at the market value of the asset. 
B)  at the market value less the accumulated depreciation on the asset. 
C)  at its historical cost. 
D)  at its historical cost plus the accumulated depreciation on the asset. 
A)  at the market value of the asset. 
B)  at the market value less the accumulated depreciation on the asset. 
C)  at its historical cost. 
D)  at its historical cost plus the accumulated depreciation on the asset.

Question 14

The major disadvantages of market-value accounting include:

Accepted Answer

A)  the difficulty in estimating the current value for some assets. 
B)  the difficulty in applying some of the valuation models used to estimate market values. 
C)  the resulting numbers are potentially open to abuse. 
D)  All of the above are disadvantages of market-value accounting. 
A)  the difficulty in estimating the current value for some assets. 
B)  the difficulty in applying some of the valuation models used to estimate market values. 
C)  the resulting numbers are potentially open to abuse. 
D)  All of the above are disadvantages of market-value accounting.

Question 15

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 ending 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 16

Spartan, Inc., is a manufacturer of automobile parts located in Greenville, South Carolina. At the end of the current fiscal year, the company had net working capital of $157,903. The company showed accounts payables of $94,233, accounts receivables of $83,112, inventory of $171,284, and cash and marketable securities of $12,311. Calculate the amount of notes payables. (Assume that notes payable and accounts payable are the only two current liabilities of the company.)

Accepted Answer

A)  $14,571 
B)  $26,882 
C)  $15,471 
D)  None of the above 
A)  $14,571 
B)  $26,882 
C)  $15,471 
D)  None of the above

Question 17

The income statement identifies the major sources of revenues generated by the firm and the corresponding expenses that were needed to generate those revenues.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is NOT true about goodwill?

Accepted Answer

A)  It is an intangible asset. 
B)  It represents the value of all unrecorded assets acquired in a merger. 
C)  It equals the premium paid over the fair market value of the assets acquired in a merger. 
D)  When goodwill appears on a firm's balance sheet, it reduces the firm's net worth by that amount. 
A)  It is an intangible asset. 
B)  It represents the value of all unrecorded assets acquired in a merger. 
C)  It equals the premium paid over the fair market value of the assets acquired in a merger. 
D)  When goodwill appears on a firm's balance sheet, it reduces the firm's net worth by that amount.

Question 19

What is the firm's net cash flow from (used in) investing activities?

Accepted Answer

A)  $0 
B)  $46,124 
C)  -$46,124 
D)  None of the above 
A)  $0 
B)  $46,124 
C)  -$46,124 
D)  None of the above

Question 20

Preparing a marked-to-market balance sheet is rather straightforward because it is easy to obtain market values for all assets and liabilities.

Accepted Answer

A) True 
 B)False

Identify the noncash items that a firm may have on its financial statements and explain their impact on the shareholders of the firm.

Cash flows from financing activities include all but one of the following:

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?

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

The balance sheet identifies the productive resources (assets) that a firm uses to generate income, as well as the sources of funding from creditors (liabilities) and owners (shareholders' equity) that were used to buy the assets.

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

The matching principle calls for the accountant of a firm to:

The generally accepted accounting principles (GAAP) are:

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

The key financial statement that ties the other three statements together is the statement of cash flows, which summarizes changes in the balance sheet from the beginning of the year to the end.

The cost principle states that an asset should be recognized on the balance sheet:

The major disadvantages of market-value accounting include:

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 ending of an accounting period?

The income statement identifies the major sources of revenues generated by the firm and the corresponding expenses that were needed to generate those revenues.

Which of the following is NOT true about goodwill?

What is the firm's net cash flow from (used in) investing activities?

Preparing a marked-to-market balance sheet is rather straightforward because it is easy to obtain market values for all assets and liabilities.

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

Identify the noncash items that a firm may have on its financial statements and explain their impact on the shareholders of the firm.

Cash flows from financing activities include all but one of the following:

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?

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

The balance sheet identifies the productive resources (assets) that a firm uses to generate income, as well as the sources of funding from creditors (liabilities) and owners (shareholders' equity) that were used to buy the assets.

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

The matching principle calls for the accountant of a firm to:

The generally accepted accounting principles (GAAP) are:

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

The key financial statement that ties the other three statements together is the statement of cash flows, which summarizes changes in the balance sheet from the beginning of the year to the end.

The cost principle states that an asset should be recognized on the balance sheet:

The major disadvantages of market-value accounting include:

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 ending of an accounting period?

The income statement identifies the major sources of revenues generated by the firm and the corresponding expenses that were needed to generate those revenues.

Which of the following is NOT true about goodwill?

What is the firm's net cash flow from (used in) investing activities?

Preparing a marked-to-market balance sheet is rather straightforward because it is easy to obtain market values for all assets and liabilities.

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