Question 1

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 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 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 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)  issuing and paying out on insurance contracts 
C)  cash purchases of treasury stock 
D)  cash proceeds from a bank loan 
A)  cash payments on the principal of long-term debt 
B)  issuing and paying out on insurance contracts 
C)  cash purchases of treasury stock 
D)  cash proceeds from a bank loan

Question 3

Trident Corporation had the following cash flows in the current year. Which one of the following is a financing activity cash flow?

Accepted Answer

A)  Rent on a warehouse amounting to $1.1 million 
B)  Purchase of $125,000 worth of five-year bonds issued by Towson Utilities 
C)  Preferred dividends to the tune of $330,000 paid to shareholders 
D)  Lease income received on a piece of land 
A)  Rent on a warehouse amounting to $1.1 million 
B)  Purchase of $125,000 worth of five-year bonds issued by Towson Utilities 
C)  Preferred dividends to the tune of $330,000 paid to shareholders 
D)  Lease income received on a piece of land

Question 4

Tumbling Haven, a gymnastic equipment manufacturer, provided the following information to its accountants. The company had current assets of $145,332, net fixed assets of $356,190, and other assets of $4,176. The firm has long-term debt of $76,445, common stock of $200,000, and retained earnings of $134,461. What amount of current liabilities does this firm have?

Accepted Answer

A)  $94,792 
B)  $505,678 
C)  $171,217 
D)  none of the above 
A)  $94,792 
B)  $505,678 
C)  $171,217 
D)  none of the above

Question 5

What are the advantages and disadvantages of using market-value accounting?

Accepted Answer

Using market-value financial statements

Question 6

Which one of the following does NOT belong on an income statement?

Accepted Answer

A)  depreciation and amortization 
B)  goodwill 
C)  extraordinary items 
D)  nonrecurring expenses 
A)  depreciation and amortization 
B)  goodwill 
C)  extraordinary items 
D)  nonrecurring expenses

Question 7

In a rising price environment, a company using the LIFO method assumes that the sale of a product is from the newest, highest-cost inventory.

Accepted Answer

A) True 
 B)False

Question 8

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 9

Explain the differences in using FIFO versus LIFO in accounting for inventory.

Accepted Answer

There are two common approaches that fir

Question 10

If a company values its inventory using the FIFO method, when the firm makes a sale in a rising price environment, it assumes the sale is from the newest, highest-cost inventory.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Statement of Cash Flows - Cash from Financing Activities: Natural Lite, Inc. reported the following items during fiscal 2010. The firm purchased marketable securities of $87,500, paid down a long-term loan in the amount of $650,000, purchased $4,250,000 of new equipment. The firm also sold $6,250,000 of common stock, paid $350,225 in dividends to its common shareholders, and repurchased $1,250,000 of common stock in the open market. What is the net cash provided by financing activities? (Round off to the nearest)

Accepted Answer

A)  $4,575,210 
B)  $1,733,285 
C)  $3,999,775 
D)  $2,467,915 
A)  $4,575,210 
B)  $1,733,285 
C)  $3,999,775 
D)  $2,467,915

Question 13

The current market value of an asset is the amount that a firm would receive for the asset if it was sold on the open market.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Which one of the following is NOT a cash flow from operating activities?

Accepted Answer

A)  cash payments on the principal of long-term debt 
B)  payments for utilities and rent 
C)  payments to purchase raw materials 
D)  cash receipts from selling goods and services 
A)  cash payments on the principal of long-term debt 
B)  payments for utilities and rent 
C)  payments to purchase raw materials 
D)  cash receipts from selling goods and services

Question 16

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

Accepted Answer

Several noncash items can be found on a

Question 17

The key financial statement that ties the other three statements together is the balance sheet, which summarizes the firm's investment and financing activities at a point in time.

Accepted Answer

A) True 
 B)False

Question 18

GAAP principles determine the rules for how a company can issue stock to raise money.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following sections do annual reports typically contain?

Accepted Answer

A)  financial summary related to the past year's performance 
B)  information about the company, its products, and its activities 
C)  audited financial statements, including limited historical financial data 
D)  All three of the above sections are included in the annual report. 
A)  financial summary related to the past year's performance 
B)  information about the company, its products, and its activities 
C)  audited financial statements, including limited historical financial data 
D)  All three of the above sections are included in the annual report.

Question 20

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

Accepted Answer

A) True 
 B)False

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?

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

Trident Corporation had the following cash flows in the current year. Which one of the following is a financing activity cash flow?

What are the advantages and disadvantages of using market-value accounting?

Which one of the following does NOT belong on an income statement?

In a rising price environment, a company using the LIFO method assumes that the sale of a product is from the newest, highest-cost inventory.

The major disadvantages of market-value accounting include

Explain the differences in using FIFO versus LIFO in accounting for inventory.

If a company values its inventory using the FIFO method, when the firm makes a sale in a rising price environment, it assumes the sale is from the newest, highest-cost inventory.

The current market value of an asset is the amount that a firm would receive for the asset if it was sold on the open market.

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

Which one of the following is NOT a cash flow from operating activities?

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

The key financial statement that ties the other three statements together is the balance sheet, which summarizes the firm's investment and financing activities at a point in time.

GAAP principles determine the rules for how a company can issue stock to raise money.

Which of the following sections do annual reports typically contain?

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

The Financial Manager and the Company

The Financial System and the Level of Interest Rates

Analysing Financial Statements

The Time Value of Money

Discounted Cash Flows and Valuation

Risk and Return

Bond Valuation and the Structure of Interest Rates

Share Valuation

The Fundamentals of Capital Budgeting

Cash Flows and Capital Budgeting

Evaluating Project Economics and Capital Rationing

The Cost of Capital

Working Capital Management

How Companies Raise Capital

Capital Structure Policy

Dividends and Dividend Policy

Business Formation, Growth and Valuation

Strategic Financial Planning and Forecasting

Options and Corporate Finance

International Financial Management

Filters

Exam 3: Financial Statements, Cash Flows and Tax

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?

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

Trident Corporation had the following cash flows in the current year. Which one of the following is a financing activity cash flow?

What are the advantages and disadvantages of using market-value accounting?

Which one of the following does NOT belong on an income statement?

In a rising price environment, a company using the LIFO method assumes that the sale of a product is from the newest, highest-cost inventory.

The major disadvantages of market-value accounting include

Explain the differences in using FIFO versus LIFO in accounting for inventory.

If a company values its inventory using the FIFO method, when the firm makes a sale in a rising price environment, it assumes the sale is from the newest, highest-cost inventory.

The current market value of an asset is the amount that a firm would receive for the asset if it was sold on the open market.

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

Which one of the following is NOT a cash flow from operating activities?

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

The key financial statement that ties the other three statements together is the balance sheet, which summarizes the firm's investment and financing activities at a point in time.

GAAP principles determine the rules for how a company can issue stock to raise money.

Which of the following sections do annual reports typically contain?

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

The Financial Manager and the Company

The Financial System and the Level of Interest Rates

Analysing Financial Statements

The Time Value of Money

Discounted Cash Flows and Valuation

Risk and Return

Bond Valuation and the Structure of Interest Rates

Share Valuation

The Fundamentals of Capital Budgeting

Cash Flows and Capital Budgeting

Evaluating Project Economics and Capital Rationing

The Cost of Capital

Working Capital Management

How Companies Raise Capital

Capital Structure Policy

Dividends and Dividend Policy

Business Formation, Growth and Valuation

Strategic Financial Planning and Forecasting

Options and Corporate Finance

International Financial Management

Filters