Deck 2: Financial Statements, Cash Flow, and Taxes

Question 1

Other things held constant, which of the following actions would increase the amount of cash on a company's balance sheet?

A) The company repurchases common stock.
B) The company pays a dividend.
C) The company issues new common stock.
D) The company gives customers more time to pay their bills.

Answer 1

C

Question 2

Which of the following statements is CORRECT?

A) The four most important financial statements provided in the annual report are the balance sheet, income statement, cash budget, and the statement of stockholders' equity.
B) The balance sheet gives us a picture of the firm's financial position at a point in time.
C) The income statement gives us a picture of the firm's financial position at a point in time.
D) The statement of cash flows tells us how much cash the firm has in the form of currency and demand deposits.
E) The statement of cash needs tells us how much cash the firm will require during some future period, generally a month or a year.

Answer 2

B

Question 3

Which of the following statements is CORRECT?

A) The balance sheet for a given year, say 2008, is designed to give us an idea of what happened to the firm during that year.
B) The balance sheet for a given year, say 2008, tells us how much money the company earned during that year.
C) The difference between the total assets reported on the balance sheet and the debts reported on this statement tells us the current market value of the stockholders' equity, assuming the statements are prepared in accordance with generally accepted accounting principles (GAAP).
D) For most companies, the market value of the stock equals the book value of the stock as reported on the balance sheet.
E) A typical industrial company's balance sheet lists the firm's assets that will be converted to cash first, and then goes on down to list the firm's longest lived assets last.

Answer 3

E