Question 1

The cash flows from operating activities of the firm include

Accepted Answer

A)  taxes paid. 
B)  dividends paid. 
C)  labor expense. 
D)  interest expense.

Question 2

A firm has year end 2001 and 2002 retained earnings balances of $670,000 and $560,000, respectively. The firm reported net profits after taxes of $100,000 in 2002. The firm paid dividends in 2002 of__________ .

Accepted Answer

A)  $210,000 
B)  $110,000 
C)  $100,000 
D)  $10,000

Question 3

For the year ended December 31, 2003, a corporation had cash flow from operating activities of-$10,000, cash flow from investment activities of $4,000, and cash flow from financing activities of$9,000. The Statement of Cash Flows would show a

Accepted Answer

A)  net increase of $5,000 in cash and marketable securities. 
B)  net increase of $3,000 in cash and marketable securities. 
C)  net decrease of $3,000 in cash and marketable securities. 
D)  net decrease of $5,000 in cash and marketable securities.

Question 4

Capital losses can be

Accepted Answer

A)  written off against all sources of income. 
B)  written off against only ordinary income. 
C)  written off against only capital gains. 
D)  cannot be written off at all.

Question 5

Under CCA, an asset which originally cost $100,000 is being depreciated using a 30% CCA rate.The depreciation expense in year 3 is___________ .

Accepted Answer

A)  $21,000 
B)  $17,850 
C)  $12,030 
D)  $10,440

Question 6

The par value of common stock is an arbitrarily assigned per share value used primarily foraccounting purposes.

Accepted Answer

A) True 
 B)False

Question 7

All of the following are examples of current assets EXCEPT

Accepted Answer

A)  cash. 
B)  accruals. 
C)  inventory. 
D)  accounts receivable.

Question 8

Capital cost allowance is simply the tax version of amortization.

Accepted Answer

A) True 
 B)False

Question 9

Financial cash flows through the firm include

Accepted Answer

A)  interest expense. 
B)  labor expense. 
C)  rent. 
D)  salaries.

Question 10

The stockholder's annual report must include

Accepted Answer

A)  a balance sheet. 
B)  an income statement. 
C)  a statement of cash flows. 
D)  all of the above.

Question 11

Under CCA, an asset which originally cost $100,000 is being depreciated using a 4% CCA rate. Thedepreciation expense in year 1 is___________ .

Accepted Answer

A)  $4,000 
B)  $6,000 
C)  $2,000 
D)  $0

Question 12

Cash flows associated with purchase and sale of both fixed assets and business interests are called

Accepted Answer

A)  financing flows. 
B)  operating flows. 
C)  investment flows. 
D)  none of the above.

Question 13

The depreciable life of an asset is of concern to the financial manager, and

Accepted Answer

A)  a longer depreciable life is preferred, because management can postpone purchasing new assets, since the old assets still have a useful life. 
B)  a shorter depreciable life is preferred, because it will result in a faster receipt of cash flows. 
C)  a longer depreciable life is preferred, because it will result in a faster receipt of cash flows. 
D)  a shorter depreciable life is preferred, because management can then purchase new assets, as the old assets are written off.

Question 14

In finance, operating cash flow is the cash flow a firm generates from its normal operations, calculated as EBIT - taxes + depreciation.

Accepted Answer

A) True 
 B)False

Question 15

The statement of cash flows includes all of the following categories EXCEPT

Accepted Answer

A)  operating flows. 
B)  equity flows. 
C)  financing flows. 
D)  investment flows.

Question 16

Net income after taxes are defined as

Accepted Answer

A)  sales revenue minus cost of goods sold. 
B)  EBIT minus interest and taxes. 
C)  gross profits minus operating expenses. 
D)  EBIT minus interest.

Question 17

Under CCA, an asset which originally cost $10,000 is being depreciated using a 20% CCA rate.What is the depreciation expense in year 2?

Accepted Answer

A)  $2,100 
B)  $1,500 
C)  $1,200 
D)  $1,800

Question 18

The depreciable value of an asset, under CCA, is

Accepted Answer

A)  the original cost plus installation costs, minus salvage value. 
B)  the original cost (purchase price) only. 
C)  the original cost minus salvage value. 
D)  the original cost plus installation.

Question 19

A firm's operating cash flow is defined as

Accepted Answer

A)  gross profit minus operating expenses. 
B)  EBIT - taxes + depreciation. 
C)  gross profit minus depreciation. 
D)  EBIT + depreciation.

Exam 2: Financial Statements, Cash Flows, and Taxes

The cash flows from operating activities of the firm include

A firm has year end 2001 and 2002 retained earnings balances of $670,000 and $560,000, respectively. The firm reported net profits after taxes of $100,000 in 2002. The firm paid dividends in 2002 of__________ .

For the year ended December 31, 2003, a corporation had cash flow from operating activities of-$10,000, cash flow from investment activities of $4,000, and cash flow from financing activities of$9,000. The Statement of Cash Flows would show a

Capital losses can be

Under CCA, an asset which originally cost $100,000 is being depreciated using a 30% CCA rate.The depreciation expense in year 3 is___________ .

The par value of common stock is an arbitrarily assigned per share value used primarily foraccounting purposes.

All of the following are examples of current assets EXCEPT

Capital cost allowance is simply the tax version of amortization.

Financial cash flows through the firm include

The stockholder's annual report must include

Under CCA, an asset which originally cost $100,000 is being depreciated using a 4% CCA rate. Thedepreciation expense in year 1 is___________ .

Cash flows associated with purchase and sale of both fixed assets and business interests are called

The depreciable life of an asset is of concern to the financial manager, and

In finance, operating cash flow is the cash flow a firm generates from its normal operations, calculated as EBIT - taxes + depreciation.

The statement of cash flows includes all of the following categories EXCEPT

Net income after taxes are defined as

Under CCA, an asset which originally cost $10,000 is being depreciated using a 20% CCA rate.What is the depreciation expense in year 2?

The depreciable value of an asset, under CCA, is

A firm's operating cash flow is defined as