Question 1

Martha's Enterprises spent €2,400 to purchase equipment three years ago.This equipment is currently valued at €1,800 on today's statement of financial position but could actually be sold for €2,000.Net working capital is €200 and non-current liabilities is €800.Assuming the equipment is the firm's only non-current asset,what is the book value of shareholders' equity?

Accepted Answer

A) €200 
B) €800 
C) €1,200 
D) €1,400 
E) The answer cannot be determined from the information provided.

Question 2

Which one of the following accounts is generally the most liquid?

Accepted Answer

A) Inventory 
B) Building 
C) Accounts receivable 
D) Equipment 
E) Patent

Question 3

Brad's Company has equipment with a book value of £500 that could be sold today at a 50% discount.Its inventory is valued at £400 and could be sold to a competitor for that amount.The firm has £50 in cash and customers owe them £300.What is the accounting value of its liquid assets?

Accepted Answer

A) £50 
B) £350 
C) £700 
D) £750 
E) £1,000

Question 4

According to International Accounting Standards,revenue is recognized as income when:

Accepted Answer

A) a contract is signed to perform a service or deliver a good. 
B) the transaction is complete and the goods or services are delivered. 
C) payment is requested. 
D) income taxes are paid. 
E) All of the above.

Question 5

Your firm has net income of £198 on total sales of £1,200.Costs are £715 and depreciation is £145.The tax rate is 34%.The firm does not have interest expenses.What is the operating cash flow?

Accepted Answer

A) £93 
B) £241 
C) £340 
D) £383 
E) £485

Question 6

Nabors plc
2010 Income Statement
( $ £ $ in millions)
$\begin{array}{|l|c|}
\hline \text { Net sales } & £ 9,610 \
\hline \text { Less: Cost of goods sold } & 6,310 \
\hline \text { Less: Depreciation } & 1,370 \
\hline \text { Eamings before interest and taxes } & 1,930 \
\hline \text { Less: Interest paid } & 630 \
\hline \text { Taxable Income } & £ 1,300 \
\hline \text { Less: Taxes } & 455 \
\hline \text { Net income } & £ \quad 845 \
\hline
\end{array}$

Nabors ple
2009 and 2010 Statement of financial positions 
( $ £ $ in millions)
$\begin{array}{|l|l|l|l|l|l|}
\hline & 2009 &2010 & & 2009 & 2010 \
\hline \text { Cash } & £, 310 & £ 405 & \text { Trade payables } & £ 2,720 & £ 2,570 \
\hline \text { Accounts rec. } & 2,640 & 3,055 & \text { Notes payable } & 100 & 0 \
\hline \text { Inventory } & 3,275 & \underline{3,850} & \text { Total } & £ 2,820 & £ 2,570 \
\hline \text { Total } & £ 6,225 & £ 7,310 & \text { Non-current liabilities } & 7,875 & 8,100 \
\hline \text { Net non-current assets } & 10,960 & 10,670 & \text { Ordinary equity } & 5,000 & 5,250 \
\hline & & & \text { Retained eamings } & \underline{1,490} & 2,060 \
\hline \text { Total Assets } & £ 17,185 & £ 17,980 & \text { Total liab.\& equity } & £ 17,185 & £ 17,890 \
\hline
\end{array}$
-What is the amount of the non-cash expenses for 2010?

Accepted Answer

A) £570 
B) £630 
C) £845 
D) £1,370 
E) £2,000

Question 7

Explain why the income statement is not a good representation of cash flow.

Accepted Answer

The answer of Explain why the income statement is not...

Question 8

_____ refers to the cash flow that results from the firm's ongoing,normal business activities.

Accepted Answer

A) Cash flow from operating activities 
B) Capital spending 
C) Net working capital 
D) Cash flow from assets 
E) Cash flow to creditors

Question 9

According to International Accounting Standards,costs are:

Accepted Answer

A) recorded as incurred. 
B) recorded when paid. 
C) matched with revenues. 
D) matched with production levels. 
E) expensed as management desires.

Question 10

Knickerdoodles NV.
$\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\underline { 2009 }\quad\quad\quad\quad\quad\underline { 2010 }$

-What is net capital spending for 2010?

Accepted Answer

A) -€250 
B) -€57 
C) €0 
D) €57 
E) €477

Question 11

The cash flow to creditors includes the cash:

Accepted Answer

A) received by the firm when payments are paid to suppliers. 
B) outflow of the firm when new debt is acquired. 
C) outflow when interest is paid on outstanding debt. 
D) inflow when trade payables decreases. 
E) received when non-current liabilities is paid off.

Question 12

At the beginning of the year,a firm has current assets of £380 and current liabilities of £210.At the end of the year,the current assets are £410 and the current liabilities are £250.What is the change in net working capital?

Accepted Answer

A) -£30 
B) -£10 
C) £0 
D) £10 
E) £30

Question 13

A firm has £300 in inventory,£600 in non-current assets,£200 in accounts receivables,£100 in trade payables,and £50 in cash.What is the amount of the current assets?

Accepted Answer

A) £500 
B) £550 
C) £600 
D) £1,150 
E) £1,200

Question 14

_____ refers to the firm's interest payments less any net new borrowing.

Accepted Answer

A) Operating cash flow 
B) Capital spending 
C) Net working capital 
D) Cash flow from shareholders 
E) Cash flow to creditors

Question 15

a(n.____ asset is one which can be quickly converted into cash without significant loss in value.

Accepted Answer

A) current 
B) non-current 
C) intangible 
D) liquid 
E) non-current.

Question 16

Nabors plc
2010 Income Statement
( $ £ $ in millions)
$\begin{array}{|l|c|}
\hline \text { Net sales } & £ 9,610 \
\hline \text { Less: Cost of goods sold } & 6,310 \
\hline \text { Less: Depreciation } & 1,370 \
\hline \text { Eamings before interest and taxes } & 1,930 \
\hline \text { Less: Interest paid } & 630 \
\hline \text { Taxable Income } & £ 1,300 \
\hline \text { Less: Taxes } & 455 \
\hline \text { Net income } & £ \quad 845 \
\hline
\end{array}$

Nabors ple
2009 and 2010 Statement of financial positions 
( $ £ $ in millions)
$\begin{array}{|l|l|l|l|l|l|}
\hline & 2009 &2010 & & 2009 & 2010 \
\hline \text { Cash } & £, 310 & £ 405 & \text { Trade payables } & £ 2,720 & £ 2,570 \
\hline \text { Accounts rec. } & 2,640 & 3,055 & \text { Notes payable } & 100 & 0 \
\hline \text { Inventory } & 3,275 & \underline{3,850} & \text { Total } & £ 2,820 & £ 2,570 \
\hline \text { Total } & £ 6,225 & £ 7,310 & \text { Non-current liabilities } & 7,875 & 8,100 \
\hline \text { Net non-current assets } & 10,960 & 10,670 & \text { Ordinary equity } & 5,000 & 5,250 \
\hline & & & \text { Retained eamings } & \underline{1,490} & 2,060 \
\hline \text { Total Assets } & £ 17,185 & £ 17,980 & \text { Total liab.\& equity } & £ 17,185 & £ 17,890 \
\hline
\end{array}$
-What is the cash flow of the firm for 2010?

Accepted Answer

A) £430 
B) £485 
C) £1,340 
D) £2,590 
E) £3,100

Question 17

Net working capital is defined as:

Accepted Answer

A) total liabilities minus shareholders' equity. 
B) current liabilities minus shareholders' equity. 
C) non-current assets minus non-current liabilities. 
D) total assets minus total liabilities. 
E) current assets minus current liabilities.

Question 18

_____ refers to the changes in net capital assets.

Accepted Answer

A) Operating cash flow 
B) Cash flow from investing 
C) Net working capital 
D) Cash flow from assets 
E) Cash flow to creditors

Question 19

Pete's Boats has beginning non-current liabilities of €180 and ending non-current liabilities of €210.The beginning and ending total debt balances are €340 and €360,respectively.The interest paid is €20.What is the amount of the cash flow to creditors?

Accepted Answer

A) -€10 
B) €0 
C) €10 
D) €40 
E) €50

Question 20

Cash flow to shareholders is defined as:

Accepted Answer

A) interest payments. 
B) repurchases of equity less cash dividends paid plus new equity sold. 
C) cash flow from financing less cash flow to creditors. 
D) cash dividends plus repurchases of equity minus new equity financing. 
E) None of the above.

Exam 3: Financial Statement Analysis and Long-Term Planning