Chapter 02 Financial Statements, Taxes, and Cash Flow
Multiple Choice Questions
1. Which one of the following is the financial statement that
... [Show More] shows the accounting value of a firm's equity as of a particular date?
A. income statement
B. creditor's
statement
C. balance sheet
D. statement of cash
flows
E. dividend statement
2. Net working capital is defined as:
A. total liabilities minus shareholders' equity.
B. current liabilities minus shareholders'
equity.
C. fixed assets minus long-term liabilities.
D. total assets minus total
liabilities.
E. current assets minus current liabilities.
3. The common set of standards and procedures by which audited financial statements are prepared is known as the:
A. matching principle.
B. cash flow
identity.
C. Generally Accepted Accounting Principles.
D. Financial Accounting Reporting
Principles.
E. Standard Accounting Value Guidelines.
4. Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time?
A. income statement
B. balance
sheet
C. statement of cash flows
D. tax reconciliation
statement
E. market value report
5. Noncash items refer to:
A. accrued expenses.
B. inventory items purchased using
credit.
C. the ownership of intangible assets such as patents.
D. expenses which do not directly affect cash
flows.
E. sales which are made using store credit.
6. The percentage of the next dollar you earn that must be paid in taxes is referred to as the tax rate.
A. mea n
B. residu
al
C. tot al
D. averag
e
E. margin al
7. The tax rate is equal to total taxes divided by total taxable income.
A. deductib le
B. residu
al
C. tot al
D. averag
e
E. margin al
8. The cash flow of a firm which is available for distribution to the firm's creditors and stockholders is called the:
A. operating cash flow.
B. net capital
spending.
C. net working capital.
D. cash flow from
assets.
E. cash flow to stockholders.
9. Which term relates to the cash flow which results from a firm's ongoing, normal business activities?
A. operating cash flow
B. capital
spending
C. net working capital
D. cash flow from
assets
E. cash flow to creditors
10 Cash flow from assets is also known as the firm's:
.
A. capital structure.
B. equity
structure.
C. hidden cash flow.
D. free cash
flow.
E. historical cash flow.
11 The cash flow related to interest payments less any net new borrowing
. is called the:
A. operating cash flow.
B. capital spending cash
flow.
C. net working capital.
D. cash flow from
assets.
E. cash flow to creditors.
12 Cash flow to stockholders is defined as:
.
A. the total amount of interest and dividends paid during the past year.
B. the change in total equity over the
past year.
C. cash flow from assets plus the cash flow to creditors.
D. operating cash flow minus the cash flow to
creditors.
E. dividend payments less net new equity raised.
13 Which one of the following is classified as an intangible fixed asset?
.
A. accounts receivable
B. production
equipment
C. buildin g
D. tradema
rk
E. invento ry
14 Which of the following are current assets?
.
I. patent
II. inventory
III. accounts payable
IV. cash
A. I and III only
B. II and IV
only
C. I, II, and IV only
D. I, II and IV
only
E. II, III, and IV only
15 Which one of the following is included in a firm's market value but yet is
. excluded from the firm's accounting value?
A. real estate investment
B. good reputation of the
company
C. equipment owned by the firm
D. money due from a
customer
E. an item held by the firm for future sale
16 Which of the following are included in current liabilities?
.
I. note payable to a supplier in eight months
II. amount due from a customer next month
III. account payable to a supplier that is due next week
IV. loan payable to the bank in fourteen months
A. I and III only
B. II and III
only
C. I, II, and III only
D. I, III, and IV
only
E. I, II, III, and IV
17 Which one of the following will increase the value of a firm's net
. working capital?
A. using cash to pay a supplier
B. depreciating an
asset
C. collecting an accounts receivable
D. purchasing inventory on
credit
E. selling inventory at a profit
18 Which one of the following statements concerning net working capital is
. correct?
A. Net working capital increases when inventory is purchased with cash.
B. Net working capital must be a positive
value.
C. Total assets must increase if net working capital increases.
D. A decrease in the cash balance may or may not decrease net
working capital.
E. Net working capital is the amount of cash a firm currently has available for spending. [Show Less]