D) valuable to a firm even though liquid assets tend to be less profitable to own.

A) a measure of the use of debt in a firm's capital structure.

B) equal to current assets minus current liabilities.

C) equal to the market value of a firm's total assets minus its total liabilities.

E) generally most associated with intangible assets.

Which one of the following accounts is included in stockholders' equity?

D) Accumulated retained earnings

B) is based on historical cost.

A) is equivalent to market value for firms with fixed assets.

C) generally tends to exceed market value when fixed assets are included.

D) is more of a financial than an accounting valuation.

E) is adjusted whenever the market value of an asset changes

If you sell an asset, you are most apt to receive which value for that asset?

B) Original cost minus accumulated depreciation

Which one of these equations is an accurate expression of the balance sheet?

E) Stockholders' equity ≡ Assets − Liabilities

A) Assets ≡ Liabilities − Stockholders' equity

B) Stockholders' equity ≡ Assets + Liabilities

C) Liabilities ≡ Stockholders' equity − Assets

D) Assets ≡ Stockholders' equity − Liabilities

If a firm's financial managers successfully meet their primary goal, then the firm's:

B) market value will exceed its book value.

A) debts will exceed its equity.

C) net working capital will exceed its long-term debt.

D) carrying value will exceed its market value.

E) equity will exceed its assets.

Which one of these is related to an increase in the book value of the stockholders' equity in a profitable, non-dividend paying firm? Assume no shares of stock are repurchased or sold.

B) An increase in earnings per share

A) A decrease in the book value of inventory

C) An increase in the market value of the firm's buildings

D) An increase in the market value of the firm's long-term debt

E) An increase in non-cash expenses

Assets are listed on the balance sheet in order of:

D) market value relative to book value.

An increase in treasury stock:

D) results from a repurchase of outstanding shares of stock.

A) increases the total equity of the firm.

B) is the result of a firm issuing new shares of stock to the federal government.

C) increases the number of shares outstanding.

E) requires repayment at some point in the future.

The book value of assets:

A) is determined under Generally Accepted Accounting Principles (GAAP) and is based on the cost of those assets.

B) represents the true market value of those assets according to GAAP.

C) is always the best measure of the company's value to an investor.

D) is always higher than the replacement cost of the assets.

E) is shown on the firm's income statement

Under Generally Accepted Accounting Principles (GAAP), a firm's assets are reported at:

D) historical cost less accumulated depreciation.

C) market value less accumulated depreciation.

E) liquidation value less accumulated depreciation.

The income statement:

A) measures performance for one specific day.

B) ignores any income other than operating revenues.

C) excludes deferred tax expense.

D) treats dividends paid as a cash expense.

According to Generally Accepted Accounting Principles (GAAP), revenue is recognized as income when:

B) the transaction is complete and the goods or services are delivered.

A) a contract is signed to perform a service or deliver a good.

D) income taxes are paid on the revenue earned.

E) managers decide to recognize it

The financial statement summarizing a firm's accounting performance over a period of time is the:

D) tax reconciliation statement.

Noncash items refer to:

D) expenses charged against revenues that do not directly affect cash flow.

B) the accounts payable of a firm.

C) the costs incurred for the purchase of intangible fixed assets.

E) all accounts on the balance sheet other than cash on hand

For a firm with long-term debt, net income must be equal to:

E) Dividends + Addition to retained earnings

A) Pretax income − Interest expense − Taxes.

C) Taxes + Addition to retained earnings.

D) Operating income × (1 − Marginal tax rate).

As seen on the income statement of a tax-paying firm:

D) depreciation reduces both the pretax income and the net income.

A) interest is deducted from income and increases the total taxes incurred.

B) the tax rate is applied to the earnings before interest and taxes when the firm pays interest.

C) depreciation is shown as an expense but does not affect the tax expense.

E) interest expense is added to earnings before interest and taxes to compute pretax income

All else held constant, the earnings per share will decrease as the:

B) number of shares outstanding increases.

C) total revenue of the firm increases.

Which one of these statements is correct?

E) Earnings per share can be negative but dividends per share cannot.

A) Pretax income is equal to net income minus taxes.

B) The addition to retained earnings is equal to net income plus dividends.

C) Operating income is equal to operating revenue minus cost of goods sold.

D) Only current taxes are included in the tax expense.

A) will increase if net income increases and the number of shares outstanding decreases.

B) will increase if net income decreases and the number of shares outstanding increases.

C) is defined as the addition to retained earnings divided by the number of shares outstanding.

D) is the total amount of dividends paid per year on a per share basis.

E) must increase at the same rate as the net income

Earnings per share will increase when:

B) the number of shares outstanding increase.

D) dividends per share decrease.

E) the average tax rate increases

Assuming the number of shares outstanding and total earnings remains constant, an increase in dividends per share will:

B) reduce the addition to retained earnings.

A) reduce the earnings per share.

For a tax-paying firm, an increase in the depreciation expense of $1 will:

D) reduce net income by less than $1.

C) reduce net income by more than $1.

E) increase net income by less than $1

According to Generally Accepted Accounting Principles (GAAP), the cost of goods sold expenses are:

D) matched with production levels.

E) expensed as management desires.

Depreciation for a profitable firm:

A) decreases both operating and net income.

B) increases the net fixed assets as shown on the balance sheet.

C) reduces both the net fixed assets and the costs of a firm.

D) is a non-cash expense which increases the net operating income.

E) decreases net fixed assets, net income, and operating cash flows

Which one of these is most apt to be a fixed, cash expense in the short run?

C) Commissions paid to sales representatives

As of 2018, the U.S. corporate tax rate is:

A) based on a progressive tax rate schedule.

B) based on a tiered, multi-rate flat tax.

D) zero with all corporate taxable income passed to shareholders.

A firm starts its year with positive net working capital. During the year, the firm acquires more short-term debt than it does short-term assets. This means that:

E) the ending net working capital can be positive, negative, or equal to zero.

A) the ending net working capital must be negative.

B) both accounts receivable and inventory decreased during the year.

C) the beginning current assets were less than the beginning current liabilities.

D) accounts payable increased and inventory decreased during the year.

Which one of these does not affect the cash flow to creditors?

C) Increase in accounts payable

A) Interest paid on long-term debt

Which one of these will cause an increase in the cash flow to creditors for the current year?

B) Payoff of a 36-month loan after the first 15 months

A) Collection of a refund for the overpayment of a loan

C) Payment of a late charge on an account payable to a supplier

D) Acquiring a new loan that will be repaid in one lump sum 24 months from now

E) Purchasing inventory using credit offered by a supplier

The cash flow to stockholders must be positive when:

D) the cash flow from assets is positive and exceeds the cash flow to creditors.

A) the dividends paid are less than the amount of net new equity raised.

B) the net sale of common stock exceeds the amount of dividends paid.

C) no income is distributed but new shares of stock are sold.

E) both the cash flow to assets and the cash flow to creditors are positive

Cash flow from assets:

B) can be positive, negative, or equal to zero.

A) equals net income plus non-cash items.

C) equals operating cash flow minus net capital spending.

D) equals the addition to retained earnings.

E) equals operating cash flow minus the cash flow to creditors

Net capital spending is equal to the:

B) net change in fixed assets plus depreciation.

A) net change in total assets plus depreciation.

C) net income plus depreciation.

D) difference between the market and book values of the total assets.

Cash flow to stockholders is defined as:

D) cash dividends paid plus repurchases of equity minus new equity financing.

B) repurchases of equity less new equity sold minus cash dividends paid.

C) cash flow from financing less cash flow to creditors.

E) cash flow from assets plus cash flow to creditors.

D) cash that the firm can distribute to creditors and stockholders.

A) the money generated from the sale of new shares of stock.

B) another term for operating cash flow.

C) the cash generated by decreasing net working capital.

E) the net income of a firm after taxes have been paid

CF Chap 2

Authored by Dung Ngọc

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MULTIPLE CHOICE QUESTION

30 sec • 10 pts

Which one of these accounts appears on the right-hand side of a balance sheet?

A) Property, plant, and equipment

B) Accumulated retained earnings

C) Accumulated depreciation

D) Cash and equivalents

E) Intangible assets

MULTIPLE CHOICE QUESTION

30 sec • 10 pts

The entire book value of the residual ownership of a corporation is known as the

A) total equity.

B) intangible assets.

C) retained earnings

D) capital surplus.

E) total assets.

MULTIPLE CHOICE QUESTION

30 sec • 10 pts

Which account represents the book value of all of a corporation's net profits less its dividend payments?

A) Capital surplus

B) Accumulated retained earnings

C) Treasury stock

D) Common stock

E) Preferred stock

MULTIPLE CHOICE QUESTION

30 sec • 10 pts

Which one of the following is a current liability?

A) Amount due to a supplier in 18 months

B) Note payable in nine months

C) Estimated taxes just paid

D) Loan payment due in 13 months

E) Amount due from a customer in 30 days

MULTIPLE CHOICE QUESTION

30 sec • 10 pts

An increase in total assets:

A) means that net working capital is also increasing.

B) requires an investment in fixed assets.

C) means that stockholders' equity must also increase.

D) must be offset by an equal increase in liabilities and stockholders' equity.

E) can only occur when a firm has positive net income.

MULTIPLE CHOICE QUESTION

30 sec • 10 pts

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

A) Inventory

B) Buildings

C) Accounts receivable

D) Equipment

E) Patents

MULTIPLE CHOICE QUESTION

30 sec • 10 pts

Which one of the following statements concerning liquidity is correct?

A) Liquid assets generally earn higher rates of return than fixed assets.

B) If you can sell an asset next year at a price equal to its actual value, the asset is highly liquid.

C) Liquid assets are defined as those assets obtained within the past year.

D) The less liquidity a firm has, the lower the probability the firm will encounter financial difficulties.

E) Balance sheet accounts are listed in order of decreasing liquidity.

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CF Chap 2

Which one of these accounts appears on the right-hand side of a balance sheet?

The entire book value of the residual ownership of a corporation is known as the

Which account represents the book value of all of a corporation's net profits less its dividend payments?

Which one of the following is a current liability?

An increase in total assets:

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

Which one of the following statements concerning liquidity is correct?

Liquidity is:

Which one of the following accounts is included in stockholders' equity?

Book value:

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