Chapter 2

If a firm's current assets are $100 and its current liabilities are $80, then its net working capital is:

$20

Which of the following are included in cash flow from investing activities?

-Acquisition of fixed assets -Sales of fixed assets

Which of the following cash flows appear in the financing activities section of the accounting statement of cash flows?

-Repurchase of stock -Payment of dividends -Retirement of long-term debt

The cash flows from financing activities include changes in:

-common stock -long-term debt

If Net Income is 97 million dollars, depreciation is 33 million dollars, and deferred taxes are 22 million dollars, what is the cash flow from operating activities?

152 million

If Net Income is 77 million dollars, depreciation is 13 million dollars, and deferred taxes are 2 million dollars, what is the cash flow from operating activities?

92 million

How many tax brackets are there for forms of business other than corporations?

> 1

What is depreciation?

A systematic expensing of an asset based on the asset's estimated life

The cash flow identity states that cash flow from assets equals cash flows to ____.

Creditors and Stockholders

Stockholders' equity ______ when retained earnings increase.

Increases

What is treasury stock?

Stock the firm has repurchased

Operating cash flow reflects which one of these?

Tax payments

______ is the income subject to tax.

Taxable income

Who owns treasury stock?

The issuer of the stock

True or false: Taxes can be a large cash outflow for a corporation.

True

True or false: The realization (timing) of income can be useful to a firm.

True

A balance sheet reflects a firm's ______ value on a particular date.

accounting

The cash flow identity states that cash flows from ______ should equal cash flows to creditors and equity investors.

assets

Liquidity refers to the ease of changing _____.

assets to cash

Taxes represent which of the following:

cash outflow

Depreciation is the accountant's estimate of the cost of ______ used up in the production process.

equipment

Selling a firm's plant and equipment results in a change in ____.

fixed assets

Stockholders' equity ______ when retained earnings increase. Multiple choice question.

increases

Cash flow analysis is popular because:

it is harder to "spin" and mislead

An official accounting statement that helps to explain the change in cash and cash equivalents is called the _____.

statement of cash flows

Which of the following will change fixed assets?

-selling a plant -buying a new machine

Which of the following are examples of financing activities?

-net payments to creditors -net payments to owners

The short run for a firm is the period of time during which ______.

-output can vary -some costs are fixed

Which one of the following calculates cash flow from operations?

EBIT + Depreciation - Taxes

How is income defined?

Revenue minus expenses

Changes in notes payables are included in the ______ section of the accounting statement of cash flows.

financing

Changes in capital spending can be negative when the acquisition of fixed assets is ______ the sale of fixed assets.

less than

Cash flow from operations is calculated by adding depreciation to EBIT and ______ current taxes.

subtracting

If a firm's current assets equal $200 and its current liabilities equal $150, then its net working capital equals ______.

$50

True or false: For financial analysis, financial statements and accounting numbers are more important than cash flows.

False

True or false: Operating cash flow includes capital spending and working capital requirements.

False

The activity of making net payments to creditors and owners (excluding interest) is called a(n) ______ activity in the accounting statement of cash flows.

Financing

When a firm pays out fewer dividends, it ______ the accounting value of its retained earnings.

Increases

The price at which willing buyers and sellers would trade is called ______ value.

Market

If the acquisition of fixed assets is $10,000,000 and the sales of fixed assets is $15,000,000, capital spending will be:

Negative

Net capital spending is equal to ending net fixed assets minus beginning net fixed assets ____.

Plus depreciation

In the U.S., taxes on proprietorships and partnerships follow which type of system after passage of the Tax Cuts and Jobs Act of 2017?

Progressive Tax

What is the most important item that can be extracted from financial statements?

The firm's actual cash flows

The statement of cash flow explains changes in _____.

cash and equivalents

Cash flows from the acquisition and sale of fixed assets are located in the _______ activities section of the accounting statement of cash flows.

investing

Net capital spending is equal to the change in net fixed assets plus:

Depreciation