Finance 450

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Which of the following are classified as liabilities on the firm's balance sheet?

-Long-term debt -Accounts Payable

Which of the following is an example of a non-cash item on an income statement? -depreciation -costs -dividends -retained earnings

Depreciation

What should you keep in mind when examining an income statement?

Gaap, cash versus non-cash items, time and costs

For financial decision-making purposes, the most important tax rate is the ___ tax rate

Marginal

The _____ principle of GAAP states that costs associated with a good or service should be recorded at the same time as the revenue from selling that good or service

Matching

The last item on the income statement is typically the?

Net income

Cash flow to stockholders equals _____

dividends paid minus net new equity raised

Costs that do not change in the short run arise because of _____

fixed commitments

Which of the following is a current asset?

inventory

For a mature operating cash flow:

it is a sign of trouble if negative over a long period of time and is usually positive

On the balance sheet, assets are listed at their _____ value

market

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

market

Non-cash items are expenses that directly affect _____ but do not directly affect ______

net income; cash flow

A primary reason that accounting income differs from cash flow is that an income statement contains _______

noncash items

What is Liquidity?

the speed and ease with which an asset can be converted to cash

Common stockholders are entitled to the difference between _____ and _____

total assets ; total liabilities

If dividends are $100, stock sold is $10, and stock repurchased is $25, what is the cash flow to stockholders?

$115

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

$20

If ending net fixed assets are $100, beginning net fixed assets are $60, and depreciation is $10, then the change in capital spending is _____

$50 (100-60+10)

If interest paid is $100 and net new borrowing is $150, then cash flow to creditors equals:

-$50

What are components of cash flow from assets?

-Change in net working capital -Capital spending -Operating cash flow

What are the components of cash flow from assets?

-Change in net working capital -Operating cash flow -Capital spending

Which of the following are classified as fixed assets on the balance sheet?

-Equipment -Buildings -Trademark

Which of these questions can be answered by reviewing a firm's balance sheet?

-How much debt is used to finance the firm -What is the total amount of assets the firm owns

According to GAAP, when is revenue recognized on an income statement?

-When the earnings process is virtually completed and when the value of an exchange of goods or services is known or reliably determined.

Non-cash items are ______ that _____ cash flow.

-expenses; do not directly affect

Marginal tax rates are the most important tax rates because:

-financial decisions are usually based on new cash flows -incremental cash flows are taxed at marginal tax rates

Long-term liabilities represent obligations of the firm lasting over _____

1 year

Rank the ease of turning the following assets into

1. Cash equivalents 2. accounts receivable 3. Inventory 4. Plant and equipment

According to the originators of the current U.S. corporate tax code, the only rates are:

15%, 25%, 34%, 35%

What does stockholders' equity represent?

A residual claim against the firm's assets

A customer has yet to pay the bill for products purchased on credit. The customer's trade credit is recorded in which balance sheet account?

Accounts receivable

Net working capital will be negative when current assets _____ current liabilities

Are less than

liquidity refers to the ease of changing ____ to _____

Assets to cash

Product costs are usually shown on the income statement under the heading of _______

COGS

In finance, the value of a firm depends on its ability to generate _____

Cash flows

When a firm smooths earning to please investors, it is called?

Earnings management

depreciation is the accountant's estimate of the cost of _____ used in production process matched with the benefits produced from owning it

Equipment and fixed assets

What does GAAP stand for?

Generally Accepted Accounting Principles

Physical assets are termed ______ assets?

Tangible

What is the purpose of the income statement?

To measure performance over a set period of time

Free cash flow is better described as?

Total distributable cash flow

How is the average income tax rate computed?

Total tax bill / Total taxable income

(T/F) Free cash flow is very similar to cash flow from assets

True

T or F: Operating cash flow does not include depreciation or interest?

True

Current assets ______ exceed current liabilities in a healthy firm

Usually

According to GAAP, when is income reported?

When it is earned or accrued

A balance sheet reflects a firm's?

accounting value on a specific date

In the long-run, costs may be considered as ________

all variable

The cash flow identity states that the cash flow from _____ should equal cash flows to creditors and equity investors

assets

Under GAAP, assets are generally carried on a firm's balance sheet at ______

book value and historical cost

The more debt a firm has the greater its?

degree of financial leverage

Changes in capital spending can be negative if?

the firm sold more assets than it purchased

On which side of the balance sheet do liabilities appear?

the right side


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