Finance test 1 chapter 2

which one of the following statements concerning the balance sheet is correct

assets are listed in descending order of liquidity

cash flow to creditors is equal to

beginning long-term debt minus ending long-term debt plus interest paid

over the past year, a firm decreased its current assets and increased its current liabilities. As a result, the firm's net working capital:

had to decrease

cash flow to creditors is defined as

interest paid minus net new borrowing

depreciation does which one of the following for a profitable firm

lowers taxes

an income statement prepared according to GAAP

records expenses based on the matching principle

which one of the following is included in the market value of a firm but not in the book value

reputation of the firm

the matching principle states that

the costs of producing an item should be recorded when the sale of that item is recorded as revenue

firms that compile financial statements according to GAAP

can still manipulate their earnings to some degree

which one of the following has nearly the same meaning as free cash flow

cash flow from assets

which one of the following will decrease the liquidity level of a firm

cash purchase of inventory

which one of the following is an intangible fixed asset

copyright

an increase in which one of the following will increase operating cash flow for a profitable, tax-paying firm

depreciation

cash flow to stockholders is defined as

dividends paid minus net new equity raised

operating cash flow is defined as

the cash that a firm generates from its normal business activities

net working capital is defined as

current assets minus current liabilities

net capital spending is equal to

ending net fixed assets minus beginning net fixed assets plus depreciation

which one of the following is included in net working capital

invoice from a supplier for inventory purchased

if a firm has a negative cash flow from assets every year for several years, the firm

may be continually increasing in size

which one of the following statements related to the income statement is correct

net income is distributed either to dividends or retained earnings

which one of the following decreases net income but does not affect the operating cash flow of a firm which owes no taxes for the current year

noncash item

which one of the following is an equity account

paid in surplus

which one of the following indicates that a firm has generated sufficient internal cash flow to finance its entire operations for the period

positive cash flow from assets

tressler industries opted to repurchase 5,000 shares of stock last year in lieu of paying a dividend. The cash flow statement for last year must have which one of the following assuming that no new shares were issued

positive cash flow to stockholders

which one of the following will increase cash flow from assets but not affect the operating cash flow

sale of a fixed asset

the recognition principle states that

sales should be recorded when the earnings process is virtually completed and the value of the sale can be determined

which one of the following statements is correct

shareholders equity is the residual value of a firm

highly liquid assets

can be sold quickly at close to full value

all else equal, an increase in which one of the following will decrease owners equity

increase in accounts payable

which one of the following relates to a negative change in net working capital

increase in current liabilities with no change in current assets for the period

which one of the following will decrease the net working capital of a firm

making a payment on a long-term debt

which of the following is the tax rate that applies to the next dollar of taxable income that a firm earns

marginal tax rate

delivery trucks are classified as

tangible fixed assets

which one of the following statements is correct concerning a firms fixed assets?

the market value is the expected selling price in today's economy

which one of the following statements concerning market and book values is correct

the market value tends to provide a better guide to the actual worth of an asset than does the book value

the concept of marginal taxation is best exemplified by which one of the following

Mitchells grocer increased its sales by $52,000 last year and had to pay an additional $16,000 in taxes

which one of the following is included in net working capital

accounts payable

which one of the following will increase the cash flow from assets for a tax-paying firm, all else constant

an increase in depreciation

which one of the following terms is defined as the total tax paid divided by the total taxable income

average tax rate

the financial statement that summarizes a firms accounting value as a particular date is called the

balance sheet

the accounting statement which measures the revenues, expenses and net income of a firm over a period of time is called the

income statement

financial leverage

increases the potential return to the shareholders

the market value of a firms fixed assets:

is equal to the estimated current cash value of those assets

The corporate tax structure in the U.S. is based on a

modified flat-rate tax

shareholders equity is equal to

net fixed assets minus long-term debt plus net working capital

cash flow assets is defined as

operating cash flow minus the change in net working capital minus net capital spending

a negative cash flow to stockholders indicates a firm

received more from selling stock than it paid out to shareholders

an increase in which one of the following will increase net income

revenue

which two of the following determine when revenue is recorded on the financial statements based on the recognition principle

the earnings process is virtually complete the value of a sale can be reliably determined