chapter 2 wk 2
EBIT((Earning before Interest) - Interest expense
EBT
If a firm's current assets equal $200 and its current liabilities equal $150, then its net working capital equals ______.
$ 50 Reason: Correct. $200 − 150 = $50.
If a firm's current assets are $100 and its current liabilities are $80, then its net working capital is ______.
$20 Reason: Correct. $100 − 80 = $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 Reason: Correct. $100 - 60 + 10 = $50.
If ending net fixed assets are $100, beginning fixed assets are $40, and depreciation is $10, then the change in capital spending is _____.
$70
In finance, the value of a firm depends on its ability to generate ______.
Cash flows Reason: Correct. In finance, the value of a firm depends on its ability to generate cash flows.
Which one of the following is true?
Cash flows can be derived from financial statements
Taxes represent which of the following ______.
Cash outflow
Net fixed assets - Beginning net fixed assets + Depreciation
Change in capital spending
The cash flows from financing activities include changes in ______.
Common stock Long-term debt
The cash flow identity states that cash flow from assets equals cash flows to ____.
Creditors and stockholders
Net Income/total shares outstanding
Earnings per share
Depreciation is the accountant's estimate of the cost of ______ used up in the production process.
Equipment
True or false: Operating cash flow includes capital spending and working capital requirements.
False
Changes in notes payables are included in the ______ section of the accounting statement of cash flows.
Financing
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
Selling a firm's plant and equipment results in a change in ____.
Fixed assets
Revenue - Expenses
Income
Revenue minus expenses is the accounting definition of ______
Income
Stockholders' equity ______ when retained earnings increase.
Increases
When a firm pays out fewer dividends, it ______ the accounting value of its retained earnings.
Increases
Cash flow to creditors
Interest Expenses Paid - [Long term debt at the end - Long term Debt at the Beginning]
Cash flows from the acquisition and sale of fixed assets are located in the _______ activities section of the accounting statement of cash flows.
Investing
Cash flow analysis is popular because
It is harder to "spin" and mislead
Changes in capital spending can be negative when the acquisition of fixed assets is ______ the sale of fixed assets.
Less than
The short run for a firm is the period of time during which ______.
Some costs are fixed Output can vary
An official accounting statement that helps to explain the change in cash and cash equivalents is called the _____
Statement of cash flows
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
EBT * Tax%
Taxes
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
______ refers to the quickness and ease with which assets can be converted to ________
liquidity____cash
Cash flow from operations is calculated by adding depreciation to EBIT and ______ current taxes.
subtracting Reason: Correct. Cash flow from operations is calculated by adding depreciation to EBIT and subtracting taxes.
If net income is $97 million, depreciation is $33 million, and deferred taxes are $22 million, what is the cash flow from operating activities?
152 97+33+22
The federal corporate tax rate in the United States became a flat ____Blank 1Blank 1 tax , Incorrect Unavailable percent with the passage of the Tax Cuts and Jobs Act of 2017.
21
The statement of cash flow explains changes in _____.
Cash and equivalents
interest paid - net new borrowing
Cash flow paid to creditors
Dividends paid - Net new equity raised
Cash flow to stockholders
One of the reasons why cash flow analysis is popular is the difficulty in manipulating, or spinning_______
Cash flows
dividends/total shares outstanding
Dividends per share
To smooth its earnings, a firm is more apt to sell appreciated property and realize the income on that sale when its other earnings are _____.
Down
Sales + Costs + Depreciation expense
EBIT
In the United States, corporate taxes are which type of system following passage of the Tax Cuts and Jobs Act of 2017?
Flat tax
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 sale of fixed assets is $15,000,000, capital spending will be ______.
Negative
EBT-Tax rate
Net Income
Which of the following are examples of financing activities?
Net payments to creditors Net payments to owners
Current assets - Current liabilities
Net working Capital
Net Income + Depreciation
Operating Activities
Earnings before Interest + Dep - taxes
Operating cash flow
How is income defined?
Revenue minus expenses
What is depreciation?
a systematic expensing of an asset based on the asset's estimated life Reason: Correct. Depreciation is the accountant's estimate of the cost of equipment used up in the production process.
On the balance sheet, assets are listed at their _____ value.
book
which of the following will change fixed assets
buying a new machine & selling a plant the issuer of the stock
Which of the following cash flows appear in the financing activities section of the accounting statement of cash flows?
payment of dividends repurchase of stock retirement of long-term debt
Assets - Liabilities
stockholders equity
If net income is $77 million, depreciation is $13 million, and deferred taxes are $2 million, what is the cash flow from operating activities?
92 77+13+ 2
A balance sheet reflects a firm's ______ value on a particular date.
Accounting
What does a balance sheet reflect about a firm?
Accounting value on a specific date
Which of the following are included in cash flow from investing activities?
Acquisition of fixed assets Sales of fixed assets
The cash flow identity states that cash flows from ______ should equal cash flows to creditors and equity investors.
Assets
liabilities + stockholders equity
Assets
Liquidity refers to the ease of changing _____.
Assets to cash
Tax bill/taxable Income
Average tax rate
The short run is a period when there are ______ costs.
Both fixed and variable
