FIN 3403 CHP 2 FSU

Residual value is the amount left over after paying _____.

Bondholders Preferred Stockholders Other debts holders Accounts Payable

The short run is a period when there are ____ costs.

Both fixed and variable

Which of the following are examples of short-run fixed costs?

Office rent Building insurance

Which are true concerning product costs?

Product cost are reported as cost of goods sold Product cost contain both fixed and variable costs.

Fixed costs are costs that will not change due to _______.

fixed commitments over a stated period of time

Long-Term liabilities represent obligations of the firm lasting over_____.

1 year

Long-term liabilities represent obligations of the firm lasting over_____?

1 year

If you earn an extra $100 of taxable income this year and owe taxes of $34 on that income, then your marginal tax rate is _____ percent.

34

What does stockholders equity represent?

A residual claim against the book value of the firms assets. (The book value of the firm's assets less the book value of its liabilities).

What is depreciation?

A systematic expensing of an asset based on the assets estimated life.

Which of the following are current assets?

Account receivable Inventory

Which of the following are period costs?

Administrative expenses General expenses Selling costs

Liquidity refers to the ease of changing ______.

Assets to cash

Rank the Following assets from most liquid to least liquid?

Cash Equivalents Accounts receivable Inventory Plant and Equipment

Net working capital plus current liabilities equal____?

Current assets

The more debt a firm has, the greater its:

Degree of financial leverage

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

Equipment

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.

Which of the following is shown on the left-hand side of the balance sheet?

Fixed assets

What does GAAP stand for?

Generally accepted accounting principles.

Which of the following do NOT appear on a balance sheet?

Good management Favorable economic conditions Talented employees

Why is positive net working capital important?

It means the firm should have suffivient cash to meet its current obligations.

Whose responsibility is it to create value for a firm?

Management

Most importantly, assets provide _____ to the firm

Value

In the long run, all costs are ____.

Variable

_____ cost change as the output of the firm changes.

Variable

A customer has yet to pay the bill for products purchased on credit. The seller records this debt in which balance sheet account?

Account Receivable

The use of financial leverage can:

Increase the potential reward for investors Greatly magnify both gains and losses Increase the chance of financial distress and business failure

Current assets that can be turned into cash within _____ months.

Twelve

Which of these questions can be answered by reviewing a firms balance sheet?

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

____ Income is money earned after interest and taxes.

Net

Which of the following are fixed assets?

Plant Land Patents

How is the average income tax computed?

Total tax bill / Total taxable income

Which of the following is true about the difference between the income statement and cash inflows and outflows?

Cost of raw material purchased on credit are accounts payable rather than cash outflows until they are paid, which may be in a different period. Sales on credit are accounts receivable rather cash inflows until they are collected, which may be in a different period. Income taxes are often deferred, so the amount on the income statement may not represent the amount to check to the IRS.

Accounting profit _____ cash flow.

Differs from

Asset can be described as items that:

A firm owns Provide market value to the firm Generate revenue

Book value of assets is generally:

Not what the asset are actually worth

Which of the following are classified as liabilities on a firms balance sheet?

Notes payable Accounts payable

The short run for a firm is the period of the time during which____?

Some cost are fixed Output can vary

The accounting equation shows that stockholder's equity equals assets _____ liabilities.

Minus

If a firms current asset are $100 and its current liabilities are $80, then its net working capital is:

20

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

Matching

Which one of the following complies with GAAP?

Matching revenues with expenses.

What are two classifications of cost that, in practice, financial accountants tend to classify?

Period cost Product costs

Which of these are generally considered to be short-run fixed costs?

Rent payments for a warehouse Management salaries Property taxes

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

Time and Cost GAAP Cash versus non-cash items

Which of the following are included in the fixed asset portion of a balance sheet?

Trademarks Accumulated depreciation

Which of the following will be found in the liabilities section of a firms balance sheet?

Long-Term bonds Notes Payable