Fin Chp 3 & 4

Operating income is derived from the firm's regular core business. Operating income is calculated as Revenues less Operating costs. Operating costs do not include interest or taxes.

True

What is correct?

The assets section of a typical company's balance sheet begins with cash, then lists the assets in the order in which they will probably be converted to cash, with the longest lived assets listed last.

What is a use of cash?

The balance of inventory increases

Analysts who follow Howe Industries recently noted that, relative to the previous year, the company's net cash provided from operations increased, yet cash, as reported on the balance sheet, decreased. Which of the following factors could explain this situation?

The company made large investments in fixed assets.

Which of the following would indicate an improvement in a company's financial position, holding other things constant?

The current and quick ratios both increase.

If the CEO of a large, diversified, firm were filling out a fitness report on a division manager (i.e., "grading" the manager), which of the following situations would be likely to cause the manager to receive a better grade? In all cases, assume that other things are held constant.

The division's basic earning power ratio is above the average of other firms in its industry.

Capital market instruments include

both long-term debt and common stocks.

The increase in a company's cash balance is equal to its net income after tax

false

What is the correct order to subtract expenses from sales revenue on the income statement?

operating, the depreciation, then interest tax

What describes a balance sheet?

reports the amount and composition of assets, liabilities, and equity at a given date

What is a source of cash?

the company sells additional common stock to its owners