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
