FNAN 300 Ch. 2

A company's_____ tax rate is its tax bill divided by its total taxable income, and its _____ tax rate is the tax rate it pays on the next dollar of income

average; marginal

the GAAP matching principle requires revenues to be matched with:

expenses

______ is not a component of cash flow from assets?

financing expenses

Costs that do not change in the short run arise because of:

fixed commitments

Under GAAP, assets are generally carried on a firm's balance sheet at:

-historical cost -book value

How is the average income tax rate computed?

total tax bill / total taxable income

If a firm's current assets equals $200 and its current liabilities equal $150, then its net working capital equals _____.

$50

Marginal tax rates are the most important tax rates because:

- financial decision are usually baed on new cash flows -incremental cash flows are taxed at marginal tax rates

According to GAAP, when is revenue recognized on a income statement?

-When the value of an exchange of goods or services is known or reliably determined -when the earnings process is virtually completed

which of the following are components of cash flow from assets

-capital spending -change in net working capital -operating cash flow

Depreciation is the accountant's estimate of the cost of ____ used in the production process matched with the benefits produced from owning it

-equipment -fixed assets

Marginal tax rates are the most important tax rates because:

-financial decision are usually based on new cash flows -Incremental cash flows are taxed at marginal tax rates

Under GAAP, asses are generally carried on a firm's balance sheet at:

-historical cost -book value

Which of the following are classified as fixed assets on the balance sheet?

-land -buildings -equipment

Which of the following are classifies as liabilities on a firm's balance sheet?

-long-term debt -accounts payable

Assets can be categorized as:

-tangible and intangible assets -current and fixed assets

Which of the following is an example of a non-cash item? on an income statement?

Depreciation

Which of the following is NOT a component of cash flows from assets?

Financing expenses

What is the purpose of the income statement?

To measure performance over a set period of time

A balance sheet reflects a firm's:

accounting value on a specific date

A balance sheet reflects a firms:

accounting value on a specific date

In the long run, costs ma be considered:

all variable

In the long-run, costs may be considered as:

all variable

The cash flow identity states that cash flows from _____ should equal cash flows to creditors and equity investors

assets

On the balance sheet, assets are listed at their _____ value:

book

The short run is a period where there are _____ costs

both fixed and variable

Non-cash items do not affect ______.

cash flow

In finance, the value of a fir depends on its ability to generate:

cash flows

In finance, the value of a firm depends on its ability to generate

cash flows

Net working capital equals:

current assets minus current liabilities

The more debt a firm has, the greater its:

degree of financial leverage

Cashflow to creditors equals:

interest paid minus net new borrowing

Cash flow to creditors equals:

interest paid minus new borrowing

The price at which willing buyers and sellers would trade is called ____ value.

market

The price at which willing buyers and sellers would trade is called ______ value.

market

Physical assets are termed:

tangible

Changes in capital spending can be negative if:

the firm sold more assets than it purchased

Common stockholders are entitles to the difference between _____ and _____

total assets; total liabilities

Financial leverage refers to a firm's:

use of debt in its capital structure

Current assets ____ exceed current liabilities in a healthy firm

usually

____ costs change as the output of the firms changes

variable

What questions can be answered by reviewing a company's balance sheet?

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

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

-time and costs -GAAP -cash versus non-cash items

Easiest to hardest to turn assets into cash:

1. Cash equivalents 2. Accounts Receivables 3. Inventory 4. Plant and equipment

What does stockholder's equity represent?

A residual claim against the firm's assets

Which of the following is an example of a non-cash item on an income statement?

Depreciation

The last item (or bottom line) on the income statement is typically the ______.

net income

Net capital spending is equal to the change in net fixed assets plus:

depreciation