BF chapter 2

Which one of the following changes during a year will increase cash flow from assets but not affect the operating cash flow?

Increase in accounts payable

Cash flow to creditors is defined as:

interest paid minus net new borrowing.

Cash flow to creditors increases when:

long-term debt is repaid.

Given a profitable firm, depreciation:

lowers taxes.

The tax rate that determines the amount of tax that will be due on the next dollar of taxable income earned is called the:

marginal tax rate

If a firm has a negative cash flow from assets every year for several years, the firm:

may be continually increasing in size.

The market value:

of an asset tends to provide a better guide to the actual worth of that asset than does the book value

Net working capital is defined as:

current assets minus current liabilities

Which one of the following statements concerning the balance sheet is correct?

Assets are listed in descending order of liquidity.

Which one of the following terms is defined as the total tax paid divided by the total taxable income?

Average tax rate

Net working capital includes:

an invoice from a supplier.

Which one of these is correct? -Depreciation has no effect on taxes. -Interest paid is a noncash item. -Taxable income must be a positive value. -Net income is distributed either to dividends or retained earnings. -Taxable income equals net income × (1 + Average tax rate).

Net income is distributed either to dividends or retained earnings

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

Net working capital decreases when:

a dividend is paid to current shareholders.

Production equipment is classified as:

a tangible fixed asset

Cash flow to stockholders is defined as:

dividends paid minus net new equity raised

Net capital spending is equal to:

ending net fixed assets minus beginning net fixed assets plus depreciation.

Paid-in surplus is classified as:

owners' equity

A negative cash flow to stockholders indicates a firm:

received more from selling stock than it paid out to shareholders.

Market values:

reflect expected selling prices given the current economic situation.

Net income increases when:

revenue increases

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

Cash flow from assets is defined as

operating cash flow minus the change in net working capital minus net capital spending.