Chapter 2

Net working capital will be negative when current assets ______ current liabilities. a. are less than b. equal d. are greater than

A

True or false: Contract liabilities put the firm at risk of default. a. True b. False

A

When is the appreciation on property recognized as a gain? a. When the property is sold b. When the appreciation occurs c. At the discretion of the property owner d. Never

A

Which one of these is considered to be the most liquid? a. Accounts receivable b. Land c. Inventory d. Equipment & machines

A

The first step in calculating cash flow from operating activities is to adjust net income for ____. a. financing and investment activities b. any changes in retained earnings c. changes in taxes and interest d. non-cash items and net working capital changes

D

The short run is ______. a. defined as six months b. an imprecise period of time c. defined as one year d. defined as one month

B

Which are true concerning product costs? Select all that apply a. Product costs contain both fixed and variable costs. b. Product costs are reported as costs of goods sold. c. Product costs contain selling expenses. d. Product costs are reported as administrative expenses.

A & B

In determining the economic and financial condition of a firm, ______ is more revealing than net income. a. retained earnings b. operating income c. total assets d. cash flow

D

In the long run, all costs are ______. a. variable b. fixed c. redundant d. operational

A

Selling a firm's plant and equipment results in a change in ____. a. current liabilities b. goodwill c. intangible assets d. fixed assets

D

Non-cash items do not affect _____. a. earnings per share b. net income c. retained earnings d. cash flow

D

If a firm's current assets equal $200 and its current liabilities equal $150, then its net working capital equals ______. a. $50 b. $350 c. $200 d. $150

A

Net earnings refers to income earned ______. a. prior to taxes b. before interest and taxes c. net of operating and administrative costs d. after interest and taxes

D

The activity of making net payments to creditors and owners (excluding interest) is called a(n) ______ activity in the accounting statement of cash flows. a. operating b. borrowing c. investing d. financing

D

Non-cash items are ______ that ____ cash flow. a. expenses; decrease b. revenues; do not directly affect c. expenses; do not directly affect d. expenses; increase

C

Assume revenues are $100, costs are $50, depreciation is $10, the tax rate is 30 percent, and there are 100 shares outstanding. What is earnings per share (EPS)? a. $.28 b. $.41 c. $.17 d. $.35

A [(100-50-10)(1-.30)]/100

True or false: Operating cash flow includes capital spending and working capital requirements. a. True b. False

B

Which of the following reduces revenues but does not increase nor decrease cash flow? a. the sale of inventory for cash b. cash payments c. the purchase of inventory on credit d. noncash items

D

The change in net working capital is usually ____ in a growing firm

Positive

Adjusting cash flows for financing activities is the ______ step in the preparation of an accounting statement of cash flows. a. first b. third c. second

B

True or false: In the short run, all costs are fixed. a. True b. False

B

Which of the following shows performance during the year? a. balance sheet b. statement of cash flows c. income statement d. statement of retained earnings

B

Which of the following is NOT important to consider when analyzing an income statement? a. GAAP b. Noncash items c. Costs d. Amount of cash e. Time

D

Which of the following are period costs? Select all that apply a. General expenses b. Selling costs c. Cost of goods sold d. Administrative expenses

A, B, & D

Which of the following obligations can put a firm at risk of bankruptcy if not paid? Select all that apply a. Interest payment on outstanding bonds b. Common stock dividends c. Principal payments on debt d. Interest payments on debt

A, C, & D

In March, Al purchased 10 video games for his store's inventory. In April, he sold five games on credit and received the payment in May. The income should be reported in the month of ____

April

An official accounting statement that helps to explain the change in cash and cash equivalents is called the _____. a. income statement b. statement of cash flows c. cash and equivalents report d. balance sheet

B

True or false: In the event of bankruptcy, stockholder's are the first to be paid. a. True b. False

B

What is treasury stock? a. Just another name for common stock b. Stock the firm has repurchased c. Outstanding stock d. Stock the U.S. Treasury has purchased

B

What is the most important item that can be extracted from financial statements? a. The firm's total sales b. Total dividends per year c. The firm's actual cash flows d. The firm's total net income

C

Which one of these can put a firm at risk of bankruptcy? a. Repurchase of common stock b. Residual obligations c. Fixed cash obligations d. Dividends on common stock

C

______ income is earnings after interest and taxes. a. Gross b. Non-operating c. Net d. Operating

C

According to GAAP, when is income reported? a. When it is first anticipated b. When cash payment is received c. Whenever the firm decides to report it d. When it is earned or accrued

D

Deferred taxes arise from differences in true taxable income and ______ income. a. economic b. inflation-adjusted c. market value d. accounting

D

The statement of cash flow explains changes in _____. a. retained earnings b. net income c. non-cash items d. cash and equivalents

D

If a firm acquires $200 in fixed assets and sells $250 worth of fixed assets, the cash flow from investing activities is: a. +$50 b. -$50 c. $200 d. $450 e. $250

A

What impact will the collection of cash from a firm's credit customers have on its net working capital? a. no effect b. It will increase net working capital. c. It will decrease net working capital. d. Net working capital will increase by the amount of cash collected.

A

Increasing its liquid assets will enable a firm to do which of the following? a. Increase its ability to avoid financial distress b. Increase its rate of return c. Increase its ability to meet short-term obligations d. Reduce its investment in receivables and inventory

A & C

Debt service implies paying ____. a. only interest b. interest and principal c. interest, principal, and dividends d. only principal

B

Financing activities involve cash flows: a. into the firm b. to and from creditors c. out of the firm d. to and from employees

B

On the balance sheet, assets are listed at their _____ value. a. economic b. book c. market d. estimated

B

Operating cash flow reflects which one of these? a. Interest payments b. Tax payments c. Changes in net working capital d. Capital spending

B

The ______ principle of GAAP states that costs associated with a good or service should be recorded at the same time as the revenue from selling that good or service. a. tax b. matching c. historic d. revenue

B

The accounting equation shows that stockholders' equity equals assets ______ liabilities. a. divided by b. minus c. plus d. times

B

The actual economic value of an asset varies ______ the asset's future cash flows. a. indirectly with b. directly with c. independent of

B

The cash flow identity states that cash flow from assets equals cash flows to ____. a. creditors and bondholders b. creditors and stockholders c. equity investors and the government d. equity investors and stockholders

B

The cash flow identity states that cash flows from ______ should equal cash flows to creditors and equity investors. a. changes in net working capital b. assets c. operations d. net working capital

B

The corporate tax code is _____. a. fairly straightforward b. extremely complicated c. easy as pie

B

True or false: Stockholders' equity appears on the left-hand side of the balance sheet. a. True b. False

B

True or false: The corporate tax code is simplistic and makes good economic sense. a. True b. False

B

Under GAAP, audited financial statements of U.S. firms carry assets at _______. a. mark-up b. cost c. market value d. less than cost e. replacement value

B

What does it mean when the firm has positive net working capital? a. It results in the highest retained earnings possible. b. It means the firm should have sufficient cash to meet its current obligations. c. It allows the firm to become debt-free. d. It results in the lowest possible tax bill.

B

What does stockholders' equity represent? a. A fixed claim against the firm's assets b. A residual claim against the firm's assets c. A fixed claim against the firm's liabilities d. A residual claim against the firm's liabilities

B

What does the operations section of an income statement report? a. Retained earnings accumulations b. Revenues and expenses from principal operations c. Only revenues and operating cash flows d. Only expenses from financing activities

B

When credit sales are made working capital ______. a. remains stable b. declines c. grows

B

Which one of the following calculates cash flow from operations? a. EBIT - Depreciation + Taxes b. EBIT + Depreciation - Taxes c. Net Income + Depreciation + Taxes d. EBIT - Depreciation - Taxes

B

Which of the following items would increase the cash flow to stockholders as they increase? Select all that apply a. stock sales b. dividends c. stock repurchases

B & C

The cash flows from financing activities include changes in: Select all that apply a. taxes b. long-term debt c. accounts receivable d. common stock

B & D

Which of the following are included in the fixed asset portion of a balance sheet? Select all that apply a. Cash and equivalents b. Plant and equipment c. Capital surplus d. Trademarks

B & D

Which of these will result from a firm using cash to buy inventory? Select all that apply a. Net working capital would increase b. Inventory would increase c. Net working capital would decrease d. Cash would decrease

B & D

Cash flow to stockholders is the amount of cash that a company pays to its stockholders less any cash received from _______. a. cash repayments of outstanding loans b. investing in inventory c. issuing new shares of stock d. payments to creditors

C

Holding too many liquid assets can be harmful for a firm because such assets are generally: a. more profitable than less liquid assets b. too profitable c. less profitable

C

If a firm's net working capital goes from $150 in 2013 to $130 in 2014, then the change in net working capital is: a. $130 b. $150 c. -$20 d. +$20

C

The total cash flow of the firm includes ____. a. only operating and net working capital cash flows b. only capital and net working capital cash flows c. operating, capital spending, and net working capital cash flows d. only operating and capital cash flows

C

What does a positive change in net working capital tell us about a firm? a. The firm's business is shrinking. b. The firm's business is static. c. The firm's business is growing.

C

Which of the following increases a firm's cash flow that can be used for capital spending? a. Payment of income taxes b. Increase in investments c. Sale of fixed assets d. Buyback of outstanding shares of common stock

C

Which of these are reported in the operations section of an income statement? Select all that apply a. After-tax cash flows b. Interest paid to bondholders c. Expenses from principal operations d. Revenues from principal operations

C & D

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. a. 34 b. 38 c. 35 d. 39

A

In finance, the value of a firm depends on its ability to generate ______. a. cash flows b. earnings per share c. net working capital d. net income

A

True or false: For financial analysis, financial statements and accounting numbers are more important than cash flows. a. True b. False

B

Net capital spending is equal to ending net fixed assets minus beginning net fixed assets ____. a. plus depreciation b. minus the change in inventory c. plus the change in inventory d. minus depreciation

A

Net capital spending is equal to the change in net fixed assets plus: a. depreciation b. dividends c. notes payable d. retained earnings

A

A firm pays $8,400 in interest and has net new borrowing of -$3,900. The cash flow paid to creditors is ____.

12,300

A balance sheet reflects a firm's ______ value on a particular date. a. accounting b. market c. hidden d. fundamental

A

Accounting profit ____ cash flow. a. differs from b. is identical to c. is always larger than

A

Under a flat-rate tax, all income levels are taxed at ______. Select all that apply a. the same marginal rate b. different average rates c. the same average rate d. different marginal rates

A & C

What are two classifications of costs used by financial accountants? Select all that apply a. Product costs b. Fixed costs c. Period costs d. Variable costs

A & C

What does the asset side of the balance sheet depend on? Select all that apply a. How management chooses to conduct the firm's business b. Management's choice of a capital structure c. The nature of the business d. Management's choices among forms of debt

A & C

Which of these are generally considered to be short-run fixed costs? a. Management salaries b. Income taxes c. Overhead expenses d. Property taxes

A, C, & D

Cash flow from investing activities includes which of the following? Select all that apply a. acquisition of fixed assets b. acquisition of current assets c. sales of current assets d. changes in capital assets e. sales of fixed assets

A, D, & E

Changes in capital spending can be negative when the acquisition of fixed assets is ______ the sale of fixed assets. a. greater than b. less than c. equal to

B

________ are not a cash outflow. a. General expenses b. Deferred taxes c. Current taxes d. Selling expenses

B

Holding more liquid assets is beneficial in the following ways: Select all that apply a. liquid assets generate investment income b. decreases the likelihood of financial distress c. enables a firm to meet its short-term obligations

B & C

One of the most important limitations of a ____ ____ is that it shows only ____ value, rather than market value

Balance Sheet Book

Which of the following do not directly affect cash flow? a. Interest payments b. Wages c. Depreciation d. Cash sales

C

Which of the following is NOT a component of operating cash flow? a. sales of goods and services b. tax payments c. capital spending

C

Which of the following measures whether the cash available in the near term will exceed the required cash payments. a. current assets b. marginal capital c. net working capital d. cash flow

C

Which of these is management's responsibility in the firm? a. Maximize profits without regard for other concerns b. Create costs for the firm that exceed value c. Create value for the firm that exceeds cost

C

A company pays out $30,000 in cash dividends, buys back $5,000 of shares from investors, and sells $60,000 of stock to investors. The result is negative cash flow to stockholders of ______. a. $30,000 b. $95,000 c. $35,000 d. $25,000

D

Bondholders claims against a firm's assets are _______. a. indeterminate b. negotiable c. residual d. fixed

D

The primary difference between the accounting cash flow and the cash flow of the firm is ____ expense

Interest

Accounting ____ refers to the speed and ease with which assets can be converted to cash.

Liquidity

The ____ tax rate is the tax paid on each extra dollar of income while the ____ tax rate is the percentage of income paid in taxes

Marginal Average

_____ _____ is the price at which willing buyers and sellers would trade the assets.

Market Value

Net cash flow is ____ when current assets are greater than current liabilities

Positive

Negative capital spending would mean more fixed assets were ____ than ____

Sold Purchased

The amount of taxes paid on a firm's earnings is determined by the a set of rules known as the ____ ____

Tax code

Free cash flow is better described as ____. a. total distributable cash flow b. non-cash expenses c. dividend and interest payments d. fixed asset investments

A

The purpose of a(n) ______ is to measure performance over a set period of time. a. prospectus b. balance sheet c. income statement d. statement of cash flows

C

True or false: Management must decide which types of businesses to engage in. a. True b. False

A

True or false: Net income equals cash flow. a. True b. False

B

Production costs such as raw materials, direct labor, and manufacturing overhead are known as ______. a. taxes b. period costs c. product costs

C

The non-operating section of the income statement includes _____ costs. a. labor b. administrative c. financing d. operations

C

What is a primary difference between the accounting cash flow and the financial cash flow of a firm? a. Timing differences b. Inflation expectations c. Interest expense d. Tax differences

C

Since new cash flows are taxed at ______ tax rates, those tax rates are the most important. a. marginal b. reduced c. equal d. average

A

The second step in preparing the accounting statement of cash flows is to calculate the ____. a. taxes and insurance expenses b. investing activities c. financing activities d. operating activities

B

What is depreciation? a. A systematic cash contribution to a company's checking account to fund a new asset b. A systematic expensing of an asset based on the asset's estimated life c. The market value of an asset minus the asset's book value d. The current market value of an asset minus the asset's initial cost

B

Which of the following is included in the nonoperating section of the income statement? a. costs of goods sold b. interest expense c. revenues d. depreciation

B

True or false: Revenue includes both cash and credit sales of goods and services. a. True b. False

A

Which of the following cash flows appear in the financing activities section of the accounting statement of cash flows? Select all that apply a. Repurchase of stock b. Retirement of long-term debt c. Payment of interest d. Payment of dividends

A, B, & D

When a firm pays out fewer dividends, it ______ the accounting value of its retained earnings. a. has no effect on b. increases c. lowers

B

EPS stands for ____ ____ ____

Earnings per share

Which of the following are current assets? Select all that apply a. Accounts receivable b. Inventory c. Buildings d. Patents and copyrights

A & B

Which of the following represent management decisions related to assets? Select all that apply a. Making versus buying commodities b. Cash versus credit sales c. Short-term versus long-term borrowing d. Cash versus marketable securities

A, B, & D

True or false: Appreciation of property will be recognized as income even if not realized. a. True b. False

B

Why might a supplier be interested in the amount of a firm's accounts payable? a. To determine the amount of stockholder's equity b. To note the size and general promptness of payments c. To determine who the specific firms owed

B

Which of the following are examples of non-cash items on an income statement? Select all that apply a. Current taxes b. Depreciation c. Deferred taxes d. Dividends

B & C

True or false: Bondholders have a higher claim to a firm's cash flow than stockholders do. a. True b. False

A

Which of these questions can be answered by reviewing a firm's balance sheet? Select all that apply a. What is the total amount of assets the firm owns? b. What is the amount of sales of the firm in this period? c. How much of the firm's net income was paid out in dividends? d. How much debt is used to finance the firm?

A & D

Interest expense is placed in the ______ section of the income statement. a. operations b. investing c. taxing d. non-operating

D

A positive operating cash flow indicates that the firm is generating enough cash to ______. a. pay operating costs b. pay out a dividend c. create valuable projects d. repurchase stock

A

Depreciation is the accountant's estimate of the cost of ______ used up in the production process. a. equipment b. labor c. inventory d. cash

A

To smooth its earnings, a firm is more apt to sell appreciated property and realize the income on that sale when its other earnings are _____. a. down b. exceedingly high. c. slightly up d. unchanged

A

Which of the following are tangible fixed assets? Select all that apply a. Land b. Plant c. Patents d. Accounts Receivable

A & B

According to GAAP, when is revenue recognized on an income statement? Select all that apply a. When the exchange of goods or services is completed b. After the related expenses are paid in full c. When the earnings process is virtually completed d. Only when cash has been received for the sale

A & C

How is the average income tax rate computed? a. Total tax bill / Total taxable income b. Total taxes paid over the last five years / 5 c. Last dollar of income earned / Amount of tax paid on that dollar of income d. Total taxable income / Marginal tax rate

A

Management decisions determine which of the following? a. The composition of the firm's assets and its liabilities b. Only the amount of equity invested by shareholders c. Only the composition of the firm's liabilities d. Only the composition of the firm's assets

A

Net working capital will be negative when current assets ______ current liabilities. a. are less than b. equal c. are greater than

A

Operating cash flow, capital spending, and additions to net working capital are the components of ______. a. total cash flow b. profit c. net income d. operating cash flow

A

The matching principle of GAAP requires revenues be matched with _____. a. expenses b. cash receipts c. net income d. retained earnings

A

True or false: Free cash flow is the total of cash flow to creditors and cash flow to stockholders. a. True b. False

A

True or false: Taxes can be a large cash outflow for a corporation. a. True b. False

A

True or false: The realization (timing) of income can be useful to a firm. a. True b. False

A

What does a balance sheet reflect about a firm? a. Accounting value on a specific date b. Earnings per share over a specified time period c. Income over a specified time period d. Economic value at a specific point in time

A

Who owns treasury stock? a. The issuer of the stock b. U.S. Treasury c. U.S. MInt d. Individual shareholders

A

Marginal tax rates are the most important tax rates because: Select all that apply a. incremental cash flows are taxed at marginal tax rates b. financial decisions are usually based on new cash flows c. because the IRS says so d. financial decisions are usually based on previous changes in cash flows

A & B

Which of the following are examples of short-run fixed costs? Select all that apply a. Bond interest b. Rent c. Sales commissions d. Material costs

A & B

Operating cash flow differs from total cash flow in that the latter makes adjustments for ____. Select all that apply a. additions to net working capital b. net income c. capital spending d. retained earnings

A & C

Debt service means repaying ____. Select all that apply a. principal b. shareholders c. both creditors and shareholders d. interest

A & D

What should you keep in mind when examining an income statement? Select all that apply a. GAAP b. cash versus non-cash items c. time and costs d. asset composition

A, B, & C

Which of these items is NOT shown on a balance sheet? Select all that apply a. Good management b. Favorable economic conditions c. Proprietary assets d. Deferred taxes

A, B, & C

Cash flow to stockholders equals ____. a. net new equity raised minus dividends paid b. dividends paid minus net new equity raised c. dividends paid plus net new equity raised d. stock repurchased plus dividends paid

B

Cash flows from the acquisition and sale of fixed assets are located in the _______ activities section of the accounting statement of cash flows. a. financing b. investing c. retained earnings d. operating

B

If EBIT equals $100, the tax rate is 40 percent, and interest expense is $10, and there are 30 shares outstanding,calculate EPS. a. $4.00 b. $1.80 c. $3.40 d. $3.80

B

If a firm's net working capital is $120 in 2014 and $100 in 2013, then the change in net working capital is: a. -$10 b. +$20 c. +$10 d. -$20

B

If you make an extra $1,000 in income and your marginal tax rate is 30 percent while your average tax rate is 20 percent, then you will pay an extra ______ in taxes. a. $250 b. $300 c. $100 d. $200

B

Net earnings refers to income earned ______. a. prior to taxes b. after interest and taxes c. before interest and taxes d. net of operating and administrative costs

B

Non-cash items are expenses that directly affect _____ but do not directly affect ______. a. cash flow; revenue b. net income; cash flow c. cash flow; net income d. cash flow; taxes

B

Why would negative operating cash flow indicate trouble for a firm? a. If operating cash flow is negative, it means that the firm is not prioritizing efficient business. b. If operating cash flow is negative, it means that the firm is not generating enough cash to pay operating costs. c. If operating cash flow is negative, it means that the firm is generating enough cash to pay operating costs, but not to invest.

B

Financial accountants do not distinguish between _____ and _____. a. product costs b. fixed costs c. variable costs d. period costs

B & C

If a firm defaults on its bond contract, the bondholders _____. Select all that apply a. must take the loss quietly b. can sue the firm c. can force the firm into bankruptcy

B & C

The cash flows from financing activities include changes in: Select all that apply a. accounts receivable b. common stock c. long-term debt d. taxes

B & C

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. a. average; median b. median; average c. average; marginal d. marginal; average

C

A decrease in depreciation expense ______ earnings per share. a. decreases b. does not affect c. increases

C

Accountants usually distinguish between ______ costs and ______ costs. a. variable; fixed b. product; variable c. product; period d. fixed; period

C

Cash flow from operations is calculated by adding depreciation to EBIT and ______ current taxes. a. multiplying by b. adding c. subtracting d. dividing by

C

GAAP requires that income is reported: a. when it is evident that income will be coming b. when payment is received c. when it is accrued, regardless of payment status

C

If a company buys back $100 worth of stock, this increases the cash flow to the stockholders by ___. a. less than $100 b. more than $100 c. exactly $100

C

If a firm acquires $100 in fixed assets and sells $80 worth of fixed assets, the cash flow from investing activities is: a. +180 b. -$180 c. -$20 d. +$20

C

If a firm's current assets are $100 and its current liabilities are $80, then its net working capital is: a. $80 b. $100 c. $20 d. $180

C

Assuming you have already accounted for the operating and investing activities, adjusting for the ______ is the last step in determining the accounting change in cash flow. a. deferred taxes b. depreciation expense c. working capital activities d. financing activities

D

Deferred taxes arise from differences in true taxable income and ______ income. a. inflation-adjusted b. market value c. economic d. accounting

D

For financial decision-making purposes, the most important tax rate is the ______ tax rate. a. average b. fair c. flat d. marginal

D

How are assets on a balance sheet listed? a. In random order b. In order by date of acquisition c. In order of increasing liquidity d. In order of decreasing liquidity

D

If dividends are $100, stock sold is $10, and stock repurchased is $25, what is the cash flow to stockholders? a. $85 b. $65 c. $135 d. $115

D

If ending net fixed assets are $100, beginning fixed assets are $40, and depreciation is $10, then the change in capital spending is _____. a. $130 b. $60 c. $50 d. $70

D

If interest paid is $100 and net new borrowing is $150, then cash flow to creditors equals: a. -$100 b. -$250 c. +$50 d. -$50

D

How is income defined? a. Revenue plus expenses b. Retained earnings minus dividends c. Revenue minus expenses d. Change in cash and equivalents

C

What does the acronym EBIT stand for? a. Earnings after interest and taxes b. Earnings before investing transactions c. Earnings before income taxes d. Earnings before interest and taxes

C

What is a primary concern for a bank lending funds to a business for the short term? a. Competition in the industry b. Retained earnings c. Liquidity d. Depreciation expense

C

Which one of the following is an example of a non-cash item on an income statement? a. Labor costs b. Retained earnings c. Deferred taxes d. Dividends

C

Assets are listed on a balance sheet in which order? a. In order of liquidity starting from most liquid to least liquid b. In order of book value starting from least valuable to most valuable c. In no particular order d. In order of market value starting from least valuable to most valuable

A

Interest expense is reflected in the __________ section of the income statement. a. non-operating b. operating cash flow c. balance sheet

A

True or false: A balance sheet shows what a firm owns and how it is financed. a. True b. False

A

Net income expressed per share of common stock is known as ____ ____ ____

Earnings per share

True or false: An increase in depreciation expense lowers net income. a. True b. False

A

True or false: Holding too many liquid assets can harm a firm financially given that it is giving up an opportunity to invest in productive assets. a. True b. False

A

True or false: There is a correlation between future cash flows and the economic value of an asset. a. True b. False

A

Which one of these is the most illiquid? a. Fixed assets b. Inventory c. Cash d. Marketable securities

A

You own a property that has increased in value. You put it on the market for sale, but haven't sold it yet. Can you report the increased value of the property as income on your financial statements? a. No b. Yes

A

The short run for a firm is the period of time during which ______. Select all that apply a. some costs are fixed b. output can vary c. all costs are variable d. output is fixed

A & B

Liabilities usually involve which of these? Select all that apply a. require a cash payout within a stated period of time b. new equity issue c. obligations of the firm

A & C

Which of the following are found on an income statement? Select all that apply a. The non-operating section b. The assets section c. The liabilities section d. The operations section

A & D

Raw materials, work in process, and finished goods are examples of _______. a. fixed assets b. inventory c. liabilities

B

If a firm defaults on its bond contracts, bondholders can do which of the following to get their money back? a. Automatically assume ownership of the firm b. Recover their losses from the federal government c. Appeal to their state or provincial government for reimbursement d. Sue the firm in court

D

If ending net fixed assets are $100, beginning net fixed assets are $60, and depreciation is $10, then the change in capital spending is ____. a. $40 b. $180 c. $140 d. $50

D

If your tax bill is $200 and your taxable income is $2,000, then your average tax rate is _____ percent. a. 2 b. 20 c. 1 d. 10

D

Period costs are the costs that are allocated to a specific ______. a. production run b. type of service c. product d. interval of time

D

The cash flow from operating activities results from which of the following? a. Borrowing and obtaining financing from investors to support operations b. Selling new share of stock to investors c. Investing in plant and equipment d. Normal business activities such as producing and selling goods and services

D

The short run is a period when there are ______ costs. a. only cash b. only fixed costs c. only variable costs d. both fixed and variable

D

Which one of the following complies with GAAP? a. Matching revenues with cash flows b. Matching cash flows, revenues, and expenses c. Matching expenses with cash flows d. Matching revenues with expenses

D

Which one of the following is true? a. The Income Statement explicitly shows cash flows. b. Earnings, net income, and cash flows are identical. c. Cash flows always exceed earnings. d. Cash flows can be derived from financial statements.

D