Chapter 2 Financial Statements and Cash Flow
If Net Income is 97 million dollars, depreciation is 33 million dollars, and deferred taxes are 22 million dollars, what is the cash flow from operating activities?
152 million
If a firm's current assets are $100 and its current liabilities are $80, then its net working capital is:
20
If a firm's current assets equal $200 and its current liabilities equal $150, then its net working capital equals ______.
50
What is depreciation?
A systematic expensing of an asset based on the asset's estimated life
What does a balance sheet reflect about a firm?
Accounting value on a specific date
Which of the following are included in cash flow from investing activities?
Acquisition of fixed assets Sales of fixed assets
What is the most important item that can be extracted from financial statements?
Actual cash flows
Cash flow analysis is popular because
It is harder to "spin" and mislead
Net capital spending is equal to ending net fixed assets minus beginning net fixed assets ____.
Plus depreciation
What is treasury stock?
Stock the firm has repurchased
A balance sheet reflects a firm's ______ value on a particular date.
accounting
The short run is a period when there are ______ costs.
both fixed and variable
Taxes represent which of the following:
cash outflow
Net capital spending is equal to the change in net fixed assets plus:
depreciation
Depreciation is the accountant's estimate of the cost of ______ used up in the production process.
equipment
The activity of making net payments to creditors and owners (excluding interest) is called a(n) ______ activity in the accounting statement of cash flows.
financing
The price at which willing buyers and sellers would trade is called ______ value.
market
If the acquisition of fixed assets is $10,000,000 and the sales of fixed assets is $15,000,000, capital spending will be:
negative
The short run for a firm is the period of time during which ______.
output can vary Some costs are fixed
In the U.S., taxes on proprietorships and partnerships follow which type of system after passage of the Tax Cuts and Jobs Act of 2017
progressive tax
Operating cash flow reflects which one of these?
tax payments
How many tax brackets are there for forms of business other than corporations?
Greater than 1
Debt service means repaying ____.
Principal Interest
Which one of the following calculates cash flow from operations?
EBIT + Depreciation - Taxes
How is income defined?
revenue minus expenses
______ income is the income subject to tax.
taxable
______ is the income subject to tax.
taxable income
Dividends per share (DPS) equals dividends divided by:
total number of share
When a firm pays out fewer dividends, it ______ the accounting value of its retained earnings.
increases
Debt service implies paying ____.
interest and principle
Cash flows from the acquisition and sale of fixed assets are located in the _______ activities section of the accounting statement of cash flows.
investing
Changes in capital spending can be negative when the acquisition of fixed assets is ______ the sale of fixed assets.
less than
_____ refers to the quickness and ease with which assets can be converted to _____
Liquidity and cash
The cash flows from financing activities include changes in:
Long-term debt Common stock
Which of the following cash flows appear in the financing activities section of the accounting statement of cash flows?
Repurchase of stock Payment of dividends Retirement of long-term debt
Who owns treasury stock?
The issuer of the stock
Liquidity refers to the ease of changing _________.
assets to cash
On the balance sheet, assets are listed at their _____ value.
book
Dividends per share (DPS) equals _____ divided by total shares outstanding.
dividend
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 _____.
down
Revenues minus expenses is the accounting definitions of:
income
Stockholders' equity ____ when retained earnings increase.
increases
