FIN CH 2

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

-Change in net working capital -Financing expenses (THIS ONE) -Capital spending -Operating cash flow

which of the following are components of cash flow from assets?

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

Operating cash flow (Select all that apply.)

-tells us whether or not a firm's cash inflows from its operations are sufficient to cover its everyday cash outflows -is a sign of trouble if negative over a long period of time

How is the average income tax rate computed?

Total tax bill/Total taxable income

According to GAAP, when is income reported?

When it is earned or accrued the matching principle of GAAP states that costs associate with a good service should be recorded at the same time as the reveue from selling that good or service. Recognition takes place when revenue is earned and expense incurred, rather than when cash is collected or spent.

net earning refers to income earned

after interest and taxes

in the long-run, costs may be considered as

all variable

the short run is

as imprecise period of time

Non-cash items do not affect

cash flow

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

cash flows

Tax rates for propietorships, partnerships, and LLCs __________ with the passage of the Tax Cuts and Jobs Act of 2017.

changed

tad rates of prop, part, and llcs

changed with the passage of the Tax Cuts and Job Act of 2017

variable cost

changes as the output of the firm changes

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

depreciation

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

depreciation Reason: Capital spending = Ending net fixed assets - beginning net fixed assets + depreciation.

Cash flow to stockholders equals ____.

dividends paid minus net new equity raised

when a firm smooths earnings to please investors, it is called

earnings management

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

fixed commitements

costs that do not change in the short run arise because of

fixed commitements

Cash flow to creditors equals:

interest paid minus net new borrowing

which of the following is a current asset?

inventory

The ______ tax rate is the tax rate paid on the next dollar of income.

marginal; the marginal tax rate is the tax rate paid on the next dollar of income.

The cash flow that results from the firm's day-to-day activities of producing and selling is called:

operating cash flow

Earnings management is a controversial practice in which corporations ________ or ___________ their earnings to "smooth out" dips and surges and keep investors calm.

overstate; understate

liquidity

refers to the speed and ease with which an asset can be converted to cash.

Free cash flow is better described as ____.

total distributable cash flow

True or false: Interest paid minus net new borrowing equals cash flow to creditors.

true

______ changes as the output of the firm changes.

variable cost

According to the current U.S. corporate tax code, the corporate tax rate in effect for 2019 is:

21%

Which one of these is considered to be the most liquid?

accounts receivable

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

financial expenses

Interest paid_______( Plus/Minus) net new borrowing equals cash flow to creditors.

minus

A positive operating cash flow indicates that the firm is generating enough cash to:

pay everyday cash outflows

Cash flow refers to:

the difference between the number of dollars that came in and the number that went out

Changes in capital spending can be negative if

the firm sold more fixed assets than it purchased

True or false: Operating cash flow does not include depreciation or interest.

true

True or false: Free cash flow is also known as cash flow from assets.

true Reason: Cash flow from assets is also known as free cash flow, though there is some variation in the calculation

True or false: Ending net fixed assets plus beginning net fixed assets minus depreciation equals net investment in fixed assets.

false

Ending net fixed assets minus beginning net fixed assets____ Blank 1 of 1 ____depreciation equals net investment in fixed assets.

plus

Net capital spending is equal to ending net fixed assets minus beginning net fixed assets ____.

plus depreciation -Net capital spending is equal to ending net fixed assets minus beginning net fixed assets plus depreciation, because depreciation is subtracted from ending gross fixed assets to achieve net fixed assets. Inventory is a current asset, not a fixed asset.

The market value of an item is

the cash value you'd get if you sold it.


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