SB FIN 2

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

Accounting value on a specific date

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

True

______ costs change as the output of the firm changes.

Variable

Assets can be described as items that _____.

a firm owns generate revenue provide market value to the firm

Net income refers to money earned ______.

after interest and taxes

Which one of the following represents what a firm owns at a given point in time?

assets

Liquidity refers to the ease of changing _____. Multiple choice question.

assets to cash

In the long run, ________ are variable.

at all costs

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

fixed commitments

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. Multiple choice question.

matching

Net working capital equals current assets ______ current liabilities.

minus

Noncash items are expenses that directly affect _____ but do not directly affect ______.

net income; cash flow

On which side of the balance sheet do liabilities appear?

right

How is the average income tax rate computed?

tax bill (divided) by your taxable income

How is the marginal tax rate computed?

the rate of the tax you would pay

Long-term liabilities are not due in the current year (from the date of the balance sheet). True false question. True/False

true

The statement of cash flow explains changes in _____. Multiple choice question.

cash and equivalents

Noncash items do not affect _____.

cash flow

The total of cash flow to creditors and cash flow to stockholders is called _____.

cash flow from assets

The cash flow identity reflects the fact that:

cash is either used to produce the product or service, pay creditors or pay out to the owners of the firm. a firm generates cash through its various activities. cash flow from the firm's assets equals the total of cash flow to creditors and cash flow to stockholders.

Cash flow to stockholders equals:

dividends paid minus net new equity raised.

The matching principle of GAAP requires revenues be matched with _____.

expenses

The passage of the Tax Cuts and Jobs Act of 2017 was to make the federal corporate tax rate in the United States a _____ tax.

flat

On the fin statement, assets are listed at their _____ value.

historical value both market and book

Fixed costs are costs that will not change ______. Multiple choice question.

in the short run

Cash flow to stockholders is dividends paid _________(minus/plus) net new equity raised.

minus

______ income is money earned after interest and taxes. Multiple choice question.

net

Cash generated from a firm's normal business activities is called _____. Multiple choice question.

operating cash flow

The short run for a firm is the period of time during which ______.

some costs are fixed Reason: In the short run, some costs are fixed and some are variable. In the long run, all costs are variable

An official accounting statement that helps to explain the change in cash and cash equivalents is called the _____.

statement of cash flows

Financial statements are frequently a key source of information for financial decisions. True false question. True/False

t

Most importantly, assets provide ______ to the firm.

value

In the long run, all costs are _____.

variable

Another name for short-term financial management is ___ management.

working capital

If your tax bill is $200 and your taxable income is $2,000, then your average tax rate is _____ percent. Multiple choice question.

10% Average tax rate = $200/$2,000 = 0.1, or 10%

Which one of the following is true? Multiple choice question. Financial statements explicitly show costing and pricing of individual products Earnings, net income, and cash flows are identical. Cash flows always exceed earnings. Cash flows can be derived from financial statements.

Cash flows can be derived from financial statements.

The use of financial leverage can: Decrease the noncash expenses incurred by the firm. Increase the chance of financial distress and business failure. Greatly magnify both gains and losses. Increase the potential reward for investors.

Increase the chance of financial distress and business failure. Greatly magnify both gains and losses. Increase the potential reward for investors.

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

Liquidity

Which of the following is a variable cost in the short run?

Raw materials used in production.

what does a balance sheet help with

The balance sheet is a snapshot of what the firm owes and what it owns. A = L + OE

what does a income statement help with

The income statement reports the firm's accrual-based accounting revenues and expenses. R - E = Net income

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

book value

The cash flow identity reflects the fact that: Multiple select question. cash is either used to produce the product or service, pay creditors or pay out to the owners of the firm. operating cash flow is the same as operating income. a firm generates cash through its various activities. cash flow from the firm's assets equals the total of cash flow to creditors and cash flow to stockholders.

cash is either used to produce the product or service, pay creditors or pay out to the owners of the firm. a firm generates cash through its various activities. cash flow from the firm's assets equals the total of cash flow to creditors and cash flow to stockholders.

A long-term liability represents a(n) _____.

debt that is not due in the coming year

The more debt a firm has, the greater its:

degree of financial leverage The more debt a firm has (as a percentage of assets), the greater is its degree of fin leverage More Debt = More financial leverage = larger potential for gains or losses

The Tax Cuts and Jobs Act of 2017 set the corporate tax rate to be ______ regardless of the level of taxable income.

21%

Under GAAP, U.S. firms must carry assets at:

Book value - at what the firm paid for them reason: Under GAAP, U.S. firms must carry assets at book value (historical cost − accumulated depreciation).

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

False Reason: Operating cash flow is the cash flow generated by business activities, excluding financing, capital spending, or changes in net working capital.

The short run is a period when there are ______ costs.

The short run is a period when there are both fixed and variable costs.

Which is true of taxes? They are not mandatory for most small firms due to low earnings. They are typically a very small expenditure for the firm. Firms can select to pay them in advance or in arrears, with no penalties or benefits. They can be one of the largest cash outflows a firm experiences.

They can be one of the largest cash outflows a firm experiences.

How is the average income tax rate computed? Multiple choice question.

Total tax bill/Total taxable income