Accounting week one
Which of the following is NOT included in the calculation of free cash flows? A) Interest expense B) Operating income C) Depreciation D) Net operating working capital
A) Interest expense
T/F: A balance sheet is a statement of the financial position of the firm on a given date, including its asset holdings, liabilities, and equity.
TRUE
T/F: The income statement provides a statement of results for the firm's operations.
TRUE
T/F: The interest payments on corporate bonds are tax-deductible.
TRUE
T/F: The marginal tax rate would equal the average tax rate for firms with earnings less than $50,000.
TRUE
T/F:Corporate income statements are usually compiled on an accrual, rather than cash, basis.
TRUE
The balance sheet describes the financial position of a firm on a given date.
TRUE
The balance sheet provides a statement of the firm's financial position.
TRUE
Which of the following items is part of the computation of net operating working capital for purposes of determining free cash flow? A) Accounts payable B) Fixed assets C) Interest expense D) Dividend payments
A) Accounts payable
Which of the following would NOT be included as equity in a corporate balance sheet? A) Cash B) Paid in capital C) Preferred stock D) Retained earnings E) Common stock
A) Cash
Which of the following best represents the stream of income that is available to common stockholders? A) Net profit after tax and after preferred dividend payments B) Earnings before interest and taxes C) Gross profit D) Operating profit
A) Net profit after tax and after preferred dividend payments
Tax tables are based on ________ tax rates. A) marginal B) average C) implied D) investment
A) marginal
Free cash flow will increase with a decrease in ________. A) tax rate B) accruals C) depreciation expense D) both A and C
A) tax rate
Which of the following would NOT be included as an asset on a corporate balance sheet? A) Accounts receivable B) Common stock C) Inventory D) Buildings
B) Common stock
Who owns the retained earnings of a public firm? A) The IRS B) Common stockholders C) Bondholders D) Preferred stockholders
B) Common stockholders
Which of the following best represents operating income? A) Income after financing activities B) Earnings before interest and taxes C) Income from capital gains D) Income from discontinued operations
B) Earnings before interest and taxes
How does "free cash flow" differ from net profit? A) It is determined by accrual basis accounting. B) It takes into consideration a firm's ongoing investment in working capital and fixed assets. C) It ignores depreciation and taxes. D) It is less expensive.
B) It takes into consideration a firm's ongoing investment in working capital and fixed assets.
Holding all other variables constant, which of the following will decrease total equity? An increase in: A) common stock issued B) dividends paid C) net income D) interest expense
B) dividends paid
Stock that is repurchased by the issuing company is called: A) paid in capital. B) treasury stock. C) retained capital. D) par value stock.
B) treasury stock.
Which of the basic financial statements is best used to answer the question, "How profitable is the business?" A) Balance sheet B) Statement of shareholder's equity C) Income statement D) Accounts receivable aging schedule
C) Income statement
Which of the following represents an attempt to measure the earnings of the firm's operations over a given time period? A) Balance sheet B) Cash flow statement C) Income statement D) None of the above
C) Income statement
Fixed assets includes which of the below? A) Inventory B) Patents C) Land D) Copyrights
C) Land
Which of the following streams of income is not affected by how a firm is financed (whether with debt or equity)? A) Net profit after tax but before dividends B) Net working capital C) Operating income D) Income before tax
C) Operating income
Which of the following is NOT considered a fixed asset? A) Land B) Equipment C) Patents D) Building
C) Patents
Which of the following is NOT included in operating income? A) Cost of goods sold B) Sales C) Taxes D) Operating expenses
C) Taxes
Which of the following would be included in the calculation of net operating working capital? A) Accounts payable B) Accruals C) Short-term notes payable D) Both A and B E) All of the above
D) Both A and B
You are about to determine your corporation's taxable income. Which of the below would NOT be included as a tax-deductible expense? A) Marketing expenses B) Depreciation expense C) Cost of goods sold D) Dividend expense
D) Dividend expense
What is sales revenue, minus cost of goods sold and operating expenses, known as for income statement purposes? A) Net profit B) Retained earnings C) Net income available to preferred shareholders D) EBIT
D) EBIT
Which of the following is the least liquid current asset? A) Accruals B) Marketable securities C) Accounts receivable D) Inventory
D) Inventory
Which of the following best describes a balance sheet? A) Reports cash receipts and cash disbursements for a specific accounting period B) Reports investment activities for a specified accounting period C) Reports revenues and expenses for a specific accounting period D) Reports the amount and composition of assets and liabilities at a specified point in time
D) Reports the amount and composition of assets and liabilities at a specified point in time
) Which of the following does NOT represent cash outflows to the firm? A) Taxes B) Interest payments C) Dividends D) Purchase of plant and equipment E) Depreciation
E) Depreciation
Which of the following would NOT be included as a liability in a corporate balance sheet? A) Accruals B) Notes payable C) Accounts payable D) Bonds E) Depreciation
E) Depreciation
A firm's balance sheet provides a representation of the current market value of the company.
FALSE
An advantage of balance sheet numbers is that assets reflect current market values.
FALSE
Cash flows from assets will always be less than cash flows from financing due to dividends.
FALSE
T/F: An income statement reports a firm's profit relative to its total investment in plant and equipment.
FALSE
T/F: Dividends paid to a firm's stockholders, both preferred and common stockholders, are tax-deductible to the paying company.
FALSE
T/F: On an accrual basis income statement, revenues and expenses always match the firm's cash flow.
FALSE
T/F: The income statement describes the financial position of a firm on a given date.
FALSE
T/F: The income statement represents a snapshot of account balances at one point in time.
FALSE
T/F: Total equity on the balance sheet increases as dividends paid increases.
FALSE
T/F: Under current accounting rules, plant and equipment appear on a company's balance sheet valued at replacement value.
FALSE
