Ch 2 Financial Statements, Taxes, Cash Flows

Four years ago, Velvet Purses purchased a mailing machine at a cost of $184956. This equipment is currently valued at $82537 on today's balance sheet but could actually be sold for $2306. This is the only fixed asset the firm owns. Net working capital is $38116. and long term debt is $57273. What is the book value of current assets? a. 7,700 b. 233,000 c. 4,800 d. 63380.00 e. 222,600

d. 63380.00

Which one of the following accounts is the most liquid? a. Building b. Land c. Equipment d. Accounts receivable e. Inventory

d. Accounts receivable

Cash flow to stockholders is defined as: a. The total amount of interest and dividends paid during the past year b. Cash flow from assets plus the cash flow to creditors c. Operating cash flow minus the cash flow to creditors d. Dividend payments less net new equity raised e. The change in total equity over the past year

d. Dividend payments less net new equity raised

A firm has net working capital of 4997. Long-term debt is 8853, total assets are 1973, and fixed assets are 6422. What is the amount of the total liabilities?

-593

A firm has 177 in inventory, 226 in fixed assets, 6385 in accounts receivable, 224 in accounts payable, and 58 in cash. What is the amount of the current assets?

6620

Jensen Enterprises paid 9673 in dividends and {int} in interest this past year. Common stock increased by {cs} and retained earnings decreased by -147. What is the net income for the year?

9526

Which one of the following is classified as an intangible fixed asset? a. Trademark b. Production equipment c. Accounts receivable d. Inventory e. Building

a. Trademark

A firm has 418 in inventory, 1541 in fixed assets, 1226 in accounts receivables, 1078 in accounts payable, and 517 in cash. What is the amount of the current assets? a. $2,640 b. $2161 c. $2,430 d. $990 e. $710

b. $2161

The cash flow of a firm which is available for distribution to the firm's creditors and stockholders is called the: a. Net working capital b. Cash flow from assets c. Operating cash flow d. Cash flow to stockholders e. Net capital spending

b. Cash flow from assets

Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time? a. Tax reconciliation statement b. Income statement c. Market value report d. Balance sheet e. Statement of cash flows

b. Income statement

Which one of the following statements concerning net working capital is correct? a. The lower the value of net working capital the greater the ability of firm to meet its current obligations b. Net working capital increases when inventory is sold for cash at a profit c. An increase in net working capital must also increase current assets d. Net working capital is a part of the operating cash flow e. Firms with equal amounts of net working capital are also equally liquid

b. Net working capital increases when inventory is sold for cash at a profit

Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date? a. Creditor's statement b. Dividend statement c. Balance sheet d. Statement of cash flows e. Income statement

c. Balance sheet

Net working capital is defined as: a. Fixed assets minus long-term liabilities b. Total assets minus total liabilities c. Current assets minus current liabilities d. Current liabilities minus shareholders equity e. Total liabilities minus shareholders equity

c. Current assets minus current liabilities

Which one of the following is included in a firm's market value but yet is excluded from the firm's accounting value? a. Equipment owned by the firm b. Real estate investment c. Good reputation of the company d. Money due from a customer e. An item held by the firm for future sale

c. Good reputation of the company

The higher the degree of financial leverage employed by a firm, the: a. Less debt a firm has per dollar of total assets b. Lower the amount of debt incurred c. Higher the probability that the firm will encounter financial distress d. Lower the balance in accounts payable e. Higher the number of outstanding shares of stock

c. Higher the probability that the firm will encounter financial distress

Which one of these is most apt to be a fixed cost? a. Raw materials b. Shipping and freight c. Office salaries d. Manufacturing wages e. Management bonuses

c. Office salaries

Which term relates to the cash flow which results from a firm's ongoing, normal business activities? a. Cash flow from assets b. Capital spending c. Operating cash flow d. Cash flow to creditors e. Net working capital

c. Operating cash flow

Which one of the following statements concerning net working capital is correct? a. Total assets must increase if net working capital increases b. Net working capital is the amount of cash a firm currently has available for spending c. Net working capital increases when inventory is purchased with cash d. Net working capital must be a positive value e. A decrease in the cash balance may or may not decrease net working capital

e. A decrease in the cash balance may or may not decrease net working capital

The cash flow related to interest payments less any net new borrowing is called the: a. Capital spending cash flow b. Cash flow from assets c. Operating cash flow d. Net working capital e. Cash flow to creditors

e. Cash flow to creditors

Depreciation: a. Is a noncash expense which increases the net income b. Reduces both the net fixed assets and the costs of a firm c. Decreases net fixed assets, net income, and operating cash flows d. Increases the net fixed assets as shown on the balance sheet e. Reduces both taxes and net income

e. Reduces both taxes and net income