FINC 5310 a Ch 2
If a firm's current assets equal $200 and its current liabilities equal $150, then its net working capital equals
$50
The federal corporate tax rate in the United States became a flat ____percent with the passage of the Tax Cuts and Jobs Act of 2017.
21%
T/F Cash flows can be derived from financial statements.
T
True or false: The realization (timing) of income can be useful to a firm.
T
is the income subject to tax.
Taxable income
What is the most important item that can be extracted from financial statements?
The firm's actual cash flows
What is depreciation?
a systematic expensing of an asset based on the asset's estimated life
A balance sheet reflects a firm's Blank______ value on a particular date. Multiple choice question.
accounting
The cash flow identity states that cash flows from ______ should equal cash flows to creditors and equity investors.
assets
The cash flow identity states that cash flows from ______ should equal cash flows to creditors and equity investors. Multiple choice question.
assets
Liquidity refers to the ease of changing Blank______.
assets to cash
On the balance sheet, assets are listed at their ______ value.
book
The short run is a period when there are Blank______ costs.
both fixed and variable
The statement of cash flow explains changes in
cash and equivalents
In finance, the value of a firm depends on its ability to generate
cash flows
Taxes represent which of the following
cash outflow
The cash flow identity states that cash flow from assets equals cash flows to
creditors and stockholders
Net capital spending is equal to the change in net fixed assets plus
depreciation
Which one of the following is shown on the left-hand side of the balance sheet?
fixed assets
Costs that do not change in the short run arise because of
fixed commitments
Fixed costs are costs that will not change in the short run due to
fixed commitments over a stated period of time
____ refers to the quickness and ease with which assets can be converted to____
liquidity; cash
Earnings per share is equal to ___, income divided by the number of outstanding _____, of a firm's common
net; shares
The short run for a firm is the period of time during which
output can vary; some costs are fixed
How is income defined? Multiple choice question.
revenue minus expenses
An official accounting statement that helps to explain the change in cash and cash equivalents is called the Blank
statement of cash flows
__ income is the income subject to tax.
taxable
The price at which willing buyers and sellers would trade is called ______ value.
market
What does a balance sheet reflect about a firm?
accounting value on a specific date
Changes in capital spending can be negative when the acquisition of fixed assets is ______ the sale of fixed assets.
less than
Selling a firm's plant and equipment results in a change in
Fixed costs
If ending net fixed assets are $100, beginning net fixed assets are $60, and depreciation is $10, then the change in capital spending is
E - B + D = $50
Which one of the following calculates cash flow from operations?
EBIT + Depreciation − Taxes
True or false: Operating cash flow includes capital spending and working capital requirements.
F
True or false: Stockholders' equity appears on the left-hand side of the balance sheet.
F
Which of the following cash flows appear in the financing activities section of the accounting statement of cash flows?
payment of dividends retirement of long-term debt repurchase of stock
Which of the following will change fixed assets?
selling a plant buying a new machine
Stockholders' equity Blank______ when retained earnings increase. Multiple choice question.
increases
Dividends per share (DPS) equals ______ divided by total shares outstanding.
dividends
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
A corporation's earnings divided by number of outstanding shares of a firm's common stock is called
earnings per share
A corporation's earnings divided by number of outstanding shares of a firm's common stock is called ______.
earnings per share
Depreciation is the accountant's estimate of the cost of Blank______ used up in the production process.
equipment
Revenue minus expenses is the accounting definition of
income
Debt service means repaying Blank
principal interest
When a firm pays out fewer dividends, it ______ the accounting value of its retained earnings.
increases