mgmt 9, 10,11,12
Which of the following accounts results in adjustments to net income under the indirect method of preparing the statement of cash flows if their balances change during the year?
Accounts payable Inventory Accounts receivable
stock split
Cause the par value per share to change
Limited liability and ease of raising outside capital are advantages of this business form:
Corporation
Preferred stock tends to have attributes of
both bonds and common stock.
invested capital
common stock
Which of the following are common characteristics or provisions of bonds?
convertible term or serial secured or unsecured
An item that requires separate disclosure on the income statement after income from continuing operations is
discontinued operations.
The debt to equity and the times interest earned ratios provide investors and creditors with a measure of
financial risk
Depreciation expense and amortization expense represent ___ items requiring adjustments to net income under the indirect method.
noncash
Depreciation expense is added back to net income when preparing the cash flow from operating activities section because depreciation represents a(n) ___ reduction to net income
noncash
A corporation will issue bonds when
the interest on the bond plus the bond issue cost is less than the interest payments for a bank loan.
The amount of net cash flows from operating activities calculated using the direct method is
the same as under the indirect method.
Historically, par value was considered to be
the value of the company's shares of stock.
The financial statement that provides information about cash receipts and cash disbursements for the period is the
statement of cash flows.
Bonds that mature on one specific date are called
term bonds
What are the effects of a stock split accounted for as a 100% stock dividend?
The number of shares outstanding increases. Par value per share stays the same.
Shares of stock that are repurchased are referred to as __ stock
treasury
What is the formula for the receivables turnover ratio?
Net credit sales divided by average accounts receivable (net).
When there is no change in interest payable, the interest expense on the income statement is ______ the actual cash paid out during the period.
equal to
A company that earns a return in excess of the cost of borrowing the funds is providing its shareholder with a greater return than what would have been earned with
equity
The two types of financing are
equity financing. debt financing.
Corporations will declare a stock split in order to
reduce the market price of a share of stock and make it more attractive to some investors
Common-size analysis is another term used for a ___ analysis
vertical
Which of the following is the formula for the current ratio?
Current assets divided by current liabilities.
Which of the following is a ratio used to evaluate a company's solvency?
Debt to equity
Identify two ratios commonly used to assess a company's financial risk.
Debt to equity ratio Times interest earned ratio
Redeemable
Nurbert Inc. demands return of preferred stock at the pre-specified amount
____ activities include cash receipts and cash payments for transactions relating to revenue and expense activities.
Operating
The rights of common stockholders typically include which of the following?
Right to dividends when declared. Right to vote for corporate directors. Right to distribution of assets in liquidation.
The debt to equity ratios for three otherwise comparable companies are as follows: Adams: 1.5; Flagler: 1.8; Roberts: 1.4. The risk of bankruptcy appears to be lowest for:
Roberts
Which of the following cash transactions are classified as cash inflows from investing activities?
Sale of building Sale of equipment Sale of investments
Sales on account are $200,000. Cash sales during the period are $50,000. Beginning accounts receivable is $20,000, and ending accounts receivable is $30,000. What is the total cash collected from customers during the period?
Sales on account + cash sales + the change in accounts receivable = cash collected for the period. $200,000 + 50,000 - 10,000 = $240,000
Which of these is a solvency ratio?
Times interest earned
Which of the following ratios are used to evaluate a company's ability to pay long-term debts?
Times interest earned ratio Debt to equity ratio
Which of the following is/are common terms used for horizontal analysis?
Trend analysis Time-series analysis
A company borrows funds for a project. If the interest rate charged for the borrowed funds is less than the rate of return on the project, this is referred to as financial
leverage
______ enables a company to earn a higher return using debt than without debt.
leverage
The most important advantage to the corporate form of business is
limited liability.
In a corporation, the stockholders' potential loss is
limited to the amount of the investment.
The current ratio, acid-test ratio, and average collection period are ratios that provide information about a company's:
liquidity
Which of the following items are classified as cash outflows from operating activities on the statement of cash flows?
payment on account payable Interest paid on bonds purchase of supplies payment of salaries payment on account
The ability of reported earnings to reflect the company's true earnings is referred to as:
quality of earnings
The ratio that is calculated by dividing net income by average total assets is referred to as:
return on assets
The starting point for preparing the operating activities section using the indirect method is:
net income
Munster Inc. issues $20 million in bonds and pledges its land holdings as collateral. Munster's bonds are:
secured
Which of the following items requires separate disclosure after income from continuing operations?
Discontinued operations
cummulative
During the current year, Petra Inc. pays dividends that were not declared last year
True or false: The times interest earned formula is net income divided by interest expense.
False
Which of the following are common noncash items requiring adjustment to net income under the indirect method?
depreciation expense amortization expense
Gains and losses on the sale of long-term assets represent common ___ items needing adjustment under the indirect method.
nonoperating
Net credit sales revenue divided by average accounts receivables equals the ___ turnover
receivables
The date on which a company determines the registered owners of the stock who will receive a dividend is referred to as the
record date.
Which of the following is included in the rights of common stockholders?
right to vote
When comparing the financial statements of two different companies, a financial analyst would use which two categories of ratios?
risk ratios profitability ratios
A company's ability to pay its long-term debt is referred to as:
solvency
The statement of stockholders' equity reports
the changes in each equity account balance over time.
Convertible bonds may be beneficial to bond investors because:
the value of the common stock shares received in the conversion may exceed the amount of the bond
The debt to equity ratio is calculated as
total liabilities divided by total stockholders' equity.
What is the formula to compute the return on assets?
Net income divided by average total assets.
The receivables turnover ratio offers an indication of how quickly a company is able to
collect its accounts receivable.
A ratio used to measure liquidity is the
current ratio.
In order to expand its business, Mueller Inc. is borrowing $1 million from its bank. Mueller is utilizing this type of financing:
debt
The average collection period equals 365 days divided by __
receivables turnover
In a statement of cash flows, the sum of cash inflows and outflows is equal to
the change in the cash balance.
The average collection period is calculated as 365 divided by
the receivable turnover ratio.
A distribution of assets to shareholders is referred to as a(n)
dividend
A decrease in accounts receivable will result in a(n) ___ in cash from sales revenue when using the direct method to determine cash flows from operations.
increase
an ___ in accounts payable indicates that cash payments were less than credit purchases and must be subtracted from purchases to calculate cash payments to suppliers.
increase
The statement of cash flows provides summary information about cash ____and cash ____ during the year.
inflow, outflow
Improved cash flows is a common advantage of acquiring equipment through
leasing
In order to assess a company's financial risk, investors and creditors frequently consider and analyze the company's:
long-term debt
When a corporation repurchases its bonds from the bondholders, the corporation __ the bonds
retires
When a corporation repurchases its bonds from the bondholders, the corporation
retires the bond
Bonds that mature in installments are referred to as
serial bonds
Which of the following will decrease the par value of shares?
stock split
Bonds that require payment of the full principle amount of the bond at the end of the loan term are referred to as
term
cummulative
Dividends not declared during one year are payable when declared in subsequent periods
Which of the following are included in the duties of the board of directors?
Establish corporate policies. Appoint officers to manage the corporation.
Which information regarding the receivables turnover ratio is true?
It shows the number of times during a period that the average accounts receivable balance is collected. It provides an indication of a company's efficiency in collecting receivables.
Convertible
Marcus turn in his preferred stock and receives common shares in exchange.
Which of the following items are included in the numerator for the current ratio but are excluded from the numerator of the quick or acid-test ratio?
Prepaid expenses Inventory
redeemable
Stocks can be turned in or re-purchased on demand
Morgan Company issued cumulative preferred stock. What additional special feature(s) could also have been granted to preferred stock holders?
The right to convert the shares to common shares The right to redeem the preferred shares for cash
When using the direct method, why is cash received from customers greater than sales revenue on the income statement when accounts receivable decreases?
There were more collections of accounts receivable than sales on account during the year.
Which of the following are correct regarding bonds?
They obligate the issuing company to pay a specific amount. They obligate the issuing company to repay the bonds at a specific date.
Retained earnings are:
all of the company's earnings not distributed to stockholders. decreased by dividends. increased by net income. sometimes called earned capital.
When cash from operating activities is presented using the indirect method, net income must be adjusted for increases and decreases in balance sheet accounts that relate to
amounts presented in the income statement.
The number of shares authorized is set forth in the company's:
articles of incorporation
The total number of shares that a company may sell is referred to as ___ shares.
authorized
The formula to compute the receivables turnover ratio is net credit sales divided by
average accounts receivable.
A formal debt instrument that obligates the borrower to repay a stated amount (referred to as the principal or face amount) at a specified maturity date can be a note or a(n)
bond
Preferred stock carries priority over common stock:
both for dividends and at dissolution
Debt can be an advantage for stockholders if it
earns a return on borrowed funds that exceeds the cost of borrowing.
When prepaid accounts increase, it indicates the company has paid Blank______ cash than it recorded as operating expenses.
more
The average collection period equals 365 days divided by ___
receivables turnover
A stock dividend causes a stockholder's percentage ownership in a company to
remain the same. Reason: A stock dividend reduces Retained Earnings (-SE) and increases Common Stock (+SE). The stockholders receive the same percentage so their percentage ownership remains the same.
earned capital
retained earnings
The advantages to the corporate form of business include
transferability of ownership. ease of raising capital.
Shares of stock previously sold by the corporation that are repurchased are called
treasury stock.
Bonds may be retired at maturity or retired early.
true
Which of the following are the most common types of bonds?
unsecured
Which of the following occurs on the date of record?
A list of shareholders that are entitled to receive a dividend is made.
Company A has an accounts receivable turnover of 8.0. Company B has an accounts receivable turnover of 10.0. Which of the following is true?
Company B collects its receivables faster than Company A.
Beneficial for both, the borrower (bond issuer) and lender (bond investor)
Convertible
Which of the following statements best describes the reason depreciation expense is added to net income when preparing the statement of cash flows?
Depreciation expense originally reduced net income, but it is a noncash expense.
___ refers to a company having enough cash or convertible assets to pay its current liabilities.
Liquidity
Which type of ratios do investors and creditors use most frequently in making financial decisions?
profitability ratios
bonds are supported by a specific asset the issuer pledges as collateral.
secured
Bonds that systematically mature over a series of years are called
serial
Another common term for stockholders' equity is:
shareholders' equity
Similar to a stock split, a stock ___ also distributes additional shares of stock to existing stockholders on a pro rata basis at no cost to the stockholders.
dividend
a companies capital structure refers to
its mixture of liabilities and stockholders equity
Mark wants to determine whether a specific company has become more profitable over time. Mark should compare the company's performance to:
its prior years' performance
Quattro Lending Company is considering lending a large sum to Eleance Inc. During its decision process, Quattro should especially consider Eleance's existing:
long-term liabilities
___ refers to a company's ability to pay its long-term liabilities.
Solvency
bonds are retired when the bondholder exchanges them for the issuing company's stock.
convertible
Cash flows from ___ activities are both outflows and inflows of cash related to the acquisition and disposal of long-term assets.
investing
Cash transactions involving the purchase and sale of long-term assets and current investments are classified on the statement of cash flows as ___
investing
A contract in which an owner provides a user the right to use an asset in return for periodic cash payments over a period of time is called a(n)
lease
__ is a contractual arrangement in which an owner provides a user the right to use an asset for a specified period of time. (Enter one word per blank)
lease
In order to determine cash flows from financing activities, we need to examine changes to
long-term liability and stockholders' equity accounts
Which of the following nonoperating items require adjustments to net income under the indirect method?
losses from sale of long-term assets gains from sale of long-term assets
A corporate charter:
names the board of directors. specifies the shares of stock to be issued. describes the business activities.
Convertible bonds allow the lender to convert each bond into:
common stock
Return on ___ measures the ability of company management to generate earnings from the resources provided by owners.
equity
Cash flows from ____ activities include both inflows and outflows of cash from the external funding of a business.
financial
Preferred stockholders
have the right to receive dividends only in the years the board of directors declares dividends.
Preferred stockholders:
have the right to receive dividends only in the years the board of directors declares dividends.
The amount of dividends paid out relative to the share price is referred to as:
dividend yield
Investors who acquire preferred stock:
do not have voting rights. have preference as to dividends.
Preferred stock generally (has/does not have) ___ voting rights and (has/does not have) ____ preference as to dividends.
does not have; has
___ profit ratio indicates the portion of each dollar of sales above the cost of goods sold.
gross
What is the formula for the profit margin ratio?
net income divided by net sales
Which of the following items are included in the numerator for the current ratio but are excluded from the numerator of the quick or acid-test ratio?
Inventory Prepaid expenses
Which term best describes a company having a suitable amount of cash or easily-convertible assets to pay incurred current liabilities?
Liquidity
Which of the following are possible benefits of leasing an asset rather than purchasing an asset?
Lower periodic payments on the asset Protection against declining asset value Improvement in cash flows
Many investors view this type of indicator as the number one measure of a company's success.
Profitability
Positive ____ represent the key to a company's long-run survival.
earnings
Receivable turnover equals:
net credit sales divided by average net receivables
Noncash items, nonoperating items, and changes in current assets and liabilities are necessary adjustments to ___ ___ to prepare the operating section for the indirect format of the statement of cash flows.
net income
Net credit sales revenue divided by average accounts receivables equals the ____ turnover.
receivables
The purpose of the statement of shareholders' equity is to
report the changes and the sources of the changes in shareholder equity accounts.
When using the indirect method to prepare the operating activities section of the statement of cash flows, the first amount listed is
net income
When using the indirect method to prepare the operating activities section of the statement of cash flows, the first amount listed is ___ ___
net income
The profit margin is calculated by dividing
net income by net sales
Wyanot Company issued 1,000 shares of its 5%, $100 par value, cumulative preferred stock for $110 cash per share. The journal entry to record this transaction includes:
$110,000 debit to Cash. $100,000 credit to Preferred stock. $10,000 credit to Additional paid-in capital - preferred.
List the four steps in preparing a statement of cash flows in the correct order.
1. calc net cash flow from operating activities, 2. determine the net cash flows from investing activities, 3 determine the net cash flow from financing activities, 4. combine operating investing and financing activities
Sales on account are $100,000. Beginning accounts receivable is $20,000, and ending accounts receivable is $15,000. What is the cash collected from customers during the period?
$100,000 + 20,000 - 15,000 = $105,000
Risk ratios and profitability ratios represent common ratios used for analysis.
true
Which of the following items are classified as cash inflows from operating activities on the statement of cash flows?
Collection from customers Interest received on notes receivable
Which of the following is a solvency ratio?
Debt-to-equity
If interest payable increases, which of the following is true?
Interest paid is lower than the interest expense on the income statement.
Which of the following are nonoperating items that require adjustments under the indirect method?
Losses on the sale of long-term assets Gains on the sale of long-term assets
Adjustments to net income in calculating operating cash flows include:
Nonoperating items Changes in current assets and current liabilities Noncash items
Which of the following are cash outflows from financing activities?
Pay dividends Repay borrowing from bank
Albert Inc. has both common and preferred stock outstanding. Which should be listed first in the stockholders' equity section of the balance sheet?
Preferred stock
Cash inflows and outflows involving stockholders and creditors are classified on the statement of cash flows as
financing activities
Repayments of formal, long-term debt contracts are classified as
financing activities
Which of the following are profitability ratios?
gross profit ratio price-earnings ratio return on assets return on equity profit margin
A stock dividend
has no effect on each stockholder's ownership percentage
Preferred stock is advantageous in that it:
has priority over common stock at liquidation. has priority over common stock when dividends are declared.
Which of the following provides the clearest indication of an organization's ability to pay current and future interest.
high earnings relative to interest expense
The higher the debt to equity ratio is for a company, the __ the risk of bankruptcy for that company
higher
Trend analysis and time-series analysis refer to ___ analysis.
horizontal
Average days in inventory is calculated as 365 days divided by the
inventory turnover ratio.
The amount of money paid into a company by its owners is referred to as:
invested capital
The purchase and sale of long-term assets and current investments are classified as
investing activities.
Evaluation of the company's profitability requires consideration of the amount of a company's earnings in relation to the size of the
investment
The number of shares outstanding equals the number of shares ___
issued minus the number of shares in treasury
Disadvantages of the corporate form of business are
more paperwork additional taxation.
The profit margin ratio is defined as ___ ____ divided by net sales
net income
When using the direct method to prepare the Statement of Cash Flows, depreciation expense is
not reported on the statement of cash flows.
Cash receipts and cash payments for transactions relating to revenue and expense activities are classified on the statement of cash flows as
operating activities
The statement of cash flows classifies items as
operating, investing, and financing.
Which of the following is typically presented first in the equity section of the balance sheet?
preferred stock
Changes to current assets and current liabilities require adjustment of net income under the indirect method because
related cash may be higher or lower than the accrued amount included in net income
Margot Inc. issues $10 million in bonds, of which $2 million are due each year for the next 5 years. Margot Inc.'s bonds are commonly referred to as a
serial bonds
A corporation is owned by its
stockholders
A 2-for-1 stock split increases the marketability of the stock because
the market price per share decreases.
A company's capital structure refers to
the mixture of debt and equity used to finance the company.
Canton has 60,000 shares of $10 par stock issued and outstanding. Canton declares a 2-for-1 stock split but for convenience accounts for it as a 100% stock dividend. What is the par value per share and number of shares outstanding after the stock split?
$10 par; 120,000 shares
Roberts Company's operating expenses (excluding depreciation expense) were $50,000 and its balance in prepaid insurance increased by $2,000. Cash paid for operating expenses was:
$50,000+$2,000 = 52000
Adam Company's operating expenses (excluding depreciation expense) were $80,000 and its balance in prepaid insurance decreased by $5,000. Cash paid for operating expenses was:
$80,000-$5,000 = 75000
X-Co issued 1,000 shares of its 5%, $10 par value, cumulative preferred stock for $100 cash per share. The journal entry to record this event includes:
$90,000 credit to Additional paid-in capital. $10,000 credit to Preferred stock. $100,000 debit to Cash.
Neue Inc. reports sales revenue of $200,000; in addition, its accounts receivable balance decreased by $15,000. Neue's cash flows from sales were:
215000
Primarily beneficial for lender (bond issuer)
Callable
Common types of analysis that help assess a specific company's performance include comparisons:
between companies to the same industry over time
Callable bonds can be redeemed at the choice of
bond issuer
The return on assets is calculated by dividing
net income; average total assets
Stock dividends
require a journal entry
Stock splits and stock dividends
cause total stockholders' equity to remain the same
Vertical analysis is also commonly known as ___ size analysis.
common
Which of the following are typically shown in an amortization schedule related to an installment notes payable? (Select all that apply.)
The cash paid each payment period The carrying value of the note at the end of the period The carrying value of the note at the beginning of the period
A review of Munchen Corporation's financial statements reveals the following information: cost of goods sold: $100,000; decrease in inventory: $5,000; increase in accounts payable: $10,000. Cash paid to suppliers was:
$100,000-$5,000-$10,000 = 85000
What is the formula for the inventory turnover ratio?
Cost of goods sold divided by average inventory.
Which ratio indicates the portion of each sales dollar above its cost of goods sold?
The gross profit ratio
List the four steps in preparing a statement of cash flows in the correct order. Instructions Choice 1 of 4. calculate the net cash flows from operating activities toggle button calculate the net cash flows from operating activities Choice 2 of 4. combine operating, investing, and financing activities toggle button combine operating, investing, and financing activities Choice 3 of 4. determine the net cash flows from investing activities toggle button determine the net cash flows from investing activities Choice 4 of 4. determine the net cash flows from financing activities toggle button determine the net cash flows from financing activities
calculate the net cash flows from operating activities, determine the net cash floes from investing activities, determine the net cash flows from financing activities, combine operating investing and financing activties
Special contractually granted features can make preferred stock:
convertible cumulative redeemable
Which of the following are common characteristics or provisions of bonds?
convertible secured or unsecured callable
A business that incorporates must file a document with the state, which includes a description of the business activities, the shares to be issued, and the composition of the board of directors. Which of the following terms are used to describe this document?
Corporate charter Articles of incorporation
Which of these are liquidity ratios?
Current ratio Receivables turnover Average collection period
convertible
Shares can be converted for common stock
Joann is preparing a statement of cash flows as part of a homework assignment. She hopes to find a check figure that will help her assess the accuracy of her results. What should Joann do to quickly find a check figure?
Calculate the change in the beginning and ending balance of cash
Additional shares issued to existing owners without an exchange of cash may be in the form of stock ___ or stock ___ .
dividends, splits
Which of the following reports net income relative to average stockholders' equity in dollars?
ROE
A review of Elisa Company's financial statements reveals the following information: cost of goods sold: $200,000; increase in inventory: $10,000; increase in accounts payable: $20,000. Cash paid to suppliers was:
$200,000+$10,000-$20,000 = 190000
True or false: A corporation is owned by debt and equity holders.
False
Which of the following are typically shown in an amortization schedule related to an installment notes payable requiring periodic payment of interest and principal? (Select all that apply.)
Interest expense based on the beginning period carrying value and the effective rate of the loan The decrease in the carrying value of the note The carrying value of the note at the end of the period The cash paid each payment period
Which of the following are cash inflows from financing activities?
Issuing stock to investors for cash Issuance of bonds Issuance of common stock to investors Borrowing from bank
Which of the following ratios measures the ability of company management to generate earnings from the resources owners provide?
Return on equity
Which of the following are classified as cash inflows from investing activities?
Sale of equipment Sale of land
Corporate bonds most often pay interest
Semiannually
Which of the following statements is correct concerning a decrease in accounts payable?
Since the cash payments were more than the credit purchases, the decrease must be added to purchases to calculate cash payments to suppliers.
when using the __ method for determining cash flows from operations, noncash expenses are omitted from the Statement of Cash Flows.
direct
True or false: Cost of goods sold must be adjusted to a cash number because the cost of merchandise sold may be more or less than the amount of cash paid to suppliers during the period.
True
True or false: The board of directors is responsible for establishing corporate policies.
True
When is it more economical for a company to borrow funds by issuing bonds?
When the interest savings exceed the additional bond issuance costs.
The journal entry to record the declaration of a dividend includes
a credit to Dividends payable a debit to Dividends
The higher a company's earnings relative to its interest expense, the more likely it is that it will be able to pay its
current and future interest payments.
Mathematically, the current ratio is expressed as current assets divided by
current liabilities
Preferred stock has a mixture of attributes of both equity and
debt
__ financing refers to borrowing money from creditors.
debt
Financing with __ requires borrowing, whereas financing with __ requires issuing shares of stock.
debt equity
Loans requiring periodic payments of interest and principle are referred to as __ notes
installment
The times interest earned formula is calculated as earnings before interest and taxes divided by
interest expense
what is an advantage of leasing over purchasing an asset with an installment note
leas
Retained earnings of $100,000 represent a corporation's cumulative earnings Blank______ and is shown on the Blank______.
not paid out by dividends; balance sheet and statement of retained earnings
___ capital is the amount of money paid into a company by its owners.
paid-in
The legal capital per share of stock that is assigned when the corporation is first established is referred to as ___ ___
par value
Preferred stock is "preferred" over common stock by providing preferred stock holders with these rights:
preference in distribution of assets during dissolution of corporation first right to specified amount of dividends
When the ___ account decreases, it means the company paid less cash for insurance than it recorded as insurance expense.
prepaid insurance
the ___ margin measures the income earned on each dollar of sales.
profit
Periodic payments on installment notes typically include (Select all that apply.)
a portion that reflects interest. a portion that reduces the outstanding loan balance.
The __-___ ratio provides a more conservative measure of a company's ability to pay its current liabilities from current sources
acid test
The sum of cash, current investments, and accounts receivable divided by current liabilities equals the
acid-test ratio
Grant's income statement reveals a loss from the sale of land. In preparing the operating activities section of the statement of cash flows using the indirect format, the loss should be
added to net income.
Return on assets is calculated as net income divided by
average total assets.
AnuU, Inc. sold 100,000 shares of the 1,000,000 shares it is allowed to sell. AnuU repurchased 10,000 of these shares. The number of shares issued equals Blank______ shares.
100,000. Reason: The number of shares authorized equals 1,000,000 which is the maximum shares the company is allowed to sell. Of the 1,000,000 shares, the company has sold 100,000 and bought back 10,000 leaving 90,000 shares outstanding. The total issued shares is the full 100,000.
What is the formula to compute the average days in inventory?
365 days/inventory turnover ratio
The formula for average collection period is
365 divided by the receivables turnover ratio.
Bagel, Inc. issued 50,000 shares of the 100,000 authorized. It has since repurchased 5,000 of its shares. The number of shares outstanding equals
45k. Reason: The 45,000 shares outstanding equals the number issued of 50,000 minus the 5,000 shares bought back by the company.
When a business incorporates, it must file its ___ with the state in which it incorporates.
articles of incorporation
Which of the following represents the first step in preparing a statement of cash flows in the correct order?
calculate the net cash flows from operating activities
The mixture of debt financing and equity financing a company uses is referred to as the company's __ structure
capital
A frequent reason for a stock split is to
cause the market price per share to decline
Which of the following represents the final step in preparing a statement of cash flows in the correct order?
combine operating, investing, and financing activities
One of the purposes of adjusting net income for changes to certain balance sheet accounts is to
convert items included in net income to cash.
Additional taxes and more paperwork are the two primary disadvantages of this business form:
corporation
The formula for the inventory turnover ratio is
cost of goods sold divided by average inventory.
The rate of interest printed on the face of a bond is referred to as the __ interest rate
coupon
An increase in accounts receivable will result in a(n) ___ ______ in cash from sales revenue when using the direct method to determine cash flows from operations.
decrease
Which of the following items are classified as cash inflows from operating activities on the statement of cash flows?
Collection from customers Collection of interest Interest received on notes receivable
You are analyzing the following four companies based on their debt to equity ratio. Which company has the highest risk of insolvency? Company A 2.5 Company B 1.0 Company C 0.9 Company D 3.0
Company D
Which of the following ratios provides the most conservative measure of a firms ability to pay its current liabilities.
The acid-test ratio
a company obtains $100000, 3 year loan, at 6% interest, with monthly payments of $3042, what would be recorded for interest expense for the first full month
= 100000 *.06 *1/12 = 500
The __ rate of interest is used to compute the cash interest paid to bondholders. (Enter one word per blank)
stated
The declaration and payment of a cash dividend ultimately causes a(n):
decrease in Cash. decrease in stockholders' equity. decrease in Retained earnings.
Using the indirect method to report cash flows from operating activities, a(n) __ (increase/decrease) in the accounts receivable from the prior period is added to net income in the ___ activities section of the statement of cash flows.
decrease, operating
Cash from operating activities differs between the direct and indirect method with respect to the:
detail and presentation only
Which method of preparing the operating activities section of the statement of cash flows consists of a summary of all operating transactions that result in either a debit or a credit to cash?
direct
the ___ method prepares the operating activities section of the statement of cash flows by restating each revenue and expense from the accrual basis to the cash basis. It shows the cash collected from customers and the cash paid for operating expenses.
direct
The dividend yield is calculated by dividing:
dividends per share by the stock price per share
ROE relates ___.
net income to the average stockholders' equity
When accounts receivable decrease
net sales are less than cash receipts from customers.
Which of the following are cash outflows from investing activities?
purchase of long-term investments purchase of land Purchase of building Purchase of investment
Receipts, Inc.'s Sales were $200,000 while its Accounts receivable was $23,000 at the beginning of the year and $27,000 at the end. All sales were credit sales. Receipts' receivables turnover equals:
8.0 = $200,000/(($23,000+$27,000)/2)
Identify the correct statement(s) relating to common bond features.
Bonds may be issued with both a call and a conversion feature Call features are more common than conversion features
True or false: The debt to equity ratio is calculated as total liabilities divided by common stock.
False
Which of the following would result in a cash outflow from investing activities?
Purchase of a machine for cash.
Which of the following are classified as cash outflows from investing activities?
Purchase of land Purchase of an investment
A common reason for redeeming a bond prior to its maturity date is that
market interest rates decreased.
Convertible bonds may be beneficial to lenders (bond issuer) because they tend to:
require a lower interest rate than bonds issued without the conversion feature
A company's past profits that are not paid out in dividends are ____
retained earnings
