Practice questions

Which of the following organizations accounts for most of the revenue

C corporation

Which of the following adjustments is NOT correct if you are trying to calculate cash flow from financing activities?

Add dividends paid

Which of the following adjustments to net income is NOT correct if you are trying to calculate cash flow from operating activities?

Add increases in accounts receivable

Which of the following is (are) deducted from EBIT to determine net income?

Both Interest expense and Corporate taxes

Which of the following statements regarding the income statement is INCORRECT?

The income statement shows the earnings and expenses at a given point in time.

Which of the following is (are) deducted from EBIT to determine pretax income?

Interest expense

If Moon Corporation has depreciation or amortization expense, which of the following is TRUE?

Its EBITDA/Interest Coverage ratio will be greater than its EBIT/Interest Coverage ratio.

Which of the following statements regarding perpetuities is FALSE?

PV of a perpetuity =

The person charged with running the corporation by instituting the rules and policies set by the Board of Directors is called

The chief executive officer

Dustin's Donuts experienced a decrease in the value of the trademark of a company it acquired two years ago. This reduction in value results in:

an impairment charge.

Accounts payable is a:

current liability

The firm's revenues and expenses over a period of time are reported on the firm's:

income statement or statement of financial performance.

The statement of financial performance is also known as the:

income statement.

A sole proprietorship is owned by

one person

By evaluating cost and benefits using competitive market prices, we can determine whether a decision will make the firm and its investors wealthier. This central concept is called:

the Valuation Principle

Gross profit is calculated as:

total sales - cost of sales

If we use future value rather than present value to decide whether to make an investment:

we will make the same decision using either future value or present value.