Chapter 2 Quiz

Over the past year, a firm decreased its current assets and increased its current liabilities. As a result, the firm's net working capital: Multiple Choice had to increase. had to decrease. remained constant. could have either increased, decreased, or remained constant. was unaffected as the changes occurred in the firm's current accounts.

had to decrease

The accounting statement that measures the revenues, expenses, and net income of a firm over a period of time is called the: statement of cash flows. income statement. Correct GAAP statement. balance sheet. net working capital schedule.

Income Statement

Cash flow from assets is defined as: the cash flow to shareholders minus the cash flow to creditors. operating cash flow plus the cash flow to creditors plus the cash flow to shareholders. operating cash flow minus the change in net working capital minus net capital spending. operating cash flow plus net capital spending plus the change in net working capital. cash flow to shareholders minus net capital spending plus the change in net working capital.

operating cash flow minus the change in net working capital minus net capital spending.

Highly liquid assets: Multiple Choice increase the probability a firm will face financial distress. appear on the right side of a balance sheet. generally produce a high rate of return. can be sold quickly at close to full value. include all intangible assets.

can be sold quickly at close to full value

Which one of the following statements concerning the balance sheet is correct? Multiple Choice Total assets equal total liabilities minus total equity. Net working capital is equal total assets minus total liabilities. Assets are listed in descending order of liquidity. Current assets are equal to total assets minus net working capital. Shareholders' equity is equal to net working capital minus net fixed assets plus long-term debt.

Assets are listed in descending order of liquidity

You are examining a company's balance sheet and find that it has total assets of $20,061, a cash balance of $2,019, inventory of $4,689, current liabilities of $5,381 and accounts receivable of $2,545. What is the company's net working capital? Multiple Choice $3,872 $14,680 $1,853 $817 $5,506

$3,872

Your firm has net income of $322 on total sales of $1,300. Costs are $720 and depreciation is $120. The tax rate is 30 percent. The firm does not have interest expenses. What is the operating cash flow? Multiple Choice $442 $322 $460 $580 $782

$442

Teddy's Pillows had beginning net fixed assets of $471 and ending net fixed assets of $550. Assets valued at $319 were sold during the year. Depreciation was $42. What is the amount of net capital spending? Multiple Choice $79 $37 $121 $440 $273

$121

At the beginning of the year, Nothing More, Corp., had a long-term debt balance of $37,554. During the year, the company repaid a long-term loan in the amount of $10,314. The company paid $3,950 in interest during the year, and opened a new long-term loan for $9,090. What was the cash flow to creditors during the year? Multiple Choice $6,364 $1,224 $14,200 $5,140 $5,174

$5,174

At the beginning of the year, long-term debt of a firm is $306 and total debt is $338. At the end of the year, long-term debt is $268 and total debt is $348. The interest paid is $34. What is the amount of the cash flow to creditors? Multiple Choice $72 -$72 $34 $38 -$38

$72