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