FIN CH 2
Which of the following is NOT a component of cash flow from assets?
-Change in net working capital -Financing expenses (THIS ONE) -Capital spending -Operating cash flow
which of the following are components of cash flow from assets?
-change in net working capital -operating cash flow -capital spending
Operating cash flow (Select all that apply.)
-tells us whether or not a firm's cash inflows from its operations are sufficient to cover its everyday cash outflows -is a sign of trouble if negative over a long period of time
How is the average income tax rate computed?
Total tax bill/Total taxable income
According to GAAP, when is income reported?
When it is earned or accrued the matching principle of GAAP states that costs associate with a good service should be recorded at the same time as the reveue from selling that good or service. Recognition takes place when revenue is earned and expense incurred, rather than when cash is collected or spent.
net earning refers to income earned
after interest and taxes
in the long-run, costs may be considered as
all variable
the short run is
as imprecise period of time
Non-cash items do not affect
cash flow
in finance, the value of a firm depends on its ability to generate
cash flows
Tax rates for propietorships, partnerships, and LLCs __________ with the passage of the Tax Cuts and Jobs Act of 2017.
changed
tad rates of prop, part, and llcs
changed with the passage of the Tax Cuts and Job Act of 2017
variable cost
changes as the output of the firm changes
which of the following is an example of a non-cash item on an income statement?
depreciation
Net capital spending is equal to the change in net fixed assets plus:
depreciation Reason: Capital spending = Ending net fixed assets - beginning net fixed assets + depreciation.
Cash flow to stockholders equals ____.
dividends paid minus net new equity raised
when a firm smooths earnings to please investors, it is called
earnings management
Costs that do not change in the short run arise because of ______.
fixed commitements
costs that do not change in the short run arise because of
fixed commitements
Cash flow to creditors equals:
interest paid minus net new borrowing
which of the following is a current asset?
inventory
The ______ tax rate is the tax rate paid on the next dollar of income.
marginal; the marginal tax rate is the tax rate paid on the next dollar of income.
The cash flow that results from the firm's day-to-day activities of producing and selling is called:
operating cash flow
Earnings management is a controversial practice in which corporations ________ or ___________ their earnings to "smooth out" dips and surges and keep investors calm.
overstate; understate
liquidity
refers to the speed and ease with which an asset can be converted to cash.
Free cash flow is better described as ____.
total distributable cash flow
True or false: Interest paid minus net new borrowing equals cash flow to creditors.
true
______ changes as the output of the firm changes.
variable cost
According to the current U.S. corporate tax code, the corporate tax rate in effect for 2019 is:
21%
Which one of these is considered to be the most liquid?
accounts receivable
Which of the following is NOT a component of cash flow from assets?
financial expenses
Interest paid_______( Plus/Minus) net new borrowing equals cash flow to creditors.
minus
A positive operating cash flow indicates that the firm is generating enough cash to:
pay everyday cash outflows
Cash flow refers to:
the difference between the number of dollars that came in and the number that went out
Changes in capital spending can be negative if
the firm sold more fixed assets than it purchased
True or false: Operating cash flow does not include depreciation or interest.
true
True or false: Free cash flow is also known as cash flow from assets.
true Reason: Cash flow from assets is also known as free cash flow, though there is some variation in the calculation
True or false: Ending net fixed assets plus beginning net fixed assets minus depreciation equals net investment in fixed assets.
false
Ending net fixed assets minus beginning net fixed assets____ Blank 1 of 1 ____depreciation equals net investment in fixed assets.
plus
Net capital spending is equal to ending net fixed assets minus beginning net fixed assets ____.
plus depreciation -Net capital spending is equal to ending net fixed assets minus beginning net fixed assets plus depreciation, because depreciation is subtracted from ending gross fixed assets to achieve net fixed assets. Inventory is a current asset, not a fixed asset.
The market value of an item is
the cash value you'd get if you sold it.