Financial Management Ch2
A company has $1,378 in inventory, $4,827 in net fixed assets, $664 in accounts receivable, $298 in cash, $626 in accounts payable, and $5,422 in equity. What is the company's long-term debt? $1,298 $1,156 $1,745 $1,707 $1,119
$1,119 Total assets = $298 + 664 + 1,378 + 4,827 = $7,167 Long-term debt = $7,167 − 626 − 5,422 = $1,119
Hinojosa Music has projected annual net income of $272,600, of which 28 percent will be distributed as dividends. The company will sell $75,000 worth of common stock. What will be the cash flow to stockholders if the tax rate is 21 percent? −$75,000 $1,328 $24,623.52 $76,328 $151,328
$1,328 CFS = .28($272,600) − $75,000 CFS = $1,328
Smashed Pumpkins Company paid $184 in dividends and $610 in interest over the past year. The company increased retained earnings by $510 and had accounts payable of $666. Sales for the year were $16,475 and depreciation was $744. The tax rate was 21 percent. What was the company's EBIT? $6,590 $1,488 $1,460 $2,038 $1,157
$1,488 Net income = $184 + 510 = $694 EBT = $694/( 1 − .21) = $878 EBIT = $878 + 610 = $1,488
At the beginning of the year, the long-term debt of a firm was $72,918 and total debt was $138,407. At the end of the year, long-term debt was $68,219 and total debt was $145,838. The interest paid was $6,430. What is the amount of the cash flow to creditors? $1,731 −$1,001 $11,129 $13,861 $19,172
$11,129 CFC = $6,430 − ($68,219 − 72,918) CFC = $11,129
Thornton, Incorporated, had taxable income of $131,582 for the year. The company's marginal tax rate was 34 percent and its average tax rate was 21 percent. How much did the company have to pay in taxes for the year? $44,738 $27,632 $28,282 $26,924 $28,626
$27,632 Taxes = $131,582(.21) = $27,632
Hoodoo Voodoo Company has total assets of $66,300, net working capital of $20,350, owners' equity of $32,270, and long-term debt of $23,830. What is the company's current assets? $45,950 $56,100 $35,750 $32,270 $30,550
$30,550 Current liabilities = $66,300 − 32,270 − 23,830 = $10,200 Current assets = $20,350 + 10,200 = $30,550
A balance sheet has total assets of $1,892, fixed assets of $1,306, long-term debt of $692, and short-term debt of $233. What is the net working capital? $353 $459 $586 $381 $1,200
$353 Net working capital = ($1,892 − 1,306) − $233 = $353
Villacana Lighting has beginning total debt of $682,400 and ending total debt of $697,413. Current liabilities increased by $18,915 during the year. What was the cash flow to creditors if the firm paid $34,215 in interest during the year? $384 $287 $38,117 $20,228 $19,202
$38,117 CFC = $34,215 − ($697,413 − 682,400 − 18,915) CFC = $38,117
You find the following financial information about a company: net working capital = $1,125; fixed assets = $7,425; total assets = $11,750; and long-term debt = $4,433. What is the company's total equity? $4,117 $8,683 $4,325 $6,375 $9,625
$4,117 Current assets = $11,750 − 7,425 = $4,325 $1,125 = $4,325 − CL CL = $3,200 Total equity = $11,750 − 4,433 − 3,200 = $4,117
Kerch Company had beginning net fixed assets of $216,534, ending net fixed assets of $211,701, and depreciation of $40,453. During the year, the company sold fixed assets with a book value of $8,002. How much did the company purchase in new fixed assets? $35,620 $43,622 $32,451 $34,276 $41,459
$43,622 Net capital spending = $211,701 − 216,534 + 40,453 = $35,620 Fixed assets bought = $35,620 + 8,002 = $43,622
A company has net working capital of $713. Long-term debt is $4,132, total assets are $6,273, and fixed assets are $4,002. What is the amount of total liabilities? $5,560 $5,690 $4,845 $8,134 $6,986
$5,690 Current assets = $6,273 − 4,002 = $2,271 Current liabilities = $2,271 − 713 = $1,558 Total liabilities = $1,558 + 4,132 = $5,690
Mahmood Productions had sales of $843,800 and costs of $609,900. The company paid $38,200 in interest and $35,000 in dividends. The depreciation was $76,400. The firm has a combined tax rate of 24 percent. What was the addition to retained earnings for the year? $55,668 $57,240 $61,060 $56,200 $68,400
$55,668 EBT = $843,800 − 609,900 − 76,400 − 38,200 EBT = $119,300 Net income = $119,300(1 − .24) Net income = $90,668 Addition to retained earnings = $90,668 − 35,000 Addition to retained earnings = $55,668
The Primus Corporation began the year with $6,641 in its long-term debt account and ended the year with $7,983 in long-term debt. The company paid $627 in interest during the year and issued $1,985 in new long-term debt. How much in long-term debt must the company have paid off during the year? $643 −$715 −$1,342 $406 $1,342
$643 Net new borrowing = $7,983 − 6,641 = $1,342 Debt retired = $1,985 − 1,342 = $643
During the past year, a company had cash flow to creditors, an operating cash flow, and net capital spending of $29,235, $64,845, and $26,380, respectively. The net working capital at the beginning of the year was $11,308 and it was $12,850 at the end of the year. What was the company's cash flow to stockholders during the year? $10,772 $1,542 $5,942 $9,230 $7,688
$7,688 Change in NWC = $12,850 − 11,308 = $1,542 CFA = $64,845 − 26,380 − 1,542 = $36,923 Cash flow to stockholders = $36,923 − 29,235 = $7,688
Shareholders' equity: is referred to as a firm's financial leverage. is equal to total assets plus total liabilities. represents the residual value of a firm. includes patents, preferred stock, and common stock. decreases whenever new shares of stock are issued.
represents the residual value of a firm.
A company is obligated to pay its creditors $6,505 at the end of the year. If the value of the company's assets equals $6,367 at that time, what is the value of shareholders' equity? −$69 −$138 $138 $12,872 $0
$0 Equity = Max[($6,367 − 6,505) , 0] = $0
Gupta Gourmet has a current market value of $26,400 and owes its creditors $31,300. What is the market value of the shareholders' equity? −$4,900 −$5,200 $0 $4,900 $5,200
$0 Shareholders' equity = Max [($26,400 − 31,300), 0] Shareholders' equity = 0Since the market value of equity cannot be negative, the answer is zero.
Cash flow to stockholders is defined as: the total amount of interest and dividends paid during the past year. the change in total equity over the past year. cash flow from assets plus the cash flow to creditors. operating cash flow minus the cash flow to creditors. dividend payments less net new equity raised.
dividend payments less net new equity raised.
At the beginning of the year, Vendors, Incorporated, had owners' equity of $50,825. During the year, net income was $7,025 and the company paid dividends of $4,725. The company also repurchased $9,075 in equity. What was the cash flow to stockholders for the year? $11,375 $4,350 −$13,800 −$4,350 $13,800
$13,800 Cash flow to stockholders = $4,725 + 9,075 = $13,800
Your firm has net income of $332 on total sales of $1,240. Costs are $690 and depreciation is $130. The tax rate is 21 percent. The firm does not have interest expenses. What is the operating cash flow? $420 $332 $462 $752 $550
$462 EBIT = Sales - Costs - Depreciation EBIT = $1,240 - 690 - 130 EBIT = $420 Taxes = Tax rate × EBIT Taxes = .21 × $420 Taxes = $88 OCF = EBIT + Depreciation - Taxes OCF = $420 + 130 - 88 OCF = $462
Which one of the following will decrease the value of a firm's net working capital? Donating inventory to charity Depreciating an asset Collecting an accounts receivable Purchasing inventory on credit Using cash to pay a supplier
Donating inventory to charity
Which one of the following statements related to liquidity is correct? Any asset that can be sold for cash is considered liquid. Inventory is more liquid than accounts receivable because inventory is tangible. Liquid assets are defined as assets that can be sold quickly regardless of the price obtained. Liquid assets are valuable to a firm. Liquid assets tend to earn a higher rate of return than illiquid assets.
Liquid assets are valuable to a firm.
For a firm that must pay income taxes, depreciation expense: increases expenses and lowers taxes. increases the net fixed assets as shown on the balance sheet. reduces both the net fixed assets and the costs of a firm. is a noncash expense that increases the net income. decreases net fixed assets, net income, and operating cash flows.
increases expenses and lowers taxes.
As the degree of financial leverage increases, the: probability a firm will encounter financial distress increases. amount of a firm's total debt decreases. less debt a firm has per dollar of total assets. number of outstanding shares of stock increases. accounts payable balance decreases.
probability a firm will encounter financial distress increases.
Adison Winery had beginning long-term debt of $38,496 and ending long-term debt of $43,871. The beginning and ending total debt balances were $47,611 and $52,592, respectively. The company paid interest of $4,255 during the year. What was the company's cash flow to creditors? $5,375 $726 $9,236 −$1,120 −$726
−$1,120 Cash flow to creditors = $4,255 − ($43,871 − 38,496) = −$1,120
Peggy Grey's Cookies has net income of $440. The firm pays out 40 percent of the net income to its shareholders as dividends. During the year, the company sold $89 worth of common stock. What is the cash flow to stockholders? $87.00 $265.00 $176.00 $140.40 $264.00
$87.00 CFS = (.40 × $440) - $89 = $87.00
Which one of the following accounts is the most liquid? Inventory Building Accounts Receivable Equipment Land
Accounts Receivable
Which one of the following is classified as a tangible fixed asset? Accounts receivable Goodwill Computer equipment Cash Inventory
Computer equipment
Which one of the following is most likely to be a fixed cost? Raw materials Rent Management bonuses Manufacturing wages Shipping and freight
Rent
The book value of a firm is: equivalent to the firm's market value minus its liabilities. a financial, rather than an accounting, valuation. generally greater than the market value when fixed assets are included. based on historical transactions. adjusted to the market value whenever the market value exceeds the stated book value.
based on historical transactions.
A firm has $768 in inventory, $1,490 in fixed assets, $538 in accounts receivable, $306 in net working capital, and $171 in cash. What is the amount of current liabilities? $1,015 $1,171 $1,783 $722 $1,000
$1,171 Current liabilities = ($171 + 538 + 768) − $306 = $1,171
Muffy's Muffins had net income of $2,500. The firm retains 65 percent of net income. During the year, the company sold $445 in common stock. What was the cash flow to shareholders? $875 $2,070 $430 $1,180 $1,320
$430 Cash flow to stockholders = (1 − .65) × $2,500 − 445 = $430
A partner in a law firm expected to earn taxable income of $80,000. Her actual taxable income exceeded this projection by $25,000. Based on the tax table below, how much additional tax did she owe due to the $25,000 increase in taxable income? $5,250.00 $6,000.00 $5,500.00 $5,889.50 $4,674.00
$5,889.50
A firm has common stock of $93, paid-in surplus of $300, total liabilities of $425, current assets of $420, and net fixed assets of $630. What is the amount of the shareholders' equity? $818 $205 $545 $625 $1,050
$625 Shareholders' equity = Current assets + Net fixed assets - Total liabilities. Shareholders' equity = $420 + 630 - 425 = $625
Which one of the following statements concerning net working capital is correct? A firm's ability to meet its current obligations increases as its net working capital decreases. An increase in net working capital must also increase current assets. Firms with equal amounts of net working capital have equal amounts of liquidity. Net working capital increases when inventory is sold for cash at a profit. Net working capital is a part of operating cash flow.
Net working capital increases when inventory is sold for cash at a profit.
Which one of the following is excluded from a firm's accounting value, but included in its market value? Real estate purchased by the firm Equipment owned by the firm Money due from a customer Recognition of the firm's brand An item held by the firm for future sale
Recognition of the firm's brand
Net working capital is defined as: total liabilities minus shareholders' equity. current liabilities minus shareholders' equity. fixed assets minus long-term liabilities. current assets minus current liabilities. total assets minus total liabilities.
current assets minus current liabilities.
At the beginning of the year, Smidovec Plumbing had current liabilities of $15,932 and total debt of $68,847. By year end, current liabilities were $13,870 and total debt was $72,415. What is the amount of net new borrowing for the year? $5,630 −$2,480 $3,568 $4,677 −$2,062
$5,630 Net new borrowing = ($72,415 − 13,870) − ($68,847 − 15,932) Net new borrowing = $5,630
Hurricane Industries had a net income of $141,150 and paid 35 percent of this amount to shareholders in dividends. During the year, the company sold $87,750 in new common stock. What was the company's cash flow to stockholders? −$38,348 $53,400 $49,403 $38,348 −$49,403
−$38,348 Cash flow to stockholders = $141,150(.35) − 87,750 = −$38,348
Teddy's Pillows had beginning net fixed assets of $475 and ending net fixed assets of $558. Assets valued at $323 were sold during the year. Depreciation was $50. What is the amount of net capital spending? $456 $83 $285 $133 $33
$133 Net capital spending = $558 (ending net fixed assets) + 50 (Depreciation) - 475 (beginning net fixed assets) Net capital spending = $133
A company has $1,280 in inventory, $4,701 in net fixed assets, $580 in accounts receivable, $242 in cash, $514 in accounts payable, $861 in long-term debt, and $5,296 in equity. What are the company's total assets? $9,997 $6,803 $12,099 $7,317 $7,792
$6,803 Total assets = $242 + 580 + 1,280 + 4,701 = $6,803
If the tax rate is 21 percent in 2020. What is the average tax rate for a firm with taxable income of $123,013? 31.90% 39.00% 23.49% 20.00% 21.00%
21.00% Taxes paid = .21($123,013) Taxes paid = $25,832.73 Average tax rate = $25,832.73/$123,013 Average tax rate = .2100, or 21.00%
Which one of the following determines the standards and procedures with which audited financial statements are prepared? Generally Accepted Accounting Principles Matching principle Cash flow identity Financial Accounting Reporting Principles Standard Accounting Value Guidelines
Generally Accepted Accounting Principles
Total income taxes divided by total taxable income equals the ______ tax rate. deductible average total residual marginal
average
Maynard Enterprises paid $1,692 in dividends and $1,606 in interest over the past year. The common stock account increased by $1,536 and retained earnings decreased by $632. What was the company's net income? $2,324 $1,060 $2,168 $904 $2,596
$1,060 Net income = $1,692 − 632 = $1,060
The income statement of Lashari Design shows depreciation of $1,611, sales of $21,415, interest paid of $1,282, net income of $1,374, and costs of goods sold of $16,408. What is the amount of the noncash expenses? $2,893 $1,282 $740 $1,611 $2,351
$1,611 Noncash expenses = Depreciation = $1,611
Wommack Interiors had beginning long-term debt of $51,207 and ending long-term debt of $36,714. The beginning and ending total debt balances were $59,513 and $42,612, respectively. The interest paid was $2,808. What is the amount of the cash flow to creditors? −$11,685 −$11,272 $17,301 $17,418 $11,174
$17,301 CFC = $2,808 − ($36,714 − 51,207) CFC = $17,301
Thakur Industries has sales of $465,000, interest paid of $2,450, costs of 150,000, and depreciation of $20,400. What is the operating cash flow if the tax rate is 21 percent? $217,242 $227,406 $245,356 $247,806 $253,649
$253,649 EBIT = $465,000 − 150,000 − 20,400 EBIT = $294,600 Tax = ($294,600 − 2,450)(.21) Tax = $61,352 OCF = $294,600 + 20,400 − 61,352 OCF = $253,649
An equity owner of McKissick and Khan Consulting, LLC earned $145,000 in taxable income from the firm. Based on the tax table below, how much will the owner owe in income taxes? Ignore any standard or itemized deductions. Taxable Income $14,274.00 $34,800.00 $28,879.50 $22,800.50 $30,450.00
$28,879.50 Income Tax = [($9,875 − 0) × 10%] + [($40,125 − 9,875) × 12%] + [($85,525 − 40,125) × 22%] + [($145,000 − 85,525) × 24%] = $28,879.50
You are examining a company's balance sheet and find that it has total assets of $21,156, a cash balance of $2,424, inventory of $5,169, current liabilities of $6,341, and accounts receivable of $2,935. What is the company's net working capital? $14,815 $982 $1,763 $6,151 $4,187
$4,187 NWC = Current assets − Current liabilities NWC = ($2,424 + 2,935 + 5,169) − 6,341 NWC = $4,187
Pham Burgers has beginning net fixed assets of $684,218, ending net fixed assets of $679,426, and depreciation expense of $48,859. What is the net capital spending for the year if the tax rate is 21 percent? $42,920 $53,651 $44,067 $35,255 $48,600
$44,067 Net capital spending = $679,426 − 684,218 + 48,859 Net capital spending = $44,067
Matsumoto Training has sales of $705,000, depreciation of $17,600, interest expense of $2,090, costs of $144,000, and a tax rate of 21 percent. What is the operating cash flow for the year? $436,018 $418,899 $447,325 $434,409 $432,451
$447,325 EBIT = $705,000 − 144,000 − 17,600 EBIT = $543,400 Tax = ($543,400 − 2,090)(.21) Tax = $113,675 OCF = $543,400 + 17,600 − 113,675 OCF= $447,325
At the beginning of the year, Shinedown, Corporation, had a long-term debt balance of $47,630. During the year, the company repaid a long-term loan in the amount of $13,855. The company paid $5,460 in interest during the year, and opened a new long-term loan for $12,160. How much is the ending long-term debt account on the company's balance sheet? $45,935 $51,395 $49,325 $7,155 $54,330
$45,935 Ending long-term debt = $47,630 + 12,160 − 13,855 = $45,935
At the beginning of the year, long-term debt of a firm is $280 and total debt is $325. At the end of the year, long-term debt is $255 and total debt is $335. The interest paid is $21. What is the amount of the cash flow to creditors? $21 $25 -$25 $46 -$46
$46 CFC = $21 - ($255 - 280) = $46
At the beginning of the year, Nothing More Corporation 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? $5,140 $14,200 $6,364 $5,174 $1,224
$5,174 Cash flow to creditors = $10,314 + 3,950 − 9,090 = $5,174
Disturbed, Incorporated, had the following operating results for the past year: sales = $22,598; depreciation = $1,490; interest expense = $1,200; costs = $16,580. The tax rate for the year was 21 percent. What was the company's operating cash flow? $3,301 $2,629 $7,349 $5,319 $3,328
$5,319 EBIT = $22,598 − 16,580 − 1,490 = $4,528 EBT = $4,528 − 1,200 = $3,328 Taxes = $3,328(.21) = $699 OCF = $4,528 + 1,490 − 699 = $5,319
Red Barchetta Company paid $27,635 in dividends and $28,500 in interest over the past year. During the year, net working capital increased from $13,578 to $18,294. The company purchased $42,330 in fixed assets and had a depreciation expense of $16,940. During the year, the company issued $25,075 in new equity and paid off $21,105 in long-term debt. What was the company's cash flow from assets? $52,165 $52,562 $45,929 $53,513 $51,186
$52,165 Cash flow from assets = ($28,500 + 21,105) + ($27,635 − 25,075) = $52,165
Lewis & Price Corporation paid $700 in dividends and $320 in interest this past year. Common stock remained constant at $6,800 and retained earnings decreased by $180. What is the net income for the year? $180 $520 $1,020 $880 $1,200
$520 Net income = $700 − 180 Net income = $520
Mikeska Equipment Repair has net working capital of $560. Long-term debt is $3,970, total assets are $7,390, and fixed assets are $3,910. What is the amount of the total liabilities? $2,050 $2,920 $4,130 $7,950 $6,890
$6,890 Current assets = $7,390 − 3,910 Current assets = $3,480 Current liabilities = $3,480 − 560 Current liabilities = $2,920 Total liabilities = $2,920 + 3,970 Total liabilities = $6,890
The balance sheet of Perez Printing shows $680 in inventory, $2,140 in fixed assets, $210 in accounts receivables, $250 in accounts payable, and $80 in cash. How much net working capital does the company have? $970 $720 $640 $3,110 $2,860
$720 NWC = $680 + 210 + 80 − 250 NWC = $720
A company has $509 in inventory, $1,768 in net fixed assets, $198 in accounts receivable, $73 in cash, and $218 in accounts payable. What are the company's total current assets? $800 $2,548 $998 $780 $582
$780 Current assets = $73 + 198 + 509 = $780
Vasquez Pottery has shareholders' equity of $218,700. The firm owes a total of $141,000, only 40 percent of which is payable within the next 12 months. The firm has net fixed assets of $209,800. What is the amount of the net working capital? $149,900 $93,500 $125,600 −$47,500 $56,500
$93,500 Current liabilities = .40($141,000) Current liabilities = $56,400 Total assets = $218,700 + 141,000 Total assets = $359,700 Current assets = $359,700 − 209,800 Current assets = $149,900 NWC = $149,900 − 56,400 NWC = $93,500
Which one of the following financial statements summarizes a firm's revenue and expenses during a period of time? Income statement Balance sheet Statement of cash flows Tax reconciliation statement Market value report
Income statement Balance sheet
Assuming accrual accounting is employed, which one of the following statements is correct? Interest is a noncash expense. Credit sales are recorded on the income statement when the cash from the sale is collected. The addition to retained earnings is equal to net income plus dividends paid. The costs of acquiring a product are expensed when the product is sold. Depreciation expenses increase a firm's marginal tax rate.
The costs of acquiring a product are expensed when the product is sold.
A positive cash flow to stockholders indicates which one of the following with certainty? The dividends paid exceeded the net new equity raised. The amount of the sale of common stock exceeded the amount of dividends paid. No dividends were distributed, but new shares of stock were sold. Both the cash flow to assets and the cash flow to creditors must be negative. Both the cash flow to assets and the cash flow to creditors must be positive.
The dividends paid exceeded the net new equity raised.
Which one of the following statements concerning corporate income taxes is correct? U.S. corporations are exempt from federal taxation. Corporations pay no tax on their first $50,000 of income. The federal income tax is applied at a flat rate across all levels of taxable income. The marginal tax rate will always be lower than the average tax rate. The first 25 percent of corporate income is exempt from taxation.
The federal income tax is applied at a flat rate across all levels of taxable income.
The cash flow related to interest payments less any net new borrowing is called the: operating cash flow. capital spending cash flow. net working capital. cash flow from assets. cash flow to creditors.
cash flow to creditors.
Zeng Graphics has taxable income of $48,900 and a tax rate of 21 percent. What is the change in retained earnings if the firm pays $20,200 in dividends for the year? $18,942 $19,948 $19,374 $18,431 $18,574
$18,431 Change in retained earnings = ($48,900)(1 − .21) − $20,200 Change in retained earnings = $18,431
Ryu and Fowler Attorneys has total assets of $4,900, fixed assets of $3,200, long-term debt of $2,900, and short-term debt of $1,400. What is the amount of net working capital? −$100 $300 $600 $1,700 $1,800
$300 NWC = $4,900 − 3,200 − 1,400 NWC = $300
You find the following financial information about a company: net working capital = $789; fixed assets = $5,513; total assets = $8,254; and long-term debt = $4,333. What are the company's total liabilities? $7,284 $6,285 $5,122 $2,171 $5,902
$6,285 Current assets = $8,254 − 5,513 = $2,741 $789 = $2,741 − CLCL = $1,952 Total liabilities = $1,952 + 4,333 = $6,285
The Somerville Corporation has cost of goods sold of $11,518, interest expense of $315, dividends of $420, depreciation of $811, and a change in retained earnings of $296. What is the taxable income given a tax rate of 21 percent? $955.38 $967.78 $906.33 $776.41 $646.15
$906.33 Net income = $296 + 420 Net income = $716 Taxable income = $716/(1 − .21) Taxable income = $906.33
Based on the tax table below, what is the average tax rate for a sole proprietor with taxable income of $155,000? Ignore any standard or itemized deductions. 10.76% 20.18% 24.00% 16.26% 21.00%
20.18% Income Tax = [($9,875 − 0) × 10%] + [($40,125 − 9,875) × 12%] + [($85,525 − 40,125) × 22%] + [($155,000 − 85,525) × 24%] = $31,279.50 Average tax rate = $31,279.50/$155,000 Average tax rate = .2018, or 20.18%
Which one of the following statements related to the cash flow to creditors must be correct? If the cash flow to creditors is positive, the firm must have borrowed more money than it repaid. If the cash flow to creditors is negative, the firm must have a negative cash flow from assets. A positive cash flow to creditors represents a net cash outflow from the firm. A positive cash flow to creditors means that a firm has increased its long-term debt. If the cash flow to creditors is zero, a firm has no long-term debt.
A positive cash flow to creditors represents a net cash outflow from the firm.
Which one of the following is a current liability? A loan payable to the bank in 4 years An invoice payable to a supplier in 45 days An amount due from a customer in 90 days A note payable to a lender in 18 months An amount due from a customer, which is already past due
An invoice payable to a supplier in 45 days
The value of which one of the following is excluded from the firm's book value, but is included in the market value? Transportation equipment Computer software Distribution warehouse Land acquired more than 50 years ago Employees' collective experience level
Employees' collective experience level
Which one of the following is an expense for accounting purposes, but is not an operating cash flow for financial purposes? Interest expense Taxes Cost of goods sold Labor costs Administrative expenses
Interest expense
The cash flow that is available for distribution to a corporation's creditors and stockholders is called the: operating cash flow. net capital spending. net working capital. cash flow from assets. cash flow to stockholders.
cash flow from assets.
Assuming a firm earns taxable income, an increase in ______ will cause the cash flow from assets to increase. depreciation expense net capital spending the change in net working capital income tax expense production costs
depreciation expense
A company has net working capital of $1,888. If all its current assets were liquidated, the company would receive $5,819. What are the company's current liabilities? $3,931 $4,875 $7,707 $7,362 $3,854
$3,931 NWC = Current assets − Current liabilities $1,888 = $5,819 − CLCL = $3,931
Which one of the following describes a noncash item? Fixed expenses Inventory items purchased using credit Ownership of intangible assets such as patents Expenses that do not consume cash Sales that are made using store credit
Expenses that do not consume cash
Cash flow from assets is also known as the firm's: capital structure. equity structure. hidden cash flow. free cash flow. historical cash flow.
free cash flow.
Last year, Yang Software had $15,900 of sales, $500 of net new equity, dividend payments of $75, addition to retained earnings of $418, depreciation of $680, and $511 of interest expense. What are the earnings before interest and taxes at a tax rate of 21 percent? $589.46 $1,135.05 $1,331.54 $1,560.85 $949.46
$1,135.05 Net income = $75 + 418 Net income = $493 Taxable income = $493/(1 − .21) Taxable income = $624.05 EBIT = $624.05 + 511 EBIT = $1,135.05
Bianchi Crafts has an operating cash flow of $4,267 and depreciation of $1,611. Current assets decreased by $1,356 while current liabilities decreased by $2,662, and net fixed assets decreased by $382 during the year. What is free cash flow for the year? $1,732 $2,247 $2,961 $3,915 $4,267
$1,732 Change in NWC = −$1,356 − (−$2,662) Change in NWC = $1,306 NCS = −$382 + 1,611 NCS = $1,229 FCF = CFA = $4,267 − 1,306 − 1,229 FCF = $1,732
At the beginning of the year, a firm has current assets of $323 and current liabilities of $227. At the end of the year, the current assets are $483 and the current liabilities are $267. What is the change in net working capital? $0 $120 $200 $160 -$120
$120 Change in net working capital = ($483 - 267) - ($323 - 227) = $120
Cookies by Casey has sales of $487,000 with costs of $263,000. Interest expense is $26,000 and depreciation is $42,000. The tax rate is 21 percent. What is the net income? $142,750 $123,240 $109,000 $128,700 $134,550
$123,240 Net income = ($487,000 − 263,000 − 26,000 − 42,000)(1 − .21) Net income = $123,240
Simon's Hot Chicken purchased its building seven years ago at a price of $141,150. The building could be sold for $180,750 today. The company spent $66,950 on other fixed assets that could be sold for $59,450. The company has accumulated depreciation of $81,750 on its fixed assets. The company has current liabilities of $37,700 and net working capital of $19,250. What is the ending book value of net fixed assets? $126,350 $170,400 $164,050 $158,450 $208,100
$126,350 Net fixed assets = $141,150 + 66,950 − 81,750 = $126,350
Running Gear has sales of $316,000, depreciation of $47,200, interest expense of $41,400, costs of $148,200, and taxes of $16,632. The firm has net capital spending of $36,400 and a decrease in net working capital of $14,300. What is the cash flow from assets for the year? $145,985 $129,068 $119,655 $120,810 $134,585
$129,068 OCF = $316,000 − 148,200 − 16,632 OCF = $151,168 CFA = $151,168 − 36,400 − (−$14,300) CFA = $129,068
Silva Enterprises has inventory of $11,600, fixed assets of $22,400, total liabilities of $12,900, cash of $1,900, accounts receivable of $8,700, and long-term debt of $6,500. What is the net working capital? $44,600 $15,700 $12,600 $15,800 $9,300
$15,800 NWC = $1,900 + 8,700 + 11,600 − ($12,900 − 6,500) NWC = $15,800
For the past year, Kayla, Incorporated, has sales of $47,747, interest expense of $4,400, cost of goods sold of $17,884, selling and administrative expense of $12,431, and depreciation of $7,430. If the tax rate is 21 percent, what is the operating cash flow? $3,473 $5,602 $10,903 $13,930 $16,256
$16,256 EBIT = $47,747 − 17,884 − 12,431 − 7,430 = $10,002 EBT = $10,002 − 4,400 = $5,602 Taxes = $5,602(.21) = $1,176O CF = $10,002 + 7,430 − 1,176 = $16,256
Johnston & Chu started the year with $650,000 in the common stock account and $1,318,407 in the additional paid-in surplus account. The end-of-year balance sheet showed $720,000 and $1,299,310 in the same two accounts, respectively. What is the cash flow to stockholders if the firm paid $68,500 in dividends? −$17,597 $17,597 −$1,500 $1,500 $68,500
$17,597 CFS = $68,500 − [($720,000 + 1,299,310) − ($650,000 + 1,318,407)] CFS = $17,597
A firm reported sales of $350,000, interest expense of $2,330, costs of $140,000, and depreciation expense of $17,800. The firm's average income tax rate is 21 percent. How much operating cash flow did the firm generate? $170,127 $148,530 $164,000 $165,794 $162,236
$170,127 EBIT = $350,000 − 140,000 − 17,800 EBIT = $192,200 Tax = ($192,200 − 2,330)(.21) Tax = $39,873 OCF = $192,200 + 17,800 − 39,873 OCF = $170,127
Agrawal, Incorporated, has common stock of $6,200, paid-in surplus of $9,100, total liabilities of $8,400, current assets of $5,900, and fixed assets of $21,200. What is the total shareholders' equity that the company should report? $6,900 $15,300 $18,700 $23,700 $35,500
$18,700 Shareholders' equity = $5,900 + 21,200 − 8,400 Shareholders' equity = $18,700 The amount of retained earnings is not provided, so you must use total assets minus total liabilities to derive the correct answer.
For the past year, Pellicier, Incorporated, had depreciation of $2,419, beginning total assets of $23,616, and ending total assets of $21,878. Current assets decreased by $1,356. What was the amount of net capital spending for the year? −$382 $2,037 $2,801 $1,993 $1,172
$2,037 Net capital spending = $21,878 − 23,616 + 1,356 + 2,419 Net capital spending = $2,037
For the past year, Pellicier Incorporated had depreciation of $2,419, beginning total assets of $23,616, and ending total assets of $21,878. Current assets decreased by $1,356. What was the amount of net capital spending for the year? −$382 $2,037 $2,801 $1,993 $1,172
$2,037 Net capital spending = $21,878 − 23,616 + 1,356 + 2,419 Net capital spending = $2,037
A company has total equity of $1,890, net working capital of $150, long-term debt of $890, and current liabilities of $720. What is the company's net fixed assets? $870 $2,780 $2,630 $1,720 $3,500
$2,630 Total liabilities and equity = Total assets = $1,890 + 890 + 720 = $3,500 NWC = Current assets − Current liabilities $150 = CA − $720 Current assets = $870 Net fixed assets = $3,500 − 870 = $2,630
The Scene Shop had operating cash flow of $48,450. Depreciation was $6,700 and interest paid was $2,480. A net total of $2,620 was paid on long-term debt. The firm spent $24,000 on fixed assets and decreased net working capital by $1,330. What was the amount of the cash flow to stockholders? $5,100 $7,830 $18,020 $19,998 $20,680
$20,680 CFA = $48,450 − (−$1,330) − 24,000 CFA = $25,780 CFC = $2,480 − (−$2,620) CFC = $5,100 CFS = $25,780 − 5,100 CFS = $20,680
At the beginning of the year, a firm had current assets of $121,306 and current liabilities of $124,509. At the end of the year, the current assets were $122,418 and the current liabilities were $103,718. What is the change in net working capital? −$19,679 −$11,503 $19,387 $15,497 $21,903
$21,903 Change in NWC = ($122,418 − 103,718) − ($121,306 − 124,509) Change in NWC = $21,903
Pavlak Surveyors has beginning current assets of $1,360, beginning current liabilities of $940, ending current assets of $1,720, and ending current liabilities of $1,080. What is the change in net working capital? $220 $170 $190 $940 $1,060
$220 Change in NWC = ($1,720 − 1,080) − ($1,360 − 940) Change in NWC = $220
Evil Pop Company began the year with net fixed assets of $17,213 and had $18,428 in the account at the end of the year. During the year, the company paid $4,174 in interest and expensed $3,665 in depreciation. The company purchased $8,170 in fixed assets during the year. How much in fixed assets did the company sell during the year? $9,070 $70 $3,290 $3,726 $5,211
$3,290 Net capital spending = $18,428 − 17,213 + 3,665 = $4,880 Fixed assets sold = $8,170 − 4,880 = $3,290
A company has net working capital of $2,845, current assets of $6,775, equity of $22,755, and long- term debt of $10,715. What is the company's net fixed assets? $29,540 $26,695 $25,600 $30,625 $40,245
$30,625 Current liabilities = $6,775 − 2,845 = $3,930 Total liabilities and equity = Total assets = $22,755 + 10,715 + 3,930 = $37,400 Net fixed assets = $37,400 − 6,775 = $30,625
Herrera Corporation has total sales of $3,110,400 and costs of $2,776,000. Depreciation is $258,000 and the tax rate is 21 percent. The firm is all-equity financed. What is the operating cash flow? $318,356 $522,176 $264,176 $60,356 $334,400
$318,356 EBIT = $3,110,400 − 2,776,000 − 258,000 EBIT = $76,400 Tax = $76,400(.21) Tax = $16,044 OCF = $76,400 + 258,000 − 16,044 OCF = $318,356
HUD Company had a beginning retained earnings of $28,655. For the year, the company had net income of $5,490 and paid dividends of $1,980. The company also issued $3,580 in new stock during the year. What is the ending retained earnings balance? $35,745 $28,585 $32,235 $32,165 $30,635
$32,165 Retained earnings = $28,655 + ($5,490 − 1,980) = $32,165
Barnett Saddlery had beginning net fixed assets of $218,470 and ending net fixed assets of $209,411. During the year, assets with a book value of $6,943 were sold. Depreciation for the year was $42,822. What is the amount of net capital spending? $33,763 $40,706 $58,218 $65,161 $67,408
$33,763 Net capital spending = $209,411 − 218,470 + 42,822 Net capital spending = $33,763
Bourne Freestyle has cost of goods sold of $92,511, interest expense of $4,608, dividends paid of $3,200, depreciation of $14,568, an increase in retained earnings of $11,920, and a tax rate of 21 percent. What is the operating cash flow? $34,296.00 $42,122.42 $36,462.58 $31,543.10 $36,741.42
$34,296.00 Net income = $3,200 + 11,920 Net income = $15,120 Taxable income = $15,120/(1 − .21) Taxable income = $19,139.24 EBIT = $19,139.24 + 4,608 EBIT = $23,747.24 Taxes = $19,139.24 − 15,120 Taxes = $4,019.24 OCF = $23,747.24 + 14,568 − 4,019.24 OCF = $34,296.00
Micro, Incorporated, started the year with net fixed assets of $75,925. At the end of the year, there was $97,575 in the same account, and the company's income statement showed depreciation expense of $13,745 for the year. What was the company's net capital spending for the year? $83,830 $35,395 $40,880 $43,290 $21,650
$35,395 Net capital spending = $97,575 − 75,925 + 13,745 = $35,395
Shen Systems purchased equipment four years ago at a cost of $218,000. The equipment is valued at $97,400 on today's balance sheet but could actually be sold for $92,900. This is the only fixed asset the firm owns. Net working capital is $41,300 and long-term debt is $102,800. What is the book value of shareholders' equity? $31,400 $47,700 $35,900 $249,400 $253,900
$35,900 Equity BV = $97,400 + 41,300 − 102,800 Equity BV = $35,900
Ivan's, Incorporated, paid $482 in dividends and $586 in interest this past year. Common stock increased by $196 and retained earnings decreased by $122. What is the net income for the year? $586 $946 $360 $482 $782
$360 Net income = Dividends paid + Change in retained earnings Net income = $482 + (- $122) = $360 In this case, the change in retained earnings was a negative value.
Krauss Upholstery purchased all of its fixed assets three years ago for $4 million. These assets can be sold today for $2 million. The current balance sheet shows net fixed assets of $2,500,000, current liabilities of $1,375,000, and net working capital of $725,000. If all the current assets were liquidated today, the company would receive $1.9 million in cash. The book value of the total assets today is ________ and the market value of those assets is ________. $4,600,000; $3,900,000 $4,600,000; $3,125,000 $5,000,000; $3,125,000 $5,000,000; $3,900,000 $6,500,000; $3,900,000
$4,600,000; $3,900,000 BV = ($725,000 + 1,375,000) + $2,500,000 BV = $4,600,000 MV = $1,900,000 + 2,000,000 MV = $3,900,000
If the tax rate is 21 percent in 2020. Your firm currently has taxable income of $81,000. How much additional tax will you owe if you increase your taxable income by $22,200? $8,658 $4,282 $4,272 $4,282 $7,548 $8,658 $4,662
$4,662 Taxes on .21($81,000) = $17,010 New taxable income = $81,000 + 22,200 = $103,200 Taxes on $.21(103,200) = $21,672 Additional tax = $21,672 - 17,010 = $4,662
Lola Corporation has shareholders' equity of $128,250. The company has a total debt of $120,675, of which 21 percent is payable in the next 12 months. The company also has net fixed assets of $183,145. What is the company's net working capital? $40,438 $7,575 $62,470 $12,465 $15,788
$40,438 Current liabilities = .21($120,675) = $25,342 Total L&E = Total assets = $120,675 + 128,250 = $248,925 Current assets = $248,925 − 183,145 = $65,780 Net working capital = $65,780 − 25,342 = $40,438
At the beginning of the year, Vendors, Incorporated, had owners' equity of $50,630. During the year, net income was $6,850 and the company paid dividends of $4,630. The company also repurchased $8,930 in equity. What was the owners' equity account at the end of the year? $37,070 $34,850 $48,080 $43,920 $41,700
$43,920 Ending owners' equity = $50,630 + 6,850 − 4,630 − 8,930 = $43,920
Callender Bikes has sales of $705,000, costs of $156,000, depreciation expense of $22,200, interest expense of $1,970, and an average tax rate of 21 percent. How much operating cash flow did the firm generate? $433,104 $438,786 $411,337 $431,567 $428,653
$438,786 EBIT = $705,000 − 156,000 − 22,200 EBIT = $526,800 Tax = ($526,800 − 1,970)(.21) Tax = $110,214 OCF = $526,800 + 22,200 − 110,214 OCF = $438,786
Riggs Company has current assets of $10,406, long-term debt of $4,780, and current liabilities of $9,822 at the beginning of the year. At year end, current assets are $11,318, long-term debt is $5,010, and current liabilities are $9,741. The firm paid $277 in interest and $320 in dividends during the year. What is the cash flow to creditors for the year? −$47 −$507 −$97 $47 $507
$47 CFC = $277 − ($5,010 − 4,780) CFC = $47
During the past year, a company had cash flow to stockholders, an operating cash flow, and net capital spending of $14,350, $32,530, and $12,360, respectively. The net working capital at the beginning of the year was $5,430 and it was $6,080 at the end of the year. What was the company's cash flow to creditors during the year? $5,820 $6,470 $5,170 $650 $3,424
$5,170 Change in NWC = $6,080 − 5,430 = $650CFA = $32,530 − 12,360 − 650 = $19,520Cash flow to creditors = $19,520 − 14,350 = $5,170
Which one of the following represents the most liquid asset? $500 account receivable that is discounted and collected for $480 today $500 worth of inventory that is sold today on credit for $515 $500 worth of inventory that is sold today for $500 in cash $500 worth of inventory that is discounted and sold today for $485 in cash $500 of accounts receivable that will be collected in full next week
$500 worth of inventory that is sold today for $500 in cash
Last year, Bad Tattoo Company had additions to retained earnings of $5,290 on sales of $97,030. The company had costs of $76,710, dividends of $3,340, and interest expense of $2,520. If the tax rate was 21 percent, what the depreciation expense? $8,630 $12,413 $5,229 $6,876 $4,278
$6,876 EBIT = ($5,290 + 3,340)/(1 − .21) + $2,520 = $13,444 Depreciation = $97,030 − 76,710 − 13,444 = $6,876
Rousey, Incorporated, had a cash flow to creditors of $16,830 and a cash flow to stockholders of $7,370 over the past year. The company also had net fixed assets of $49,630 at the beginning of the year and $57,040 at the end of the year. Additionally, the company had a depreciation expense of $12,180 and an operating cash flow of $50,935. What was the change in net working capital during the year? $9,460 $6,420 $7,410 $7,145 $5,713
$7,145 Cash flow from assets = $16,830 + 7,370 = $24,200Net capital spending = $57,040 − 49,630 + 12,180 = $19,590Change in net working capital = $50,935 − 19,590 − 24,200 = $7,145
Recently, the owner of Martha's Wares encountered severe legal problems and is trying to sell her business. The company built a building at a cost of $1,150,000 that is currently appraised at $1,350,000. The equipment originally cost $630,000 and is currently valued at $377,000. The inventory is valued on the balance sheet at $320,000 but has a market value of only one-half of that amount. The owner expects to collect 99 percent of the $180,200 in accounts receivable. The firm has $11,600 in cash and owes a total of $1,350,000. The legal problems are personal and unrelated to the actual business. What is the market value of this firm? $1,067,198 $537,000 $726,998 $1,387,198 $886,998
$726,998 Market value = $1,350,000 (building) + 377,000 (equipment) + (.5 × $320,000) (inventory) + (.99 × $180,200) (accounts receivable) + 11,600 cash - 1,350,000 (amount owed) Market value = $726,998
Clark-Phillips Incorporated purchased $145,000 in new equipment and sold equipment with a net book value of $68,400 during the year. What is the amount of net capital spending if the depreciation was $38,600? $115,200 $76,600 $94,200 $38,000 −$38,000
$76,600 Net capital spending = $145,000 − 68,400 Net capital spending = $76,600
Clark-Phillips, Incorporated, purchased $145,000 in new equipment and sold equipment with a net book value of $68,400 during the year. What is the amount of net capital spending if the depreciation was $38,600? $115,200 $76,600 $94,200 $38,000 −$38,000
$76,600 Net capital spending = $145,000 − 68,400 Net capital spending = $76,600
Barre Dance has sales of $30,600, costs of $15,350, addition to retained earnings of $4,221, dividends paid of $469, interest expense of $1,300, and a tax rate of 21 percent. What is the amount of the depreciation expense? $4,820.13 $5,500.89 $8,013.29 $8,180.01 $9,500.00
$8,013.29 Net income = $4,221 + 469 Net income = $4,690 EBT = $4,690/(1 − .21) EBT = $5,936.71 EBIT = $5,936.71 + 1,300 EBIT = $7,236.71 Depreciation = $30,600 − 15,350 − 7,236.71 Depreciation = $8,013.29
For the past year, Momsen Limited had sales of $44,042, interest expense of $2,918, cost of goods sold of $14,559, selling and administrative expense of $10,626, and depreciation of $4,675. If the tax rate was 21 percent, what was the company's net income? $7,885 $14,229 $8,899 $11,264 $6,300
$8,899 EBT = $44,042 − 14,559 − 10,626 − 4,675 − 2,918 = $11,264 Taxes = $11,264(.21) = $2,365 Net income = $11,264 − 2,365 = $8,899
Kalagara Outfitters neither sold nor repurchased any shares of stock during the year. The firm had annual sales of $7,202, depreciation of $1,196, cost of goods sold of $4,509, interest expense of $318, taxes of $248, beginning-of-year shareholders' equity of $4,808, and end-of-year shareholders' equity of $4,922. What is the amount of dividends paid during the year? $817 $1,009 $864 $709 $515
$817 Net income = $7,202 − 4,509 − 1,196 − 318 − 248 Net income = $931 Dividends paid = $931 − ($4,922 − 4,808) Dividends paid = $817
Arora Jewelry owns the building in which it conducts business. The building cost $647,000 to purchase and is currently appraised at $819,000. The fixtures inside the building originally cost $148,000 and are currently valued at $65,000. The inventory has a book value of $319,000 and a market value equal to 1.1 times the book value. The shop expects to collect 96 percent of its $21,700 in accounts receivable. The shop has $26,800 in cash and total debt of $414,700. What is the market value of its equity? $867,832 $900,166 $695,832 $775,632 $1,190,332
$867,832 Equity MV = $819,000 + 65,000 + 1.1($319,000) + .96($21,700) + 26,800 − 414,700 Equity MV = $867,832
During the year, Pharr Corporation had sales of $459,000. Costs were $388,000 and depreciation expense was $102,800. In addition, the company had an interest expense of $79,250 and a tax rate of 21 percent. What is the operating cash flow for the year? Ignore any tax loss carry-forward provisions. $77,768 $47,679 $15,071 $94,321 $72,733
$94,321 EBIT = $459,000 − 388,000 − 102,800 EBIT = −$31,800 Tax = (−$31,800 − 79,250)(.21) Tax = −$23,321 OCF = −$31,800 + 102,800 + 23,321 OCF = $94,321
Vuong Rentals has sales of $546,000, costs of $295,000, depreciation expense of $37,000, interest expense of $15,000, and a tax rate of 21 percent. The firm paid $59,000 in cash dividends. What is the addition to retained earnings? $98,210 $81,700 $95,200 $103,460 $121,680
$98,210 Net income = ($546,000 − 295,000 − 37,000 − 15,000)(1 − .21) Net income = $157,210 Addition to retained earnings = $157,210 − 59,000 Addition to retained earnings = $98,210
Mariota Industries has sales of $287,600 and costs of $147,250. The company paid $22,150 in interest and $12,100 in dividends. It also increased retained earnings by $62,138 during the year. If the company's depreciation was $14,300, what was its average tax rate? 20.34% 10.31% 39.96% 35.03% 28.55%
28.55% Net income = $12,100 + 62,138 = $74,238 EBT = $287,600 − 147,250 − 14,300 − 22,150 = $103,900 Taxes = $103,900 − 74,238 = $29,662 Average tax rate = $29,662/103,900 = .2855, or 28.55%
You recently purchased a restaurant that had equal market and book values. The purchase included the building, fixtures, and inventory. Which one of the following would be most likely to cause the market value of the restaurant to fall below its book value? A sudden and unexpected increase in inflation The replacement of old menu items with more desirable products A pandemic that required restaurants to limit the number customers allowed inside Construction of new sidewalks and street lighting Addition of a movie theater and music venues nearby
A pandemic that required restaurants to limit the number customers allowed inside
For a corporation that earned positive taxable income, which one of the following statements is correct? Taxable income minus dividends paid will equal the ending retained earnings for the year. An increase in depreciation expense will increase the operating cash flow. share. Net income divided by the number of shares outstanding will equal the dividends per Interest paid will be included in both net income and operating cash flow. An increase in the tax rate will increase both net income and operating cash flow.
An increase in depreciation expense will increase the operating cash flow. share.
Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date? Income statement Creditor's statement Balance sheet Statement of cash flows Dividend statement
Balance sheet
Which of the following actions could cause a company's change in net working capital to be negative for a given year? Increase the dividends paid to stockholders Pay off long-term debt before the due date Purchase additional inventory with cash Borrow money from the bank using a note payable in nine months Use long-term debt to buy a building
Borrow money from the bank using a note payable in nine months
Which one of the following statements related to corporate income taxes is correct? A corporation's marginal tax rate must be equal to or lower than its average tax rate. A corporation's taxes equals its taxable income multiplied by the marginal tax rate. Above a certain level, if the corporation earns additional income, it will be taxed at a higher rate. The marginal tax rate will always exceed a corporation's average tax rate. Corporations pay the same rate of taxes regardless of the amount of taxable income.
Corporations pay the same rate of taxes regardless of the amount of taxable income.
Which one of the following is true according to Generally Accepted Accounting Principles? Depreciation is recorded based on the market value principle. Income is recorded based on the realization principle. Costs are recorded based on the realization principle. Depreciation is recorded based on the recognition principle. Costs of goods sold are recorded based on the recognition principle.
Income is recorded based on the realization principle.
Which one of the following statements related to an income statement is correct? Interest expense increases the amount of tax due. Depreciation does not affect taxes since it is a noncash expense. Net income is distributed to dividends and paid-in surplus. Income taxes reduce both net income and operating cash flow. Interest expense is included in operating cash flow.
Income taxes reduce both net income and operating cash flow.
Which one of the following is excluded from the cash flow from assets? Accounts payable Inventory Sales Interest expense Cost of goods sold
Interest expense
Which one of the following is classified as a current asset? Accounts payable Patent Inventory Notes payable Office furniture
Inventory
Which one of the following statements concerning net working capital is correct? Net working capital increases when inventory is purchased with cash. Net working capital may be a negative value. Total assets must increase if net working capital increases. Net working capital excludes inventory. Net working capital is the amount of cash a firm currently has available for spending.
Net working capital may be a negative value.
Which one of the following must be true if a firm had a negative cash flow from assets? The firm borrowed money. The firm obtained external funding The firm had a net loss for the period. The firm acquired new fixed assets. Newly issued shares of stock were sold.
The firm obtained external funding
Net capital spending: is equal to ending net fixed assets minus beginning net fixed assets. is equal to zero if the decrease in the net fixed assets is equal to the depreciation expense. reflects the net changes in total assets over a stated period of time. is equivalent to the cash flow from assets minus the operating cash flow minus the change in net working capital. is equal to the net change in the current accounts.
is equal to zero if the decrease in the net fixed assets is equal to the depreciation expense.
The ______ tax rate is the percentage of the last dollar you earned that must be paid in taxes. marginal residual total average standard
marginal
The cash flow that results from a company's ongoing, normal business activities is called: operating cash flow. capital spending. net working capital. cash flow from assets. cash flow to creditor.
operating cash flow.
For the year, Movie Mania increased current liabilities by $1,400, decreased cash by $1,200, increased net fixed assets by $340, increased accounts receivable by $200, and decreased inventory by $150. What is the annual change in net working capital? −$2,550 −$70 $590 $550 −$2,210
−$2,550 Change in NWC = −$1,400 − 1,200 + 200 − 150 Change in NWC = −$2,550
Njoku Marketing paid $1,282 in interest and $975 in dividends last year. Current assets increased by $2,700, current liabilities decreased by $420, and long-term debt increased by $2,200. What was the cash flow to creditors? −$530 −$918 $1,839 2,132 $3,094
−$918 CFC = $1,282 − 2,200 CFC = −$918
