Unit 9 missed questions

Balance sheets contain A) the net worth of the firm at the end of the reporting period B) the amount of cash and cash equivalents expended during the first half of the fiscal year as opposed to the second half C) gross revenues for the year D) no reference to the accounting methods used to construct the balance sheet

A) the net worth of the firm at the end of the reporting period

One of the components of a cash flow statement is cash flow from investing activities. Included would be A) payments to retire bonds and the payment of dividends. B) transactions and events involving the purchase and sale of land, buildings, and equipment. C) cash receipts (money coming in) from items such as interest and dividends. D) cash proceeds from issuing stock or bonds.

B) transactions and events involving the purchase and sale of land, buildings, and equipment. Investing activities include transactions and events involving the purchase and sale of securities, land, buildings, equipment, and other assets not generally held for resale as a product of the business.

Net income A) must be paid out in dividends B) reflects the operating profits of a firm only C) is paid out in cash to stockholders in addition to any declared dividends D) represents the amount of money remaining after all expenses including taxes

D) represents the amount of money remaining after all expenses including taxes

Which of the following acts requires publicly traded corporations to issue annual reports? A) Securities Exchange Act of 1934 B) Securities Act of 1933 C) Investment Company Act of 1940 D) Trust Indenture Act of 1939

A) Securities Exchange act of 1934

Due to changes in market rates, a corporation is able to purchase some of its outstanding 20-year bonds at a discount. Which of the following is CORRECT? Working capital is increased. Working capital is reduced. Net worth is increased. Net worth is reduced.

working capital is reduced and net worth is increased Even though the bonds are purchased for less than par value, working capital is reduced because the company is using a current asset—cash—to pay off a long-term liability. However, the fact that it is reducing its debt for less than the amount shown on the books will result in an increase to net worth.

If during a given year a company has net income of $1 million and pays out dividends of $800,000, its retained earnings will A) increase by $200,000 B) decrease by $1 million C) decrease by $200,000 D) increase by $1 million

A) increase by $200,000

The owners' equity portion of a corporation's balance sheet would contain all of the following EXCEPT A) net income B) preferred stock C) paid-in capital D) treasury stock

A) net income it is only found in the income statement

Components of a company's net worth would include all of these EXCEPT A) goodwill B) fixed assets C) operating income D) inventory

C) operating income it would be found on the income statement and is neither an asset or a liability

If a corporation issues mortgage bonds, all of the following would be affected EXCEPT A) total assets B) working capital C) shareholder's equity D) total liabilities

C) shareholders equity When issued, the corporation receives the net proceeds in cash, increasing current assets (and thus total assets). Simultaneously, the corporation's long-term liabilities increase reflecting the debt (and thus total liabilities). Working capital increases because of the increase in current assets. Shareholder's equity, or net worth, is only affected by the sale of new equity securities or by any profit or loss generated by the corporation.

An analyst comparing revenues with expenses is most likely analyzing A) liquidity B) capitalization C) working capital D) cash flow

D) cash flow

When viewing a corporation's balance sheet, you would expect to see all of the following included in owner's equity EXCEPT A) preferred stock B) retained earnings C) cash D) paid-in capital

C) cash The primary components listed on a balance sheet under owner's equity are the (1) par value of the outstanding preferred stock; (2) par value of the outstanding common stock; (3) any excess paid in over the par value of the common stock at issuance, known as paid-in capital or paid-in surplus; (4) retained earnings (years ago referred to as earned surplus); and, (5), if the company has reacquired any of its common stock (treasury stock), the cost of that purchase is subtracted from retained earnings.

Those investors wishing to examine a document that would probably give them the most information about an issuer's current and planned operations would seek out A) the balance sheet B) the investor's brochure C) the annual report D) the Form 10-K

C) the annual report The annual report to shareholders is going to contain not only a complete financial report of the prior year's operations but will also include statement from key personnel dealing with the company's future plans. The Form 10-K does not include discussion of future business plans - it is a report of "what has happened over the previous fiscal year."

The total of the cash from operations, investing, and financing, as reported on the statement of cash flows, is A) the net change in the cash position of the firm for the reporting period B) an integral part of the footnotes to the balance sheet required by generally accepted accounting principles C) reported as cash income on the income statement D) reported as a separate line item on the balance sheet

A) the net change in the cash position of the firm for the reporting period

A corporate executive decides that it is in the company's best interest to purchase a yacht. Over the years, the company has built up substantial retained earnings and will use accumulated funds to make the purchase. An analyst interested in how this purchase will affect the company's debt-to-asset ratio would examine A) the statement of cash flows. B) the seaworthiness of the ship. C) the balance sheet. D) the income statement

C) the balance sheet

If a client has 100 shares of XYZ publicly traded stock and it undergoes a split, afterward the client will have: A) no effective change in the value of his ownership share B) a greater role in the daily management of the company C) a proportionately increased interest in XYZ company D) a proportionately decreased interest in XYZ company

A) no effective change in the value of his ownership share When a stock splits, the number of shares each shareholder holds increases. However, the value of each share decreases proportionately. The client experiences no effective change in the value of his ownership share.