Question 1

Net operating working capital is equal to operating current assets minus operating current liabilities.

Accepted Answer

A) True 
 B)False

Question 2

Hunter Manufacturing Inc.'s December 31, 2014 balance sheet showed total common equity of $2,050,000 and 100,000 shares of stock outstanding. During 2015, Hunter had $250,000 of net income, and it paid out $100,000 as dividends. What was the book value per share at 12/31/2015, assuming that Hunter neither issued nor retired any common stock during 2015σ

Accepted Answer

A)   $20.90
B)   $22.00
C)   $23.10
D)   $24.26
E)   $25.47F) C) and E)
G) A) and E)

Question 3

Wells Water Systems recently reported $8,250 of sales, $4,500 of operating costs other than depreciation, and $950 of depreciation. The company had no amortization charges, it had $3,250 of outstanding bonds that carry a 6.75% interest rate, and its federal-plus-state income tax rate was 35%. In order to sustain its operations and thus generate sales and cash flows in the future, the firm was required to spend $750 to buy new fixed assets and to invest $250 in net operating working capital. How much free cash flow did Wells generate?

Accepted Answer

A)   $1,770.00
B)   $1,858.50
C)   $1,951.43
D)   $2,049.00
E)   $2,151.45F) C) and D)
G) A) and C)

Question 4

Its retained earnings is the actual cash that the firm has generated through operations less the cash that has been paid out to stockholders as dividends. Retained earnings are kept in cash or near cash accounts and, thus, these cash accounts, when added together, will always be equal to the firm's total retained earnings.

Accepted Answer

A) True 
 B)False

Question 5

Ullrich Printing Inc. paid out $21,750 of common dividends during the year. It ended the year with $187,500 of retained earnings versus the prior year's retained earnings of $132,250. How much net income did the firm earn during the year?

Accepted Answer

A)   $77,000
B)   $80,850
C)   $84,893
D)   $89,137
E)   $93,594F) B) and E)
G) C) and D)

Question 6

Which of the following statements is CORRECTσ

Accepted Answer

A)   a typical industrial company's balance sheet lists the firm's assets that will be converted to cash first, and then goes on down to list the firm's longest lived assets last.
B)   the balance sheet for a given year is designed to give us an idea of what happened to the firm during that year.
C)   the balance sheet for a given year tells us how much money the company earned during that year.
D)   the difference between the total assets reported on the balance sheet and the debts reported on this statement tells us the current market value of the stockholders' equity, assuming the statements are prepared in accordance with generally accepted accounting principles (gaap) .
E)   for most companies, the market value of the stock equals the book value of the stock as reported on the balance sheet.F) A) and B)
G) A) and E)

Question 7

TSW Inc. had the following data for last year: Net income = $800; Net operating profit after taxes (NOPAT)  = $700; Total assets = $3,000; and Total operating capital = $2,000. Information for the just-completed year is as follows: Net income = $1,000; Net operating profit after taxes (NOPAT)  = $925; Total assets = $2,600; and Total operating capital = $2,500. How much free cash flow did the firm generate during the just-completed year?

Accepted Answer

A)   $383
B)   $425
C)   $468
D)   $514
E)   $566F) B) and C)
G) All of the above

Question 8

Which of the following statements is CORRECT?

Accepted Answer

A)   if a company pays more in dividends than it generates in net income, its retained earnings as reported on the balance sheet will decline from the previous year's balance.
B)   dividends paid reduce the net income that is reported on a company's income statement.
C)   if a company uses some of its bank deposits to buy short-term, highly liquid marketable securities, this will cause a decline in its current assets as shown on the balance sheet.
D)   if a company issues new long-term bonds during the current year, this will increase its reported current liabilities at the end of the year.
E)   accounts receivable are reported as a current liability on the balance sheet.F) C) and D)
G) B) and E)

Question 9

Companies generate income from their "regular" operations and from other sources like interest earned on the securities they hold, which is called non-operating income. Lindley Textiles recently reported $12,500 of sales, $7,250 of operating costs other than depreciation, and $1,000 of depreciation. The company had no amortization charges and no non-operating income. It had $8,000 of bonds outstanding that carry a 7.5% interest rate, and its federal-plus-state income tax rate was 40%. How much was Lindley's operating income, or EBITσ

Accepted Answer

A)   $3,462
B)   $3,644
C)   $3,836
D)   $4,038
E)   $4,250F) A) and D)
G) A) and C)

Question 10

Which of the following items is NOT included in current assetsσ

Accepted Answer

A)   short-term, highly liquid, marketable securities.
B)   accounts receivable.
C)   inventory.
D)   bonds.
E)   cash.F) A) and D)
G) A) and C)

Question 11

JBS Inc. recently reported net income of $4,750 and depreciation of $885. How much was its net cash flow, assuming it had no amortization expense and sold none of its fixed assets?

Accepted Answer

A)   $4,831.31
B)   $5,085.59
C)   $5,353.25
D)   $5,635.00
E)   $5,916.75F) A) and D)
G) B) and D)

Question 12

The LeMond Corporation just purchased a new production line. Assume that the firm planned to depreciate the equipment over 5 years on a straight-line basis, but Congress then passed a provision that requires the company to depreciate the equipment on a straight-line basis over 7 years. Other things held constant, which of the following will occur as a result of this Congressional action?Assume that the company uses the same depreciation method for tax and stockholder reporting purposes.

Accepted Answer

A)   lemond's tax liability for the year will be lower.
B)   lemond's taxable income will be lower.
C)   lemond's net fixed assets as shown on the balance sheet will be higher at the end of the year.
D)   lemond's cash position will improve (increase) .
E)   lemond's reported net income after taxes for the year will be lower.F) B) and C)
G) B) and D)

Question 13

The interest and dividends paid by a corporation are considered to be deductible operating expenses, hence they decrease the firm's tax liability.

Accepted Answer

A) True 
 B)False

Question 14

If the tax laws were changed so that $0.50 out of every $1.00 of interest paid by a corporation was allowed as a tax-deductible expense, this would probably encourage companies to use more debt financing than they presently do, other things held constant.

Accepted Answer

A) True 
 B)False

Question 15

The income statement shows the difference between a firm's income and its costsσi.e., its profitsσduring a specified period of time. However, not all reported income comes in the form or cash, and reported costs likewise may not correctly reflect cash outlays. Therefore, there may be a substantial difference between a firm's reported profits and its actual cash flow for the same period.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is CORRECT?

Accepted Answer

A)   depreciation and amortization are not cash charges, so neither of them has an effect on a firm's reported profits.
B)   the more depreciation a firm reports, the higher its tax bill, other things held constant.
C)   people sometimes talk about the firm's net cash flow, which is shown as the lowest entry on the income statement, hence it is often called "the bottom line."
D)   depreciation reduces a firm's cash balance, so an increase in depreciation would normally lead to a reduction in the firm's net cash flow.
E)   net cash flow (ncf)  is often defined as follows:net cash flow = net income + depreciation and amortization charges.F) None of the above
G) B) and E)

Question 17

Bae Inc. has the following income statement. How much net operating profit after taxes (NOPAT)  does the firm have?
   Seles  Costs  Depreciation  EBIT  Interest expens  EBT  Teres (3%/)   Net incame $2,000.001,200.00100.00$700.00200.00$500.00175.00$325.00\begin{array}{l}\begin{array} { l } 	ext { Seles } \	ext { Costs } \	ext { Depreciation } \	ext { EBIT } \	ext { Interest expens } \	ext { EBT } \	ext { Teres (3\%/)  } \	ext { Net incame }\end{array}\begin{array} { r } \$2,000.00 \1,200.00 \100.00 \\hline \$700.00 \200.00 \\hline \$500.00 \175.00 \\hline \$325.00\end{array}\end{array} Seles  Costs  Depreciation  EBIT  Interest expens  EBT  Teres (3%/)   Net incame ​$2,000.001,200.00100.00$700.00200.00$500.00175.00$325.00​​​

Accepted Answer

A)   $370.60
B)   $390.11
C)   $410.64
D)   $432.25
E)   $455.00 F) B) and C)
G) A) and E)

Question 18

The time dimension is important in financial statement analysis. The balance sheet shows the firm's financial position at a given point in time, the income statement shows results over a period of time, and the statement of cash flows reflects changes in the firm's accounts over that period of time.

Accepted Answer

A) True 
 B)False

Question 19

Jessie's Bobcat Rentals' operations provided a negative net cash flow last year, yet the cash shown on its balance sheet increased. Which of the following statements could explain the increase in cash, assuming the company's financial statements were prepared under generally accepted accounting principles?

Accepted Answer

A)   the company had high depreciation expenses.
B)   the company repurchased some of its common stock.
C)   the company dramatically increased its capital expenditures.
D)   the company retired a large amount of its long-term debt.
E)   the company sold some of its fixed assets.F) C) and D)
G) A) and B)

Question 20

EP Enterprises has the following income statement. How much net operating profit after taxes (NOPAT)  does the firm have?
  Sales  Costs  Depreciation  EBIT  Interest expen  EBT  Taxes (40%)  Net income $1,800.001,400.00250.00$1500070.00$800032.00$4800\begin{array}{l}\begin{array} { l } 	ext { Sales } \	ext { Costs } \	ext { Depreciation } \	ext { EBIT } \	ext { Interest expen } \	ext { EBT } \	ext { Taxes }(40 \%)  \	ext { Net income }\end{array}\begin{array} { l } \$ 1,800.00\1,400.00\250.00\\$ 15000\70.00\\$ 8000\32.00\\$ 4800\end{array}\end{array} Sales  Costs  Depreciation  EBIT  Interest expen  EBT  Taxes (40%)  Net income ​$1,800.001,400.00250.00$1500070.00$800032.00$4800​​

Accepted Answer

A)   $81.23
B)   $85.50
C)   $90.00
D)   $94.50
E)   $99.23 F) C) and D)
G) A) and E)

Exam 6: Accounting for Financial Management

Correct Answer
verified

JBS Inc. recently reported net income of $4,750 and depreciation of $885. How much was its net cash flow, assuming it had no amortization expense and sold none of its fixed assets?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The time dimension is important in financial statement analysis. The balance sheet shows the firm's financial position at a given point in time, the income statement shows results over a period of time, and the statement of cash flows reflects changes in the firm's accounts over that period of time.

Correct Answer
verified

Correct Answer
verified

The interest and dividends paid by a corporation are considered to be deductible operating expenses, hence they decrease the firm's tax liability.

Correct Answer
verified

Which of the following statements is CORRECT?

Correct Answer
verified

Which of the following statements is CORRECT?

Correct Answer
verified

Correct Answer
verified

Ullrich Printing Inc. paid out $21,750 of common dividends during the year. It ended the year with $187,500 of retained earnings versus the prior year's retained earnings of $132,250. How much net income did the firm earn during the year?

Correct Answer
verified

Correct Answer
verified

Which of the following statements is CORRECTσ

Correct Answer
verified

Correct Answer
verified

If the tax laws were changed so that $0.50 out of every $1.00 of interest paid by a corporation was allowed as a tax-deductible expense, this would probably encourage companies to use more debt financing than they presently do, other things held constant.

Correct Answer
verified

Net operating working capital is equal to operating current assets minus operating current liabilities.

Correct Answer
verified

Which of the following items is NOT included in current assetsσ

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Exam 6: Accounting for Financial Management

Correct AnswerverifiedShow Answer

JBS Inc. recently reported net income of $4,750 and depreciation of $885. How much was its net cash flow, assuming it had no amortization expense and sold none of its fixed assets?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The interest and dividends paid by a corporation are considered to be deductible operating expenses, hence they decrease the firm's tax liability.

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Ullrich Printing Inc. paid out $21,750 of common dividends during the year. It ended the year with $187,500 of retained earnings versus the prior year's retained earnings of $132,250. How much net income did the firm earn during the year?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECTσ

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the tax laws were changed so that $0.50 out of every $1.00 of interest paid by a corporation was allowed as a tax-deductible expense, this would probably encourage companies to use more debt financing than they presently do, other things held constant.

Correct AnswerverifiedShow Answer

Net operating working capital is equal to operating current assets minus operating current liabilities.

Correct AnswerverifiedShow Answer

Which of the following items is NOT included in current assetsσ

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified