公司理财英文版题库2.doc

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CHAPTER 2Financial Statements & Cash FlowMultiple Choice Questions:I.DEFINITIONSBALANCE SHEETb1.The financial statement showing a firms accounting value on a particular date is the:a.income statement.b.balance sheet.c.statement of cash flows.d.tax reconciliation statement.e.shareholders equity sheet.Difficulty level: EasyCURRENT ASSETSc2.A current asset is:a.an item currently owned by the firm.b.an item that the firm expects to own within the next year.c.an item currently owned by the firm that will convert to cash within the next 12 months.d.the amount of cash on hand the firm currently shows on its balance sheet.e.the market value of all items currently owned by the firm.Difficulty level: EasyLONG-TERM DEBTb3.The long-term debts of a firm are liabilities:a.that come due within the next 12 months.b.that do not come due for at least 12 months.c.owed to the firms suppliers.d.owed to the firms shareholders.e.the firm expects to incur within the next 12 months.Difficulty level: EasyNET WORKING CAPITALe4.Net working capital is defined as:a.total liabilities minus shareholders equity.b.current liabilities minus shareholders equity.c.fixed assets minus long-term liabilities.d.total assets minus total liabilities.e.current assets minus current liabilities.Difficulty level: EasyLIQUID ASSETSd5.A(n) _ asset is one which can be quickly converted into cash without significant loss in value.a.currentb.fixedc.intangibled.liquide.long-termDifficulty level: EasyINCOME STATEMENTa6.The financial statement summarizing a firms performance over a period of time is the:a.income statement.b.balance sheet.c.statement of cash flows.d.tax reconciliation statement.e.shareholders equity sheet.Difficulty level: EasyNONCASH ITEMSd7.Noncash items refer to:a.the credit sales of a firm.b.the accounts payable of a firm.c.the costs incurred for the purchase of intangible fixed assets.d.expenses charged against revenues that do not directly affect cash flow.e.all accounts on the balance sheet other than cash on hand.Difficulty level: EasyMARGINAL TAX RATESe8.Your _ tax rate is the amount of tax payable on the next taxable dollar you earn.a.deductibleb.residualc.totald.averagee.marginalDifficulty level: EasyAVERAGE TAX RATESd9.Your _ tax rate measures the total taxes you pay divided by your taxable income.a.deductibleb.residualc.totald.averagee.marginalDifficulty level: EasyCASH FLOW FROM OPERATING ACTIVITIESa10._ refers to the cash flow that results from the firms ongoing, normal business activities.a.Cash flow from operating activitiesb.Capital spendingc.Net working capitald.Cash flow from assetse.Cash flow to creditorsDifficulty level: MediumCASH FLOW FROM INVESTINGb11._ refers to the changes in net capital assets.a.Operating cash flowb.Cash flow from investingc.Net working capitald.Cash flow from assetse.Cash flow to creditorsDifficulty level: MediumNET WORKING CAPITALc12._ refers to the difference between a firms current assets and its current liabilities.a.Operating cash flowb.Capital spendingc.Net working capitald.Cash flow from assetse.Cash flow to creditorsDifficulty level: EasyCASH FLOW OF OPERATIONSd13._ refers to the net total cash flow of the firm available for distribution to its creditors and stockholders.a.Operating cash flowb.Capital spendingc.Net working capitald.Cash flow from operationse.Cash flow to creditorsCASH FLOW TO CREDITORSe14._ refers to the firms interest payments less any net new borrowing.a.Operating cash flowb.Capital spendingc.Net working capitald.Cash flow from shareholderse.Cash flow to creditorsCASH FLOW TO STOCKHOLDERSe15._ refers to the firms dividend payments less any net new equity raised.a.Operating cash flowb.Capital spendingc.Net working capitald.Cash flow from creditorse.Cash flow to stockholdersEARNINGS PER SHAREa16.Earnings per share is equal to:a.net income divided by the total number of shares outstanding.b.net income divided by the par value of the common stock.c.gross income multiplied by the par value of the common stock.d.operating income divided by the par value of the common stock.e.net income divided by total shareholders equity.DIVIDENDS PER SHAREb17.Dividends per share is equal to dividends paid:a.divided by the par value of common stock.b.divided by the total number of shares outstanding.c.divided by total shareholders equity.d.multiplied by the par value of the common stock.e.multiplied by the total number of shares outstanding.II.CONCEPTSCURRENT ASSETSa18.Which of the following are included in current assets?I.equipmentII.inventoryIII.accounts payableIV.casha.II and IV onlyb.I and III onlyc.I, II, and IV onlyd.III and IV onlye.II, III, and IV onlyCURRENT LIABILITIESb19.Which of the following are included in current liabilities?I.note payable to a supplier in eighteen monthsII.debt payable to a mortgage company in nine monthsIII.accounts payable to suppliersIV.loan payable to the bank in fourteen monthsa.I and III onlyb.II and III onlyc.III and IV onlyd.II, III, and IV onlye.I, II, and III onlyBALANCE SHEETd20.An increase in total assets:a. means that net working capital is also increasing.b. requires an investment in fixed assets.c. means that shareholders equity must also increase.d. must be offset by an equal increase in liabilities and shareholders equity.e. can only occur when a firm has positive net income.LIQUIDITYc21.Which one of the following accounts is generally the most liquid?a.inventoryb. buildingc. accounts receivabled. equipmente. patentLIQUIDITYe22.Which one of the following statements concerning liquidity is correct?a. If you sold an asset today, it is a liquid asset.b. If you can sell an asset next year at a price equal to its actual value, the asset is highly liquid.c. Trademarks and patents are highly liquid.d. The less liquidity a firm has, the lower the probability the firm will encounter financial difficulties.e. Balance sheet accounts are listed in order of decreasing liquidity.LIQUIDITYd23.Liquidity is:a.a measure of the use of debt in a firms capital structure.b. equal to current assets minus current liabilities.c. equal to the market value of a firms total assets minus its current liabilities.d. valuable to a firm even though liquid assets tend to be less profitable to own.e. generally associated with intangible assets.SHAREHOLDERS EQUITYd24.Which of the following accounts are included in shareholders equity?I.interest paidII.retained earningsIII.capital surplusIV.long-term debta.I and II onlyb.II and IV onlyc.I and IV onlyd.II and III onlye.I and III onlyBOOK VALUEb25.Book value:a.is equivalent to market value for firms with fixed assets.b. is based on historical cost.c. generally tends to exceed market value when fixed assets are included.d. is more of a financial than an accounting valuation.e. is adjusted to market value whenever the market value exceeds the stated book value.MARKET VALUEa26.When making financial decisions related to assets, you should:a. always consider market values.b. place more emphasis on book values than on market values.c. rely primarily on the value of assets as shown on the balance sheet.d. place primary emphasis on historical costs.e. only consider market values if they are less than book values.INCOME STATEMENTd27.As seen on an income statement:a. interest is deducted from income and increases the total taxes incurred.b. the tax rate is applied to the earnings before interest and taxes when the firm has both depreciation and interest expenses.c. depreciation is shown as an expense but does not affect the taxes payable.d. depreciation reduces both the pretax income and the net income.e. interest expense is added to earnings before interest and taxes to get pretax income.EARNINGS PER SHAREa28.The earnings per share will:a.increase as net income increases.b. increase as the number of shares outstanding increase.c. decrease as the total revenue of the firm increases.d. increase as the tax rate increases.e. decrease as the costs decrease.DIVIDENDS PER SHAREe29.Dividends per share:a.increase as the net income increases as long as the number of shares outstanding remains constant.b. decrease as the number of shares outstanding decrease, all else constant.c. are inversely related to the earnings per share.d. are based upon the dividend requirements established by Generally Accepted Accounting Procedures.e. are equal to the amount of net income distributed to shareholders divided by the number of shares outstanding.REALIZATION PRINCIPLEb 30.According to Generally Accepted Accounting Principles, a. income is recorded based on the matching principle.b. income is recorded based on the realization principle.c. costs are recorded based on the liquidity principle.d. net income is recorded based on the realization principle.e. depreciation is recorded as it affects the cash flows of a firm.MATCHING PRINCIPLEc31.According to Generally Accepted Accounting Principles, costs are:a.recorded as incurred.b.recorded when paid.c.matched with revenues.d.matched with production levels.e.expensed as management desires.NONCASH ITEMSa32.Depreciation:a.is a noncash expense that is recorded on the income statement.b. increases the net fixed assets as shown on the balance sheet.c. reduces both the net fixed assets and the costs of a firm.d. is a non-cash expense which increases the net operating income.e. decreases net fixed assets, net income, and operating cash flows.MARGINAL TAX RATEc33.When you are making a financial decision, the most relevant tax rate is the _ rate.a.averageb. fixedc. marginald. totale. variableOPERATING CASH FLOWa34.An increase in which one of the following will cause the operating cash flow to increase?a.depreciationb. change in net working capitalc. net working capitald. taxese. costsCHANGE IN NET WORKING CAPITALe35.A firm starts its year with a positive net working capital. During the year, the firm acquires more short-term debt than it does short-term assets. This means that:a.the ending net working capital will be negative.b.both accounts receivable and inventory decreased during the year.c.the beginning current assets were less than the beginning current liabilities.d.accounts payable increased and inventory decreased during the year.e.the ending net working capital can be positive, negative, or equal to zero.CASH FLOW TO CREDITORSc36.The cash flow to creditors includes the cash:a. received by the firm when payments are paid to suppliers.b. outflow of the firm when new debt is acquired.c.outflow when interest is paid on outstanding debt.d.inflow when accounts payable decreases.e.received when long-term debt is paid off.CASH FLOW TO STOCKHOLDERSa37.Cash flow to stockholders must be positive when:a. the dividends paid exceed the net new equity raised.b. the net sale of common stock exceeds the amount of dividends paid.c. no income is distributed but new shares of stock are sold.d. both the cash flow to assets and the cash flow to creditors are negative.e. both the cash flow to assets and the cash flow to creditors are positive.BALANCE SHEETb38.Which equality is the basis for the balance sheet? a.Fixed Assets = Stockholder's Equity + Current Assets b.Assets = Liabilities + Stockholder's Equity c.Assets = Current Long-Term Debt + Retained Earnings d.Fixed Assets = Liabilities + Stockholder's Equity e.None of the above. BALANCE SHEETa39.Assets are listed on the balance sheet in order of: a.decreasing liquidity. b.decreasing size. c.increasing size. d.relative life. e.None of the above. DEBTe40.Debt is a contractual obligation that:a.requires the payout of residual flows to the holders of these instruments. b.requires a repayment of a stated amount and interest over the period. c.allows the bondholders to sue the firm if it defaults. d.Both A and B. e.Both B and C. CARRYING VALUEa41.The carrying value or book value of assets:a.is determined under GAAP and is based on the cost of the asset. b.represents the true market value according to GAAP. c.is always the best measure of the company's value to an investor. d.is always higher than the replacement cost of the assets. e.None of the above. GAAPd42.Under GAAP, the value of all the firm's assets are reported at:a.market value. b.liquidation value. c.intrinsic value. d.cost. e.None of the above. INCOME STATEMENTe43.Which of the following statements concerning the income statement is true? a.It measures performance over a specific period of time. b.It determines after-tax income of the firm. c.It includes deferred taxes. d.It treats interest as an expense. e.All of the above. GAAP INCOME RECOGNITIONb44.According generally accepted accounting principles (GAAP), revenue is recognized as income when:a.a contract is signed to perform a service or deliver a good. b.the transaction is complete and the goods or services are delivered. c.payment is requested. d.income taxes are paid. e.All of the above. OPERATING CASH FLOWb45.Which of the following is not included in the computation of operating cash flow? a.Earnings before interest and taxes b.Interest paid c.Depreciation d.Current taxes e.All of the above are included. NET CAPITAL SPENDINGb46.Net capital spending is equal to:a.net additions to net working capital. b.the net change in fixed assets. c.net income plus depreciation. d.total cash flow to stockholders less interest and dividends paid. e.the change in total assets. CASH FLOW TO STOCKHOLDERSd47.Cash flow to stockholders is defined as: a.interest payments. b.repurchases of equity less cash dividends paid plus new equity sold. c.cash flow from financing less cash flow to creditors. d.cash dividends plus repurchases of equity minus new equity financing. e.None of the above. FR