Question 1

Which of the below statements is FALSE?

Accepted Answer

A)   Typically, income statements are prepared quarterly and annually for distribution outside the company, but usually semi-annually for internal managers.
B)   Typically, income statements are prepared quarterly and annually for distribution outside the company.
C)   The income statement begins with revenue and subtracts various operating expenses until arriving at Earnings Before Interest and Taxes (EBIT) .
D)   The income statement reports the performance of the firm over the past period. It summaries and categorizes a company's revenues and expenses for that period.

Question 2

Notes to the financial statements help explain many of the details necessary to gain a more complete picture of the firm's performance. Some of the items often disclosed in the financial notes includes which of the following?

Accepted Answer

A)   How a specific item was computed
B)   Additional information on a company's financial condition
C)   Methods used to prepare the financial statements
D)   All of these items are often included.

Question 3

Consider the information below from a firm's balance sheet for 2007 and 2008.
Current Assets 2008 2007 Change
Cash and Equivalents $1,561 $1,800 -$ 239
Short-Term Investments $1,052 $3,010 -$1,958
Accounts Receivable $3,616 $3,129 $ 487
Inventories $1,816 $1,543 $ 273
Other Current Assets $ 707 $ 601 $ 106
Total Current Assets $8,752 $10,083 -$1,331
Current Liabilities
Accounts Payable $5,173 $5,111 $ 62
Short-Term Debt $ 288 $ 277 $ 11
Other Current Liabilities $1,401 $1,098 $ 303
Total Current Liabilities $6,862 $6,486 $ 376
What is the Net Working Capital for 2008? What is it for 2007? What is the Change in Net Working Capital (NWC)? Assuming the Operating Cash Flows (OCF) are $7,155 and the Net Capital Spending (NCS) is $2,372, what is the Cash Flow from Assets?

Accepted Answer

Net Working Capital for 2008 is $8,752 - $6,862 = $1,890
Net Working Capital for 2007 is $10,083 - $6,486 = $3,597
Decrease in Net Working Capital (NWC) = $1,890 - $3,597= -$1,707
Assuming that Operating Cash Flows (OCF) are $7,155, Net Capital Spending (NCS) is $2,372, and Decrease in Net Working Capital is -$1,707, we get:
Cash Flow from Assets = OCF - NCS - Decrease in NWC = $7,155 - $2,372 - (-$1,707) = $6,490.

Question 4

Net income is ________.

Accepted Answer

A)   not cash flow
B)   the cash flow from the operations of the company during the period
C)   the increase or decrease in cash flow for the period
D)   earnings before interest and taxes A

Question 5

EBIT (earnings before interest and taxes) is obtained by adding together revenue and operating expenses.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following identities is TRUE?

Accepted Answer

A)   Operating Cash Flow = EBIT - Depreciation + Taxes
B)   Net Capital Spending = Ending Net Fixed Assets - Depreciation
C)   Net Working Capital (NW
C)   = Current Assets - Current Liabilities
D)   Cash Flow from Assets = Operating Cash Flow - Net Capital Spending

Question 7

Which of the statements below is FALSE?

Accepted Answer

A)   The purpose of studying financial statements is to understand those portions of the statements that have relevance for financial decision making.
B)   We need to understand how to interpret and use the information presented in financial statements to form a picture of the financial profile of the firm.
C)   Accounting, it has been said, looks back to where a company has been - somewhat like looking through a rear view mirror.
D)   Accounting and finance view the numbers in the same way.

Question 8

The 10-K is a quarterly report that must be filed within 60 days after the end of the company's fiscal year.

Accepted Answer

A) True 
 B)False

Question 9

Equity on the balance sheet refers to what the owners receive after liabilities have been satisfied.

Accepted Answer

A) True 
 B)False

Question 10

In regards to the Cash Flow Statement, assume we want to break down Yahoo! Finance's cost of revenue into its two major components, cost of goods sold (COGS)  and depreciation. To do so, we would need to look at ________ for the depreciation amount.

Accepted Answer

A)   the Statement of Cash Flow
B)   both the Income Statement and the Statement of Cash Flow
C)   both the Balance Sheet and the Statement of Cash Flow
D)   the Income Statement

Question 11

Cash flow from assets equals cash flow to creditors plus cash flow to stockholders.

Accepted Answer

A) True 
 B)False

Question 12

From the finance perspective, there are five principal line accounts of particular interest on the balance sheet: the cash account, the working capital accounts, long-term capital assets accounts, long-term debt accounts, and ownership accounts. Briefly explain each.

Accepted Answer

The cash account indicates how much mone...

Question 13

Understanding the sources and uses of cash in the recent past will enable a manager to ________ the cash flow for a potential project of the firm.

Accepted Answer

A)   determine with perfect precision
B)   forecast with perfect precision
C)   predict more accurately
D)   know today C

Question 14

Which of the statements below is TRUE?

Accepted Answer

A)   The ownership accounts or owners' equity section of the balance sheet reflects the owners' stake in the firm.
B)   The ownership accounts or owners' equity section of the balance sheet is made up of common stock but not retained earnings.
C)   The retained earnings amount on the balance sheet really reflect retained earnings and other stockholder equity, but not treasury stock.
D)   The Statement of Retained Earnings is used to show the distribution of the interest paid for the past period.

Question 15

In the presentation of the income statement at yahoo.finance.com, you will find cost of revenue, not cost of goods sold, with depreciation expense included in cost of revenue.

Accepted Answer

A) True 
 B)False

Question 16

Which of the statements below is FALSE?

Accepted Answer

A)   The cash that the firm generates from its operating decisions (use of its assets)  is used to either pay creditors or the owners of the company.
B)   Cash flow from assets shows the success or failure of the operating decisions.
C)   Cash flow to owners shows cash paid to owners plus any new borrowing from owners.
D)   Cash flow to creditors shows a portion of how the firm is financing the operations.

Question 17

Which of the statements below is TRUE?

Accepted Answer

A)   Accounting Identity is: Assets ≡ Liabilities - Owners' Equity.
B)   Accounting Identity is: Assets ≡ Liabilities + Owners' Equity.
C)   Accounting Identity is: Assets ≡ Owners' Equity - Liabilities.
D)   Accounting Identity is: Liabilities ≡ Assets + Owners' Equity.

Question 18

Which of the statements below is FALSE?

Accepted Answer

A)   The textbook uses the framework of the income statement to find the operating income of the company (an accounting measure)  and then makes adjustments to find the true cash flow from operations.
B)   In accrual-based accounting, revenue is recorded at the time of sale if the revenue has been received in cash.
C)   Three fundamental issues separate net income and cash flow: accrual-based accounting, non-cash expense items, and interest expense.
D)   Generally Accepted Accounting Principles (GAAP)  in the United States allow the use of accrual accounting to record revenue.

Question 19

An increase in borrowing from long-term debt holders is a source of cash.

Accepted Answer

A) True 
 B)False

Question 20

Describe some of the differences that the textbook mentions about yahoo.finance.com's presentation of the income statement.

Accepted Answer

In the presentation of the income statem...

Exam 2: Financial Statements

Which of the below statements is FALSE?

Correct Answer
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Notes to the financial statements help explain many of the details necessary to gain a more complete picture of the firm's performance. Some of the items often disclosed in the financial notes includes which of the following?

Correct Answer
verified

Net income is ________.

Correct Answer
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A

EBIT (earnings before interest and taxes) is obtained by adding together revenue and operating expenses.

Correct Answer
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Which of the following identities is TRUE?

Correct Answer
verified

Which of the statements below is FALSE?

Correct Answer
verified

The 10-K is a quarterly report that must be filed within 60 days after the end of the company's fiscal year.

Correct Answer
verified

Equity on the balance sheet refers to what the owners receive after liabilities have been satisfied.

Correct Answer
verified

In regards to the Cash Flow Statement, assume we want to break down Yahoo! Finance's cost of revenue into its two major components, cost of goods sold (COGS) and depreciation. To do so, we would need to look at ________ for the depreciation amount.

Correct Answer
verified

Cash flow from assets equals cash flow to creditors plus cash flow to stockholders.

Correct Answer
verified

From the finance perspective, there are five principal line accounts of particular interest on the balance sheet: the cash account, the working capital accounts, long-term capital assets accounts, long-term debt accounts, and ownership accounts. Briefly explain each.

Correct Answer
verified
The cash account indicates how much mone...
View Answer

Understanding the sources and uses of cash in the recent past will enable a manager to ________ the cash flow for a potential project of the firm.

Correct Answer
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C

Which of the statements below is TRUE?

Correct Answer
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In the presentation of the income statement at yahoo.finance.com, you will find cost of revenue, not cost of goods sold, with depreciation expense included in cost of revenue.

Correct Answer
verified

Which of the statements below is FALSE?

Correct Answer
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Which of the statements below is TRUE?

Correct Answer
verified

Which of the statements below is FALSE?

Correct Answer
verified

An increase in borrowing from long-term debt holders is a source of cash.

Correct Answer
verified

Describe some of the differences that the textbook mentions about yahoo.finance.com's presentation of the income statement.

Correct Answer
verified
In the presentation of the income statem...
View Answer

Exam 2: Financial Statements

Which of the below statements is FALSE?

Correct AnswerverifiedShow Answer

Notes to the financial statements help explain many of the details necessary to gain a more complete picture of the firm's performance. Some of the items often disclosed in the financial notes includes which of the following?

Correct AnswerverifiedShow Answer

Net income is ________.

Correct AnswerverifiedA

EBIT (earnings before interest and taxes) is obtained by adding together revenue and operating expenses.

Correct AnswerverifiedShow Answer

Which of the following identities is TRUE?

Correct AnswerverifiedShow Answer

Which of the statements below is FALSE?

Correct AnswerverifiedShow Answer

The 10-K is a quarterly report that must be filed within 60 days after the end of the company's fiscal year.

Correct AnswerverifiedShow Answer

Equity on the balance sheet refers to what the owners receive after liabilities have been satisfied.

Correct AnswerverifiedShow Answer

In regards to the Cash Flow Statement, assume we want to break down Yahoo! Finance's cost of revenue into its two major components, cost of goods sold (COGS) and depreciation. To do so, we would need to look at ________ for the depreciation amount.

Correct AnswerverifiedShow Answer

Cash flow from assets equals cash flow to creditors plus cash flow to stockholders.

Correct AnswerverifiedShow Answer

From the finance perspective, there are five principal line accounts of particular interest on the balance sheet: the cash account, the working capital accounts, long-term capital assets accounts, long-term debt accounts, and ownership accounts. Briefly explain each.

Correct AnswerverifiedThe cash account indicates how much mone...View AnswerShow Answer

Understanding the sources and uses of cash in the recent past will enable a manager to ________ the cash flow for a potential project of the firm.

Correct AnswerverifiedC

Which of the statements below is TRUE?

Correct AnswerverifiedShow Answer

In the presentation of the income statement at yahoo.finance.com, you will find cost of revenue, not cost of goods sold, with depreciation expense included in cost of revenue.

Correct AnswerverifiedShow Answer

Which of the statements below is FALSE?

Correct AnswerverifiedShow Answer

Which of the statements below is TRUE?

Correct AnswerverifiedShow Answer

Which of the statements below is FALSE?

Correct AnswerverifiedShow Answer

An increase in borrowing from long-term debt holders is a source of cash.

Correct AnswerverifiedShow Answer

Describe some of the differences that the textbook mentions about yahoo.finance.com's presentation of the income statement.

Correct AnswerverifiedIn the presentation of the income statem...View AnswerShow Answer

Correct Answer
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Correct Answer
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A

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The cash account indicates how much mone...
View Answer

Correct Answer
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C

Correct Answer
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In the presentation of the income statem...
View Answer