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Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date?
 
A. income statement
B. creditor's statement
C. balance sheet
D. statement of cash flows
E. dividend statement
   
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.
   
The common set of standards and procedures by which audited financial statements are prepared is known as the:
 
A. matching principle.
B. cash flow identity.
C. Generally Accepted Accounting Principles.
D. Financial Accounting Reporting Principles.
E. Standard Accounting Value Guidelines.
   
Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time?
 
A. income statement
B. balance sheet
C. statement of cash flows
D. tax reconciliation statement
E. market value report
   
Which term relates to the cash flow which results from a firm's ongoing, normal business activities?
 
A. operating cash flow
B. capital spending
C. net working capital
D. cash flow from assets
E. cash flow to creditors
   
Cash flow from assets is also known as the firm's:
 
A. capital structure.
B. equity structure.
C. hidden cash flow.
D. free cash flow.
E. historical cash flow.
   
The cash flow related to interest payments less any net new borrowing is called the:
 
A. operating cash flow.
B. capital spending cash flow.
C. net working capital.
D. cash flow from assets.
E. cash flow to creditors.
   
Cash flow to stockholders is defined as:
 
A. the total amount of interest and dividends paid during the past year.
B. the change in total equity over the past year.
C. cash flow from assets plus the cash flow to creditors.
D. operating cash flow minus the cash flow to creditors.
E. dividend payments less net new equity raised.
   
Which one of the following is classified as an intangible fixed asset?
 
A. accounts receivable
B. production equipment
C. building
D. trademark
E. inventory
   
Which one of the following will increase the value of a firm's net working capital?
 
A. using cash to pay a supplier.
B. depreciating an asset.
C. collecting an account’s receivable.
D. purchasing inventory on credit.
E. selling inventory at a profit.
   
Which one of the following statements concerning net working capital is correct?
 
A. Net working capital increases when inventory is purchased with cash.
B. Net working capital must be a positive value.
C. Total assets must increase if net working capital increases.
D. A decrease in the cash balance also decreases net working capital.
E. Net working capital is the amount of cash a firm currently has available for spending.
   
Which one of the following accounts is the most liquid?
 
A. inventory
B. building
C. accounts receivable
D. equipment
E. land
   
Which one of the following statements related to liquidity is correct?
 
A. Liquid assets tend to earn a high rate of return.
B. Liquid assets are valuable to a firm.
C. Liquid assets are defined as assets that can be sold quickly regardless of the price obtained.
D. Inventory is more liquid than accounts receivable because inventory is tangible.
E. Any asset that can be sold within the next year is considered liquid.
   
Which one of the following statements concerning net working capital is correct?

a. The lower the value of net working capital the greater the ability of firm to meet its current obligations
b. Firms with equal amounts of net working capital are also equally liquid.
c. Net working capital is a part of the operating cash flow.
d. An increase in net working capital must also increase current assets.
e. Net working capital increases when inventory is sold for cash at a profit.
   
Which one of these is most apt to be a fixed cost?

a. office salaries
b. raw materials
c. manufacturing wages
d. shipping and freight
e. management bonuses
   
The percentage of the next dollar you earn that must be paid in taxes is referred to as the _____ tax rate.

a. average
b. marginal
c. total
d. residual
e. mean
   
A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a:

a. zero partner
b. corporate shareholder
c. limited partner
d. generally partner
e. sole proprietor
   
Which one of the following is defined as a firm's short-term assets and its short-term liabilities?

a. debt
b. capital structure
c. investment capital
d. net capital
e. working capital
   
A general partner:

a. has no say over a firm's daily operations
b. faces double taxation whereas a limited partner does not
c. is personally responsible for all the partnerships debts
d. has a max loss equal to his or her equity investment
e. receives a salary in lieu of a portion of the profits.
   
A stakeholder is:

a. a person who initially founded a firm and currently has management control over that firm
b. any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of a firm
c. a creditor to whom a firm currently owes money
d. a person who owns shares of stock
e. any person who has voting rights based on stock ownership of a corporation
   
Which one of the following terms is defined as the management of a firm's long-term investments?

a. agency cost analysis
b. capital structure
c. working capital management
d. capital budgeting
e. financial allocation
   
Which one of the following functions should be the responsibility of the controller rather than the treasurer?

a. equipment purchase analysis
b. payment to a vendor
c. income tax returns
d. daily cash deposit
   
Which one of the following best describes the primary advantage of being a limited partner instead of a general partner?

a. no potential financial loss
b. greater control over the business affairs of the partnership
c. active participation in the firm's activities
d. maximum loss limited to the capital invested
e. tax-free income
   
Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management?

a. increase in the number of share outstanding
b. decrease in the net working capital
c. decrease in the per unit production costs
d. increase in the amount of the quarterly dividend
e. increase in the market value per 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?
A. income statement
B. creditor's statement
C. balance sheet
D. statement of cash flows
E. dividend statement
 
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.
 
The common set of standards and procedures by which audited financial statements are  prepared is known as the:
A. matching principle.
B. cash flow identity.
C. Generally Accepted Accounting Principles.
D. Financial Accounting Reporting Principles.
E. Standard Accounting Value Guidelines.
 
Which one of the following is the financial statement that summarizes a firm's revenue and  expenses over a period of time?
A. income statement
B. balance sheet
C. statement of cash flows
D. tax reconciliation statement
E. market value report
 
Which term relates to the cash flow which results from a firm's ongoing, normal business  activities?
A. operating cash flow
B. capital spending
C. net working capital
D. cash flow from assets
E. cash flow to creditors
 
Cash flow from assets is also known as the firm's:
A. capital structure.
B. equity structure.
C. hidden cash flow.
D. free cash flow.
E. historical cash flow.
 
The cash flow related to interest payments less any net new borrowing is called the:
A. operating cash flow.
B. capital spending cash flow.
C. net working capital.
D. cash flow from assets.
E. cash flow to creditors.
 
Cash flow to stockholders is defined as:
A. the total amount of interest and dividends paid during the past year.
B. the change in total equity over the past year.
C. cash flow from assets plus the cash flow to creditors.
D. operating cash flow minus the cash flow to creditors.
E. dividend payments less net new equity raised.
 
Which one of the following is classified as an intangible fixed asset?
A. accounts receivable
B. production equipment
C. building
D. trademark
E. inventory
 
Which of the following are included in current liabilities?
I. Note payable to a supplier in 13 months.
II. Amount due from a customer last week.
III. Account payable to a supplier that is due next week.
IV. Loan payable to the bank in 10 months.
III and IV
 
Which one of the following will increase the value of a firm's net working capital?
A. using cash to pay a supplier
B. depreciating an asset
C. collecting an accounts receivable
D. purchasing inventory on credit
E. selling inventory at a profit
 
Which one of the following statements concerning net working capital is correct?
A. Net working capital increases when inventory is purchased with cash.
B. Net working capital must be a positive value.
C. Total assets must increase if net working capital increases.
D. A decrease in the cash balance also decreases net working capital.
E. Net working capital is the amount of cash a firm currently has available for spending.
 
Which one of the following accounts is the most liquid?
A. inventory
B. building
C. accounts receivable
D. equipment
E. land
 
Which one of the following represents the most liquid asset?
A. $100 account receivable that is discounted and collected for $96 today
B. $100 of inventory which is sold today on credit for $103
C. $100 of inventory which is discounted and sold for $97 cash today
D. $100 of inventory that is sold today for $100 cash
E. $100 accounts receivable that will be collected in full next week
 
Which one of the following statements related to liquidity is correct?
A. Liquid assets tend to earn a high rate of return.
B. Liquid assets are valuable to a firm.
C. Liquid assets are defined as assets that can be sold quickly regardless of the price obtained.
D. Inventory is more liquid than accounts receivable because inventory is tangible.
E. Any asset that can be sold within the next year is considered liquid.
 
Which one of the following will increase the cash flow from assets, all else equal?
Decrease in the change in net working capital
 
For a tax-paying firm, an increase in _____ will cause the cash flow from assets to increase.
Depreciation
 
Which one of the following must be true if a firm had a negative cash flow from assets?
The firm utilized outside funding
 
Which one of the following is NOT included in cash flow from assets?
Interest expense
 
Net capital spending:
Is equal to zero if the decrease in the net fixed assets is equal to the depreciation expense
 
Which one of the following statements related to the cash flow to creditors is correct?
A positive cash flow to creditors represents a net cash outflow from the firm
 
A positive cash flow to stockholders indicates which one of the following with certainty?
The dividends paid exceeded the net new equity raised
 
A firm has $680 in inventory, $2,140 in fixed assets, $210 in accounts receivables, $250 in accounts payable,
and $80 in cash. What is the amount of the net working capital?
 
$720
 
A firm 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?
 
$6,890
   
A firm 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 amount of the shareholders' equity?
 
 
$18,700
   
RTF Oil has total sales of $911,400 and costs of $787,300. Depreciation is $52,600 and the tax rate is 34 percent.
The firm does not have any interest expense. What is the operating cash flow?
 
$99,790
   
Nielsen Auto Parts had beginning net fixed assets of $218,470 and ending net fixed assets of $209,411.
During the year, assets with a combined book value of $6,943 were sold. Depreciation for the year was $42,822.
What is the amount of net capital spending?
 
$33,763
   
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?
 
$21,903
   
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?
 
$11,129
   
Ernie's Home Repair 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?
 
$17,301
   
The Daily News had net income of $121,600 of which 40 percent was distributed to the shareholders as dividends.
During the year, the company sold $75,000 worth of common stock. What is the cash flow to stockholders?
 
-$26,360
   
The Lakeside Inn 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 is the amount of the cash flow to stockholders?
 
$20,680
   
Beach Front Industries has sales of $546,000, costs of $295,000, depreciation expense of $37,000, interest expense of $15,000,
and a tax rate of 32 percent. The firm paid $59,000 in cash dividends. What is the addition to retained earnings?
 
$76,320
   
The Widget Co. purchased new machinery three years ago for $4 million.
The machinery can be sold to the Roman Co. today for $2 million.
The Widget Co.'s 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 Widget Co.'s assets today is _____ and the market value of those assets is _____.
 
$4,600,000; $3,900,000
   
Webster World has sales of $13,800, costs of $5,800, depreciation expense of $1,100, and interest expense of $700.
What is the operating cash flow if the tax rate is 32 percent?
 
$6,016
   
A firm's balance sheet showed beginning net fixed assets of $3.6 million and ending net fixed assets of $3.4 million.
The depreciation expense is $900,000. What was the net capital spending for the year?
 
$700,000
   
Global Tours had current assets of $1,360 and current liabilities of $940 as of the beginning of the year.
At the end of the year, current assets are $1,720 and current liabilities are $1,080.
What was the change in net working capital for the year?
 
$220
   
The beginning of year balance sheet of The Beach Shoppe showed long-term debt of $2.1 million, while the end of
year balance sheet showed long-term debt of $2.3 million. The annual income statement showed an interest expense of $250,000.
What was the cash flow to creditors for the year ?
 
$50,000
   
At the beginning of the year, the balance sheet of The Outlet showed $800,000 in the common stock account and $2.6 million
in the additional paid-in surplus account. The end-of-year balance sheet showed $872,000 and $4.8 million in the same two accounts,
respectively. The company paid out $150,000 in cash dividends during the year. What is the cash flow to stockholders for the year?
 
-$2,122,000
   
Suppose you are given the following information for Bayside Bakery:
sales = $30,000;
costs = $15,000;
addition to retained earnings = $4,221;
dividends paid = $469;
interest expense = $1,300;
tax rate = 30 percent.
What is the amount of the depreciation expense?
 
$7,000
   
The Overside Market is obligated to pay its creditors $11,800 today.
The firm's assets have a current market value of $10,900. What is the current market value of the shareholders' equity?
$0
   
During the year, RIT Corp. had sales of $565,600. Costs of goods sold, administrative and selling expenses,
and depreciation expenses were $476,000, $58,800, and $42,800, respectively. In addition, the company had
an interest expense of $112,000 and a tax rate of 32 percent.
What is the operating cash flow for the year?
Ignore any tax loss carryback or carry-forward provisions.
 
$30,800
   
A firm has $680 in inventory,
$2,140 in fixed assets,
$210 in accounts receivables,
$250 in accounts payable, and
$80 in cash.
What is the amount of the net working capital?
 
$720
 
$680 + 210 + 80 - 250 = $720
   
Your firm 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?
 
$300
 
$4,900 - 3,200 - 1,400 = $300
   
Four years ago, Ship Express purchased a mailing machine at a cost of $218,000.
This equipment is currently 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?
 
$35,900
 
$97,400 + 41,300 - 102,800 = $35,900
   
Drew owns The What-Not Shop which he is trying to sell so that he can retire and travel.
The shop owns the building in which it is located. This building was built at a cost of $647,000 and is currently appraised at $819,000.
The counters and fixtures originally cost $148,000 and are currently valued at $65,000. The inventory is valued on the balance sheet at
$319,000 and has a retail market value equal to 1.1 times its cost. Jake expects the store to collect 96 percent of the $21,700
in accounts receivable. The firm has $26,800 in cash and has total debt of $414,700. What is the market value of this firm?
 
$867,832
 
$819,000 + 65,000 + 1.1($319,000) + .96($21,700) + 26,800 - 414,700 = $867,832
   
Jensen Enterprises paid $1,300 in dividends and $920 in interest this past year.
Common stock increased by $1,200 and retained earnings decreased by $310. What is the net income for the year?
 
$990
 
$1,300 + (-$310) = $990
   
Andre's Bakery has sales of $613,000 with costs of $479,000. Interest expense is $26,000 and depreciation is $42,000.
The tax rate is 25 percent. What is the net income?
 
$49,500
 
 ($613,000 - 479,000 - 26,000 - 42,000) (1 - .25) = $49,500
   
RTF Oil has total sales of $911,400 and costs of $787,300.
Depreciation is $52,600 and the tax rate is 34 percent. The firm does not have any interest expense.
What is the operating cash flow?
 
$99,790
 
$911,400 - 787,300 - 52,600 = $71,500
$71,500 ×.34 = $24,310
$71,500 + 52,600 - 24,310 = $99,790
   
Nielsen Auto Parts had beginning net fixed assets of $218,470 and ending net fixed assets of $209,411.
During the year, assets with a combined book value of $6,943 were sold. Depreciation for the year was $42,822.
What is the amount of net capital spending?
 
$33,763
 
209,411 - 218,470 + 42,822 = $33,763
   
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?
 
$21,903
 
 ($122,418 - 103,718) - ($121,306 - 124,509) = $21,903
   
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?
 
$11,129
 
$6,430 - ($68,219 - 72,918) = $11,129
   
The Daily News had net income of $121,600 of which 40 percent was distributed to the shareholders as dividends.
During the year, the company sold $75,000 worth of common stock.
What is the cash flow to stockholders?
 
A. -$75,000
B. -$26,360
C. -$2,040
D. $123,640
E. $147,960
 
.40($121,600) - $75,000 = -$26,360
balance sheet and income statement example to find net capital spending
Net capital spending = $17,107 - 17,489 + 1,611 = $1,229
   
Which one of the following indicates that a firm has generated sufficient internal cash flow to finance its entire operations for the period
 
Positive cash flow from assets
   
The recognition principle states that sales should be recorded when the earnings process is virtually
 
completed and the value of the sale can be determined
   
Which one of the following will decrease the net working capital of a firm
 
Making a payment on a long-term debt
   
An increase in which one of the following will increase operating cash flow for a profitable, tax-paying firm?
 
Depreciation
   
Which one of the following will decrease the liquidity level of a firm
 
Cash purchase of inventory
   
Cash flow to creditors is equal to
 
beginning long-term debt minus ending long-term debt plus interest paid.
   
A negative cash flow to stockholders indicates a firm
 
received more from selling stock than it paid out to shareholders