Download Test Bank for Quiz-2 FINA252 Financial Management

Test Bank for Quiz-2
FINA252
Financial Management
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A firm’s financial statement, that summarizes its sources and uses of cash
over a specified period, is known as a(n):
A. profit and loss statement
B. accounting standard
C. statement of cash flows
D. balance sheet
1.
2.
Activities of the firm that generate cash are known as:
A. uses of cash
B. sources of cash
C. application of cash
D. cash receipts
3.
Activities of the firm in which cash is spent are known as:
A. uses of cash
B. sources of cash
C. application of cash
D. uses of cash or application of cash
A summary of a firm’s financial position on a given date is known as
________.
A. statement of cash flows from assets
B. statement of operating profits
C. statement of working capital
D. balance sheet
4.
5.
Which of the following assets would be considered the most liquid?
A. a new automobile
B. inventory
C. debtors
D. cash
6.
The difference between the total value of assets and the total value of
liabilities is the ________.
A. net cash flows
B. net working capital
C. shareholders’ equity
D. operating profit
7.
A debt that is not due in the coming year is classified as a(n) ________.
A. indirect liability
B. direct liability
C. non-current liability
D. current liability
8.
Cash flow from assets is equal to:
A. cash flow to debt holders plus cash flow to shareholders
B. cash flow to debt holders less cash flow to shareholders
C. cash flow to debt holders only
D. cash flow to shareholders only
9.
Assets are classified as ________.
A. tangible and intangible
B. current and fixed (non-current)
C. cash and accounts receivable
D. direct and indirect
The difference between a firm’s current assets and current liabilities is
called:
A. accounting profits
B. excess profits
C. net working capital
D. both accounting profits and net working capital
10.
Which of the following would be considered a current asset on a firm’s
balance sheet?
A. accounts receivable
B. inventory
C. plant and machinery
D. both accounts receivable and inventory
11.
12.
The value of a firm’s assets is equal to the sum of its liabilities and:
A. liquidity
B. operating cash flows
C. retained earnings
D. shareholders’ equity
13.
The liabilities side of the balance sheet primarily reflects managerial
decisions about ________.
A. the use of debt alone
B. the capital structure
C. the owner’s equity
D. capital structure and the use of debt
14.
The values shown on the balance sheet for the firm’s assets are ________
and generally are not what the assets are actually worth.
A. discounted values
B. intrinsic values
C. book values
D. market values
15.
Which of the following does not appear in the balance sheet?
A. good management
B. talented employees
C. good reputation
D. all of the above
________ refers to the cash flow that results from the firm’s normal
business activities.
A. Cash flow from assets
B. Operating cash flow
C. Working capital
D. Capital spending
16.
________ refers to a firm’s interest payments to lenders, less net new
borrowings.
A. Capital spending
B. Additions to net working capital
C. Cash flows to shareholders
D. Cash flows to debt holders
17.
18.
________ refers to a firm’s dividend payments to shareholders, less net
new equity raised.
A. Capital spending
B. Additions to net working capital
C. Cash flows to shareholders
D. Cash flows to debt holders
19.
________ refers to a firm’s ending net working capital, less beginning net
working capital.
A. Net capital spending
B. Change in net working capital
C. Cash flows to shareholders
D. Cash flows to debt holders
20.
________ refers to a firm’s ending non-current assets, less beginning noncurrent assets, plus depreciation.
A. Net capital spending
B. Change in net working capital
C. Cash flows to shareholders
D. Cash flows to debt holders
21.
A.
B.
C.
D.
Uses of funds include a (an):
decrease in cash
increase in any liability
increase in fixed assets
tax refund
22.
A.
B.
C.
D.
An examination of the sources and uses of funds statement is part of:
a forecasting techniques
a funds flow analysis
a ratio analysis
calculations for preparing the balance sheet.
23.
A.
B.
C.
D.
For a profitable firm, total sources of funds will always
funds.
be equal to
be greater than
be less than
none of the above
24.
A.
B.
C.
D.
In finance, "working capital" means the same thing as
total assets
fixed assets
current assets
current assets minus current liabilities
25.
A.
B.
C.
D.
Which of the following items can be found on an income statement?
Accounts receivable
Long-term debt
Sales
Inventory
26.
If you only knew a company’s total assets and total debt, which item could
you easily calculate?
Sales
Depreciation
Total equity
Inventory
A.
B.
C.
D.
total uses of
TRUE and FALSE
1.
The market value and the book value are always the same. True or False?
A. True
B. False
(correct answer: Market value could be equal or more or less than the book value)
2.
Revenues + Expenses (costs) = Profit. True or False?
A. True
B. False
(correct answer: Revenue – expenses (costs)= profit)
3.
Inventory is often the least liquid current asset. True or False?
A. True
B. False
4.
EBIT (Earnings before interest and taxes) = Sales (revenue) – cost of goods
sold (expenses) + depreciation. True or False?
A. True
B. False
correct answer: (– depreciation)
5.
Net profits = EBIT + interest – taxes. True or False?
A. True
B. False
correct answer: (– interest)
6.
Cash flow from assets = cash flow to debt-holders + cash flow to
shareholders. True or False?
A. True
B. False
A summary of a firm’s revenues and expenses over a specified period is
called balance sheet. True or False?
A. True
B. False
correct answer: (Income statement)
7.
cash flow from the firm’s assets is equal to the cash flow paid to suppliers
of capital to the firm. True or False?
A. True
B. False
8.
9.
Cash flow to debt-holders = Interest paid – net new equity. True or False?
A. True
B. False
correct answer: (net new borrowing)
Cash flow to share-holders = Dividends paid – net new equity. True or
False?
A. True
B. False
10.
11.
Petro Rabigh had operating cash flow equal to $352.00 for 2015. If its
earnings before interest and taxes (EBIT) was $400.00 while its tax bill was
$108.00, Petro Rabigh’s depreciation expense for the year was $960.00.
True or False?
A. True
B. False
correct answer:
$60.00
[Operating Cash Flow = EBIT - Taxes + Depreciation
352.00 = 400.00 – 108.00 + Depreciation
Depreciation = 60.00]
12.
Petro-Rabigh’s had sales (revenue) is $1420.00 for 2015. If its costs of
goods sold was $960.00 while its depreciation was $60.00. Petro Rabigh’s
operation cash flow for this year is $1420.00. True or False?
A. True
B. False
correct answer:
$352.00
[Operating Cash Flow = EBIT - Taxes + Depreciation
= 400.00 – 108.00 + 60.00]
The formula (EBIT – Taxes + Depreciation) use to calculate operating cash
flow. True or False?
A. True
B. False
13.
Petro-Rabigh’s had non-current assets $1970.00 for 2014 and $2200.00 for
2015, while its depreciation was $60.00. Petro Rabigh’s net capital
spending for this year is $2200.00. True or False?
A. True
B. False
correct answer:
$290.00
[Net capital spending = ending noncurrent assets – beginning
noncurrent assets + Depreciation
= 2200.00 – 1970.00 + 60.00]
14.