Question 1

Which of the following is more likely to be correct if market value of equity is less than book value of equity?

Accepted Answer

A)  investors anticipate excellent earning potential.
B)  investors anticipate low earning potential relative to the level of risk.
C)  assets have been fully depreciated.
D)  the company is bankrupt.E) C) and D)
F) A) and D)

Question 2

What is the change in cash for a firm with the following: $10,000 cash flow from operations, $1,600 cash used for new investment, a reduction in the level of debt of $2,000, $1,000 in cash dividends, and $200 in depreciation expense?

Accepted Answer

A)  $5,600
B)  $9,600
C)  $9,400
D)  $5,400E) B) and C)
F) A) and D)

Question 3

An increase in inventories uses cash, reducing the firm's net cash balance.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following forms of income can individuals defer from taxation?

Accepted Answer

A)  dividends
B)  interest
C)  realized capital gains
D)  unrealized capital gainsE) B) and C)
F) None of the above

Question 5

Which of the following statements about depreciation is correct?

Accepted Answer

A)  depreciation is subtracted from cost of goods sold to calculate net income.
B)  when depreciation expense is incurred, cash balances are reduced.
C)  depreciation expense does not affect net income.
D)  depreciation reduces the book value of assets.E) All of the above
F) A) and B)

Question 6

Amy wants to know if inventory is increasing as a percentage of total assets.Which one of these statements most easily provides the information she is seeking?

Accepted Answer

A)  statement of cash flows
B)  balance sheet
C)  common-size balance sheet
D)  income statementE) B) and D)
F) None of the above

Question 7

According to the statement of cash flows, cash flows from financing could be positive if:

Accepted Answer

A)  the firm repaid more debt than it added.
B)  the firm added more debt than it repaid.
C)  interest rates were low on outstanding debt.
D)  the firm sold portions of its plant and equipment.E) B) and D)
F) A) and D)

Question 8

What happens to the market value of a firm's equity as the book value of the firm's equity increases?

Accepted Answer

A)  it increases by the same amount.
B)  it decreases by the same amount.
C)  it remains constant.
D)  there is no set relationship to determine this outcome.E) A) and B)
F) B) and D)

Question 9

When subtracting an asset's accumulated depreciation from its historic cost, the resulting value is termed the:

Accepted Answer

A)  book value of the asset.
B)  market value of the asset.
C)  depreciation expense.
D)  current asset value.E) All of the above
F) A) and D)

Question 10

If a firm's statement of cash flows shows that cash was used for investments, which of the following would seem most likely?

Accepted Answer

A)  the inventory balance increased.
B)  common stock was repurchased.
C)  new machines were acquired.
D)  cash dividends were paid.E) A) and B)
F) C) and D)

Exam 3: Accounting and Finance

If a firm's statement of cash flows shows that cash was used for investments, which of the following would seem most likely?

Correct Answer
verified

An increase in inventories uses cash, reducing the firm's net cash balance.

Correct Answer
verified

According to the statement of cash flows, cash flows from financing could be positive if:

Correct Answer
verified

What happens to the market value of a firm's equity as the book value of the firm's equity increases?

Correct Answer
verified

When subtracting an asset's accumulated depreciation from its historic cost, the resulting value is termed the:

Correct Answer
verified

Which of the following forms of income can individuals defer from taxation?

Correct Answer
verified

Which of the following is more likely to be correct if market value of equity is less than book value of equity?

Correct Answer
verified

What is the change in cash for a firm with the following: $10,000 cash flow from operations, $1,600 cash used for new investment, a reduction in the level of debt of $2,000, $1,000 in cash dividends, and $200 in depreciation expense?

Correct Answer
verified

Amy wants to know if inventory is increasing as a percentage of total assets.Which one of these statements most easily provides the information she is seeking?

Correct Answer
verified

Which of the following statements about depreciation is correct?

Correct Answer
verified

Exam 3: Accounting and Finance

If a firm's statement of cash flows shows that cash was used for investments, which of the following would seem most likely?

Correct AnswerverifiedShow Answer

An increase in inventories uses cash, reducing the firm's net cash balance.

Correct AnswerverifiedShow Answer

According to the statement of cash flows, cash flows from financing could be positive if:

Correct AnswerverifiedShow Answer

What happens to the market value of a firm's equity as the book value of the firm's equity increases?

Correct AnswerverifiedShow Answer

When subtracting an asset's accumulated depreciation from its historic cost, the resulting value is termed the:

Correct AnswerverifiedShow Answer

Which of the following forms of income can individuals defer from taxation?

Correct AnswerverifiedShow Answer

Which of the following is more likely to be correct if market value of equity is less than book value of equity?

Correct AnswerverifiedShow Answer

What is the change in cash for a firm with the following: $10,000 cash flow from operations, $1,600 cash used for new investment, a reduction in the level of debt of $2,000, $1,000 in cash dividends, and $200 in depreciation expense?

Correct AnswerverifiedShow Answer

Amy wants to know if inventory is increasing as a percentage of total assets.Which one of these statements most easily provides the information she is seeking?

Correct AnswerverifiedShow Answer

Which of the following statements about depreciation is correct?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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