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Finance Flashcards

Business Finance 2

Net working capital is defined as:A. the depreciated book value of a firm’s fixed assets.B. the value of a firm’s current assets.C. available cash minus current liabilities.D. total assets minus total liabilities.E. current assets minus current liabilities. E. current assets minus current liabilities.
The accounting statement that measures the revenues, expenses, and net income of a firm over aperiod of time is called the:A. statement of cash flows.B. income statement.C. GAAP statement.D. balance sheet.E. net working capital schedule. B. income statement.
The tax rate that determines the amount of tax that will be due on the next dollar of taxable incomeearned is called the:A. average tax rate.B. variable tax rate.C. marginal tax rate.D. fixed tax rate.E. ordinary tax rate C. marginal tax rate.
Production equipment is classified as:A. a net working capital item.B. a current liability.C. a current asset.D. a tangible fixed asset.E. an intangible fixed asset. D. a tangible fixed asset.
Shareholders’ equity is equal to:A. total assets plus total liabilities.B. net fixed assets minus total liabilities.C. net fixed assets minus long-term debt plus net working capital.D. net working capital plus total assets.E. total assets minus net working capital. C. net fixed assets minus long-term debt plus net working capital.
Which one of the following statements concerning the balance sheet is correct?A. Total assets equal total liabilities minus total equity.B. Net working capital is equal total assets minus total liabilities.C. Assets are listed in descending order of liquidity.D. Current assets are equal to total assets minus net working capital.E. Shareholders’ equity is equal to net working capital minus net fixed assets plus long-term debt. C. Assets are listed in descending order of liquidity.
An income statement prepared according to GAAP:A. reflects the net cash flows of a firm over a stated period of time.B. reflects the financial position of a firm as of a particular date.C. distinguishes variable costs from fixed costs.D. records revenue when payment for a sale is received.E. records expenses based on the matching principle. E. records expenses based on the matching principle.
Net income increases when:A. fixed costs increase.B. depreciation increases.C. the average tax rate increases.D. revenue increases.E. dividends cease. D. revenue increases.
Given a profitable firm, depreciation:A. increases net income.B. increases net fixed assets.C. decreases net working capital.D. lowers taxes.E. has no effect on net income D. lowers taxes.
An increase in which one of the following will increase operating cash flow for a profitable, tax-payingfirm?A. Fixed expensesB. Marginal tax rateC. Net capital spendingD. InventoryE. Depreciation E. Depreciation
A negative cash flow to stockholders indicates a firm:A. had a net loss for the year.B. had a positive cash flow to creditors.C. paid dividends that exceeded the amount of the net new equity.D. repurchased more shares than it sold.E. received more from selling stock than it paid out to shareholders. E. received more from selling stock than it paid out to shareholders.
Tressler Industries opted to repurchase 5,000 shares of stock last year in lieu of paying a dividend. Thecash flow statement for last year must have which one of the following assuming that no new shares wereissued?A. Positive operating cash flowB. Negative cash flow from assetsC. Positive net incomeD. Negative operating cash flowE. Positive cash flow to stockholders E. Positive cash flow to stockholders
ANC Plastics has net working capital of $15,400, current assets of $39,200, equity of $46,600, andlong-term debt of $22,100. What is the amount of the net fixed assets?A. $50,800B. $56,900C. $45,500D. $48,100E. $53,300Net fixed assets = $22,100 + 46,600- 15,400 = $53,300 E. $53,300Net fixed assets = $22,100 + 46,600- 15,400 = $53,300
Plenti-Good Foods has ending net fixed assets of $98,700 and beginning net fixed assets of $84,900.During the year, the firm sold assets with a total book value of $13,200 and also recorded $9,800 indepreciation expense. How much did the company spend to buy new fixed assets?A. -$23,900B. $9,200C. $36,800D. $40,700E. $37,400New fixed asset purchases = $98,700 + 9,800 + 13,200-84,900 = $36,800 C. $36,800New fixed asset purchases = $98,700 + 9,800 + 13,200-84,900 = $36,800
Dockside Warehouse has net working capital of $42,400, total assets of $519,300, and net fixed assetsof $380,200. What is the value of the current liabilities?A. $61,700B. $88,40000C. $102,900D. $96,700E. $111,500Current liabilities = $519,300 -380,200 -42,400 = $96,700 D. $96,700Current liabilities = $519,300 -380,200 -42,400 = $96,700
Cornerstone Markets has beginning long-term debt of $64,500, which is the principal balance of a loanpayable to Centre Bank. During the year, the company paid a total of $16,300 to the bank, including $4,100of interest. The company also borrowed $11,000. What is the value of the ending long-term debt?A. $45,100B. $53,300C. $58,200D. $63,300E. $900Ending long-term debt = $64,500 -16,300 + 4,100 + 11,000 = $63,300 D. $63,300Ending long-term debt = $64,500 -16,300 + 4,100 + 11,000 = $63,300
Gino’s Winery has net working capital of $29,800, net fixed assets of $64,800, current liabilities of$34,700, and long-term debt of $23,000. What is the value of the owners’ equity?A. $36,900B. $66,700C. $71,600D. $89,400E. $106,300Owners’ equity = $29,800 + 64,800 -23,000 = $71,600 C. $71,600Owners’ equity = $29,800 + 64,800 -23,000 = $71,600
72. Holly Farms has sales of $509,600, costs of $448,150, depreciation expense of $36,100, and interestpaid of $12,400. The tax rate is 28 percent. How much net income did the firm earn for the period?A. $7,778B. $9,324C. $10,380D. $8,671E. $5,886Net income = ($509,600 -448,150 -36,100 -12,400)(1 -.28) = $9,324 B. $9,324Net income = ($509,600 -448,150 -36,100 -12,400)(1 -.28) = $9,324
For the year, Uptowne Furniture had sales of $818,790, costs of $748,330, and interest paid of$24,450. The depreciation expense was $56,100 and the tax rate was 34 percent. At the beginning of theyear, the firm had retained earnings of $172,270 and common stock of $260,000. At the end of the year,retained earnings was $158,713 and common stock was $280,000. Any tax losses can be used. What isthe amount of the dividends paid for the year?A. $5,266B. $6,466C. $7,566D. $7,066E. $6,898Net income = [($818,790 -748,330-56,100 -24,450)(1 -.34)] =-$6,659Dividends paid = -$6,659 – ($158,713-172,270) = $6,898 E. $6,898Net income = [($818,790 -748,330-56,100 -24,450)(1 -.34)] =-$6,659Dividends paid = -$6,659 – ($158,713-172,270) = $6,898
Neiger Flours owes $16,929 in taxes on taxable income of $61,509. If the firm earns $100 more inincome, it will owe an additional $48 in taxes. What is the average tax rate on income of $61,609?A. 28.00 percentB. 30.33 percentC. 33.33 percentD. 35.00 percentE. 27.56 percentAverage tax rate = ($16,929 + 48)/$61,609 = .2756, or 27.56 percent E. 27.56 percentAverage tax rate = ($16,929 + 48)/$61,609 = .2756, or 27.56 percent
The financial statements of Blue Fin Marina reflect depreciation expenses of $41,600 and interestexpenses of $27,900 for the year. The current assets increased by $31,800 and the net fixed assetsincreased by $28,600. What is the amount of the net capital spending for the year?A. $13,000B. $21,600C. $28,600D. $60,400E. $70,200Net capital spending = $28,600 + 41,600 = $70,200 E. $70,200Net capital spending = $28,600 + 41,600 = $70,200
A balance sheet shows beginning values of $56,300 for current liabilities and$289,200 for long-termdebt. The ending values are $61,900 and $318,400, respectively. The income statement shows interestpaid of $29,700 and dividends of $19,000. What is the amount of the net new borrowing?A. $29,200B. $40,450C. $34,800D. $70,150E. $58,900Net new borrowing = $318,400-289,200 = $29,200 A. $29,200Net new borrowing = $318,400-289,200 = $29,200
For the past year, LP Gas, Inc., had cash flow from assets of $38,100 of which $21,500 flowed to thefirm’s stockholders. The interest paid was $2,300. What is the amount of the net new borrowing?A. -$14,300B. -$9,700C. $12,300D. $14,300E. $18,900Cash flow to creditors = $38,100 -21,500 = $16,600Net new borrowing = $2,300 – 16,600 = -$14,300 A. -$14,300Cash flow to creditors = $38,100 -21,500 = $16,600Net new borrowing = $2,300 – 16,600 = -$14,300
Six months ago, Benders Gym repurchased $140,000 of its common stock. The company pays regulardividends totaling $18,500 per quarter. What is the amount of the cash flow to stockholders for the pastyear if 1,200 new shares were issued and sold for $38 a share?A. -$10,000B. -$20,400C. $28,500D. $74,000E. $168,400Cash flow to stockholders = ($18,500×;4) -[(1,200 ×$38) – $140,000] = $168,400 E. $168,400Cash flow to stockholders = ($18,500×;4) -[(1,200 ×$38) – $140,000] = $168,400
Able Co. has $267,000 in taxable income and Bravo Co. has $1,600,000 in taxable income. Supposeboth firms have identified a new project that will increase taxable income by $10,000. The additional projectwill increase Able Co.’s taxes by _____ and Bravo Co.’s taxes by ____[Taxable Income] [Tax Rate]TI [0-] [50000] TR [15%]TI [50001-] [75,000] TR [25]TI [75001-] [100,000] TR [34]TI [100001-] [335,000] TR [39]TI [335001-] [10,000,000] TR [34]A. $1,500; $1,500B. $1,500; $3,400C. $3,400; $3,900D. $3,900; $3,400E. $3,400; $3,400Able Co. tax = $10,000 ×39 = $3,900Bravo Co. tax = $10,000×34 = $3,400 D. $3,900; $3,400Able Co. tax = $10,000 ×39 = $3,900Bravo Co. tax = $10,000×34 = $3,400

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