finance 3

in general, what is changing as you read down the left hand side of a balance sheet? a. the assets are more fully depreciated b. the assets are growing in value c. the assets are increasing in maturity d. the assets are becoming less liquid d. the assets are becoming less liquid
a balance sheet portrays the value of a firm’s assets and liabilities :a. over an annual periodb. over any stated period of time c. at any stated point in time d. at the end of the calendar year c. at any stated point in time
which of the following items should not be included in a listing of current assets?a. marketable securities b. accounts payable c. accounts receivable d. inventories b. accounts payable
which of the following assets is liekly to be considered the most liquiid? a. marketable securitiesb. net fixed assets c. accounts payable d. inventory a. marketable securities
if the value of a firms net fixed assets equals the value of the accumulated depreciation, then, from an accounting context, the fixed assets are:a. new b. fully depreciated c. one-half depreciated d. equal in value to the firms current assets c. one half depreciated
if the balance sheet of a firm indicates that total assets exceed current liabilities plus shareholders equity then the firm has:a. no retainded earningsb. long term debtc. no accumulated depreciation d. current assets b. long term debt
accumulated depreciation is used to reduce what tpe of account on the balance sheeta. current asset b. capital assets or fixed assets c. liability d. owners equity b. capital assets or fixed assets
what balancing entry is most likely to be called for if previously excluded intangible assets were added to a firms balance sheet?a. increase accumulated depreciation b. decrease long term debtc. increase shareholders equity d. decrease current assets c. increase shareholders equity
what happens to firms net worth as it uses cash to repay accounts payable?a. net worth increases b. net worth decreases c. net worth remains the same d. net worth decreases temporarily, until cash is replenished c. net worth remains constant
if a payment of principal is due in 7 months on a long term liability, that payment will appear on the current balance sheeet now as a(n):a. current liability b. long term debt c. cash d. interest expense a. current liability
net working captal is a measure of the companys:a. goodwill b. short term liabilities c. estimated liquidity d. shareholders equity c. estimated liquidity
net working capital is calculated by taking the difference between:a. total assets and total liabilities b. inventory and accounts payable c. current assets and current liabilities d. cash and long term debt c. current assets and current liabilities
according to GAAP, assets and liabilities are typically recorded on the balance sheet at:a. historical cost b. market value c. salvage valued. historical cost less depreciation d. historical cost less depreciation
which of the following is correct for a fully depreciated asset?a. market value is zero b. market value is greater than book valuec. book value is greater than market value d. the relationship between market and book values is indeterminable d. the relationship between market and book values is indeterminable
depreciation expense is used to:a. allocate costs to all departments of the firm b. determine when an asset is fully paid off c. allocate historical cost over the life of an assetd. equate the historical cost and market values of an asset c. allocated historical cost over the life of an asset
when subtracting an asset’s accumulated depreciatin from its historic cost, the resulting value is termed the:a. book value of the asset b. market value of the assetc. depreciation expense d. current asset vaue a. book value of the asset
ABC Corp’s balance sheet showers their long term debt of $10 million. The debt was issued with a 10% interest rate, and the current interest rate is 7%. Based on this information, the market value of this debt would be:a. less than $20 million b. more than $20 millionc. equal to $20 milliond. unknown without knowing the maturity of the debt b. more than $20 million
if market interest rates have increased since a company last borrowed long-term funds, the market value of these longterm funds will likely be:a. greater than their book value b. less than their book value c. equal to their book valued. unknown without knowing the maturity of the debt b. less than their book value
which of the following values would most likely interest a shareholder?a. book value of equity b. market value of equity c. historical cost of equity d. retained earnings component of equity b. market value of equity
what happens to the market value of a firms equity as the book value of the firm’s equity increases?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 d. there is no set relationship to determine this outcome
which of the following statements is true for a corporation with $1 million market value of equity, $2 million market value of assets, and 1000 shares of outstanding stock?a. market value of liabilities exceeds book value of liabilities b. market value of liabilities equals $1 million c. market value per share equals $1000d. market value per share equals $2000 b. market value of liabilities equals $1 million
which of the following is more likely to be correct if market value of equity is less than book value of equity?a. investors anticipate excellent earning potential b. investors anticipate low earning potential c. assets have been fully depreciated d. the company is bankrupt b. investors anticipate low earning potential
market value balance sheets differ from book-value balance sheets in that market values:a. are higher than book values b.. are lower than book valuesc. conform more to GAAP accountingd. confrom to investors expectations d. conform to investors expectations
calculate the EBIT for a firms $4 million total revenues, $3.5 million cost of goods sold, $500000 depreciation expense, and $120000 interest expense. a. $500,000b. $380,000c. $0d ($120000) C. 0
the net income figure on an income statement is calculated before deducting:a. interest expense b. depreciation expensec. cash dividends d. tax liability c. cash dividends
an increase in depreciation expense will (other things equal):a. increase net income b. decrease net income c. increase cash flow d. decrease the market value of assets b. decrease net income
current period depreciation expense is listed on:a. the balance sheetb. the investment section of the cash flow statement c. the income statement d. neither the balance sehet nor the income statement, it is a noncash expense c. the income statement
which of the following statements about depreciation is correct?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 d. deprecation reduces the book value of assets
net earnings result from:a. the sale of additional shares of stock to investors b. income not paid to shareholders in the form of cash dividends c. an excess of assets over liabilities d. market values the exceed book values b. income not paid to shareholders in the form of cash dividends
which of the following is NOT a typica reason for differences between profit and cash flow?a. depreciation expense b. income taxesc. changing levels of accounts receivabled. accrual accounting practices b. income taxes
which of the following best explains the combination of a high level of sales combined with a low cash flow during an accounting period?a. high depreciation expense b. reduction of inventory levels c. acquisition of equipmentd. increase in accounts payable c. acquisition of equipment
if a firm generates $2000 in sales and has a $500 increases in AR during an accounting period, then, based on these two categories, cash flow will increase by:a. $2500b. $2000c. $1500d. $500 b. $2000
the gathering of related revenues and expenses into the same period, regardless of when they were incurred, is:a. cash basis accounting b. market value accounting c. book value accountingd. accrual accounting d. accrual accounting
according to accrual accounting, when goods are not sold until the period after they were produced, then the cost of goods sold:a. will be recognized in the first period b. will be recognized in the second period c. will be recognized when payment is received d. will be split between both periods b. will be recognized in the second period
in a statement of cash flows, which category includes deprecation expense?a. operations b. investments c. financing d. none of the above; depreciation is a non-cash expense a. operations
which of the following will occur in a statement of cash flows as a result of paying cash dividends?a. cash flows from operations will increase b. cash flows from investments will decrease c. cash flows from financing will decrease d. cash balances will not be affected c. cash flows from financing will decrease
which of the following changes in working capital will result in an increase in cash flow?a. increase in AP b. increase in inventory c. increase in AR d. decrease in other CL a. increase in AP
which of the following statements is more likely if cash and marketable securities increase by $5000 during a period in which cash provided by operations increase by $1000 and cash used by investments decreases by $500? a. cash provided by financing increases by $3500b. cash used by financing decreases by $1000c. debt increased by more than cash dividends paid d. debt was reduced by more than cash dividends paid c. debt increased by more than cash dividends paid
if a firms net income is positive and its non-cash expenses are positive, which of the following could account for a negative amount of cash provided by operationsa. current assets decrease more than current liabilities decreaseb. current assets increase more than current liabilities increase c. current assets decrease more than current liabilities increase d. a large addition is made to plant and equipment b. current assets increase more than current liabilities increase
what is the most likely conclusion for a firm whose statement of cash flows shows an increase in cash balances and has negative cash flows from both operations and financing?a. the firm has low deprecation expense b. the firm did not pay any dividends c. the firm sold more equipment than it purchased d. the firm has a low interest rate on its debt c. the firm sold more equipment than it purchased
what happens when moving from net income to cash flows as the result of an increase in inventory balances?a. cash flows increaseb. cash flows decreasec. cash flows are unchanged d. the change in cash flows cannot be determined b. cash flows decrease
according to the statement of cash flows, cash flows from financing could be positive if: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 b. the firm added more debt than it repaid
which of the firms financial statements most clearly recognizes the payment for new equipment?a. balance sheet b. income statement c. statement of cash flowsd. statement of condition c. statement of cash flows
which of the following categories of a statement of cash flows is affected by the payment of interest expense?a. cash flows from operations b. cash flows from noncash expenses c. cash flows from investments d. cash flows from financing a. cash flows from operations
which of the following information is reported on the income statement?a. AP b. revenues, expenses, and net income or lossc. current liabilities d. current portion of LTD b. revenues, expenses, net income or loss
which of the following statements correctly compares international accounting standards?a. the standards are becoming less similiar over time b. the standards are typically more lenient in Canada and the US c. the standards are typically stricter in Canada and the US d. balance sheets differ, but income statements are similar in all countries c. the standards are typically stricter in canada and the US
which of the following represents a recent trend in financial statements?a. dividends are appearing on the balance sheet b. income statements no longer record depreciation expense c. statements of cash flow are considered obsolete d. balance sheets record market values rather than historic costs d. balance sheets record market values rather than historic costs
marginal tax rates are based on:a. net income b. total income c. an additional dollar of income d. earnings before interest and taxes c. an additional dollar of income
if market values of equity exceed book values of equity then, a. equity has been depreciated too quicklyb. the firm uses accrual-based accoutningC. profit potential is expected to be attractived. the firm is holding too much cash c. profit potential is expected to be attractive
for all canadian corporations except those in the lowest and highest tax brackets, it is the case that thier:a. marginal tax rate exceeds their average tax rateb. average tax rate exceeds their marginal tax ratec. marginal tax rate equals their average tax rated. marginal tax rate equals 15% a. marginal tax rate exceeds their average tax rate
if market values of equity exceed book values of equity, then:a. equity has been depreciated too rapidlyb. the firm uses accrual-based accountingc. profit potential is expected to be attractive d. the firm is holding too much cash c. profit potential is expected to be attractive
what is the marginal impact on taxes for a profitable corporation in the 35% marginal tax bracket that incurs an additional dollar of depreciation expense?a. decrease of 65 cents b. decrease of 35 cents c. an increase of 65 cents d. zero impact b. a decrease of 35 cents
which one of the following expenses cannot be used to reduce taxable corporate income?a. cash dividends b. depreciation expense c. interest expensed. administrative expense a. cash dividends
who pays the taxes on earnings distributed as dividends?a. the corporationb. the investor receiving the dividendc. both the corporation and the investor d. neither the corporation nor the investor c. both the corporation and the investor
which of the following forms of income can individuals defer from taxation?a. dividends b. interestc. realized capital gains d. unrealized capital gains d. unrealized capital gains
which statement is correct about the tax treatment of dividend income and capital gains received inside pension funds?a. dividends are taxable while capital gains are not taxable b. capital gains are taxable while dividends are not taxable c. both dividends and capital gains are taxable d. neither dividneds nor capital gains are taxable d. neither dividends nor capital gains are taxable
which of the following statements about NWC is correct?a. NWC is positive for all firms b. as NWC decreases, potential liquidity increases c. NWC excludes inventory, which is deemed liquid d. Decreases in NWC can increase the firms risk d. decreases in NWC can increase the firms risk
a balance sheet may be considered “backward looking”, from the perspective that:a. it works backward, starting with net income b. it records historic, not current valuesc. it cannot forecast the futured. it records costs over many previous periods b. it records historic, not current values
perhaps the best method for estimating the market value of shareholders’ equity is to:a. read from the firms balance sheet b. read from the firms income statement c. multiply number of shares outstanding by the price of each share d. add the retained earnings plus total liabilities c. mutliply number of shares outstanding by the price of each share
in which of the following asset accounts are you LEAST likely to find a difference between market value and book value? a. cash b. inventory c. landd. shareholders’ equity a. cash
what occurs when the value of a firm’s debt exceeds the value of shareholders’ equity?a. the firm is bankrupt b. the firm is very risky c. a high rate of interest is being paid on the debt d. the firm is financed more through debt than through equity d. the firm is financed more through debt than through equity
which of the following expense categories is subtracted from total revenues to arrive at a firms EBIT?a. cash dividendsb. depreciation expense c. interest expense d. tax liability b. depreciation expense
which of the following cash outflows does not reduce a firms net income?a. income taxes b. interest expense c. dividends d. depreciation expense c. dividends
accrual accoutning, which attempts to match sales revenues and the expenses associated with the production of goods is conducted in an attempt to:a. reduce income tax liability b. reduce bias in reported profitability measures c. speed up the receipt of AR d. reduce the time necessary to depreciate assets b. reduce bias in reported profitability measures
if a firms cash flow statement shows that cash was used for investments, which of the following would seem most likely?a. the inventory balance increased b. common stock was repurchased c. new machines were acquired d. cash dividends are paid c. new machines were acquired
interest expense appears in the operations section of the cash flows statement because:a. firms cannot operate without incurring interest expense b. its payment is not within managerial discretion c. it is paid to finance a firms inventory d. false statement, b. its payment is not within managerial discretion
when an accountant does not report all of the potentially relevant financial information on the firms financial statements, the accountnat is most likely:a. hiding transactions from the shareholders b. using the discretion that is built into GAAPc. not following GAAP d. not licensed to practice accounting b. using the discretion that is built into GAAP
one of the stronger motivations for a continuing standardization in international accounting standards is to:a. allow foreign countries to escape the wrath of the US government b. provide additional work for accountants c. force financial statements to be prepared in Englishd. develop international sources of capital for firms d. develop international sources of capital for firms
For a corporation in the 25% marrginal tax bracket that incurs $70 in labour and materials expense, plus $15 in depreciation expense while generating an incremental revenue of $100, tax liability will increase by:a. $3.75b. $7.50c. $13.75d. $25 a. $3.75
according to the current Canadian federal income tax structure, the marginal tax rate for personal taxpayers in the highest levels of income is:a. 15%b. 25%c. 29%d. 39.6% c. 29%
which of the following statements appears correct for a corporation with a negative net income in both the present and the last fiscal year?a. this years loss can be carried back, but last years loss cannot be used b. neither of the losses can be used to reduce taxes c. both losses can be carried froward but not backwardd. both losses can be carried forward and backward, within certain time limits d. both losses can be carried forward and backward, within certain time limits
which of the following statements is correct for an individual with a net income of $50000, a tax liability of $10704.50, and a 28% marginal tax rate?a. the average tax rate is 21.41%b. the average tax rate is 28% c. the average tax rate is unknown, but less than the marginal tax rated. the average tax rate is unknown, but greater than the marginal tax rate a. the average tax rate is 21.41%
an individuals income for the year includes both dividend and interest payments. Which of the following statements will be correct concering that individuals tax liability?a. divides are taxed; tax on interest payments is paid at the corporate levelb. interest is taxed; tax on dividend payments is paid at the corporate level c. both dividend and interest payments are taxed at the personal level d. all taxes on dividend and interest payments are paid at the corporate level c. both dividend and interest payments are taxed at the personal level
which of the following could account for a firm that has a negative net income, yet has a positive amount of cash provided by operations?a. the net loss was greater than the amount of depreciation expense b. inventory increased significantly more than AP c. AR decreased by significantly more than AP d. cash balances declined to the desired amount c. AR decreased by significantly more than AP
the existence of “goodwill” on a corporate balance sheet indicates that the corporation has:a. been profitable in the pastb. depreciated its tangible assets c. intangible assets from past acquisitions d. retained earnings resulting from past income c. intangible assets from past acquisitions
foreign corporations may be more likely in the future to develop their financial statements according to GAAP so that:a. they can reduce or avoid the payment of income taxes b. maintain reserves that are hidden from shareholders c. they can adhere to less stringent accounting standards d. their stock qualifies for listening on US exchanges d. their stock qualifies for listing on US exchanges

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