4L for solution

Question 1

1.

Pro forma financial statements are used to:

a. find the contribution margin
b. show the results of some assumed event
c. predict the sensitivity of different output variables
d. show the results of an actual event

0.4 points   

Question 2

1.

An example of an investing activity is:

a. Issuing new corporate stock
b. Paying corporate income taxes
c. Buying new computers
d. Taking out a new loan.

0.4 points   

Question 3

1.

The value of debt and equity securities is based upon:

a. The type of investment vehicle
b. The growth potential of the asset
c. The accounting method used for recording the asset
d. The present value of the cash flows that the securities are expected to provide.

0.4 points   

Question 4

1.

Which of the following is defined as the systematic allocation of the cost of an asset over more than one period?

a. Deferral
b. Expensing
c. Optimization
d. Depreciation

0.4 points   

Question 5

1.

Peerless believes that its sales next year will increase 20 percent from the current level of $800,000. Management calculates that assets must increase $110,000 to support the new sales level, and current liabilities will increase $70,000. What total financing will be needed?

a. $40,000
b. $1,600
c. $33,600
d. $8,000

0.4 points   

Question 6

1.

In preparing a statement of cash flows, the ____ method involves adjusting net income to reconcile it to net cash flows from operating activities.

a. direct
b. indirect
c. accrual
d. none of the above

0.4 points   

Question 7

1.

Ship-to-Shore earned $280,000 after taxes last year. Its expenses included depreciation of $55,000, interest expenses of $40,000 and deferred taxes of $20,000. The company also purchased two new fresh water fishing boats for $40,000 ($20,000) each. What is Ship-to-Shore?s after-tax cash flow for last year?

a. $395,000
b. $355,000
c. $315,000
d. $280,000

0.4 points   

Question 8

1.

Dippity Doo-Dah Party Dips has revenues of $50,000, general & administrative expenses of $35,000, interest expense of $4,000 and depreciation expense of $4200. The firm is in the 38% tax bracket. What would be the firm s cash flow from operations?

a. $4216
b. $4000
c. $8416
d. $6,800

0.4 points   

Question 9

1.

The financial statement that shows the effects of a company?s operating, investing, and financing activities on its cash balance is known as the:

a. cash budget statement
b. pro forma financial statement
c. statement of cash flows
d. breakeven analysis

0.4 points   

Question 10

1.

To decrease the additional financing needed to support an increase in sales, management can

a. decrease notes payable
b. retire common stock
c. increase the dividend payout
d. cut dividends

0.4 points   

Question 11

1.

In the percent-of-sales forecasting method, which of the following is (are) assumed to increase proportionately with sales?

a. Cash
b. accounts receivable
c. accounts payable
d. all of the above

0.4 points   

Question 12

1.

Cash budgeting can be employed effectively by management to

a. identify potential cash flow problems in advance
b. aid them in capital budgeting
c. control retained earnings
d. coordinate cash and deferred expenses

0.4 points   

Question 13

1.

All the following current liabilities normally vary directly with the sales except:

a. accounts payable
b. notes payable
c. accrued wages
d. accrued taxes

0.4 points   

Question 14

1.

Using a cash budget is more useful than the percentage of sales method because: I. It can more precisely estimate the amount of financing needed. II. It can better estimate the time of financing need.

a. I only
b. II only
c. Both I and II
d. Neither I nor II

0.4 points   

Question 15

1.

A good operational plan incorporates a plan for:

a. the unionization of its business.
b. a solid organizational chart with detailed job descriptions.
c. the resources a firm will need to obtain its long term objectives.
d. all of the above

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