University of Illinois, Urbana Champaign - FIN 221

Chapter 3

1)Assets and equity on a non-financial company's balance sheet are reported at

1. market value
2. book value -
3. present value
4. future value

 

2. Which of the following is true about an income statement?

1. The income statement accurately represents all cash inflows and outflows for a given period of time.
2. The income statement is a snapshot of a company's financial position.
3. The income statement is reported on an accrual basis. -
4. The income statement shows how a company's retained earnings changed over a given period of time.

 

 

3. What liabilities are subtracted from current assets to find net operating working capital?

1. accounts payable

 

2. accruals (accrued taxes and wages)

 

3. notes payable

 

4. Both A and B

 

5. All of the above

 

4. Which of the following defines net cash flow?

1. net income

 

2. net income minus dividends

 

3. net income plus net working capital

 

4. net income plus depreciation

 

 

 

 

 

 

5. Which of the following makes up the change in cash on the balance sheet over a period of time?

 

1. cash flow from operations + investing cash flow + financing cash flow
2. net income plus depreciation
3. net income minus dividends
4. cash flow from operations

6. Which of the following illustrates an outflow of cash?

1. a decrease in inventory
2. an increase in long-term debt
3. an increase in common stock
4. an increase in accounts receivable

 

7. What does net operating profit after taxes plus depreciation measure?

1. net cash flow
2. operating cash flow
3. free cash flow
4. investing cash flow

 

8. Which of the following sources of investment income has the highest marginal tax rate for an individual?

1. Dividends
2. Interest from a savings account
3. Long-term capital gains
4. Interest from a municipal bond

 

9. Which of the following measures the cash available to the company's investors?

1. net cash flow
2. operating cash flow
3. free cash flow -
4. investing cash flow

 

 

10 Which of the following is NOT tax deductible for a corporation?

1. dividends paid
2. interest paid
3. depreciation
4. all of the above are tax deductible

 

 

11. For which of the following sources of income does a corporation receive a tax break?

 

1. Interest Income from a non-municipal bond
2. Long-term capital gains
3. Short-term capital gains
4. Dividend income

 

 

12. Which of the following is NOT tax deductible for a corporation?

 

1. dividends paid
2. interest paid
3. depreciation
4. all of the above are tax deductible

 

13. What does the statement of cash flows measure?

1. How the company's assets are financed.
2. How the company's cash account changed over a period of time.
3. How the company's retained earnings changed over a period of time.
4. The market value of the company's assets and equity.

 

14. Which of the following sources of investment income has the highest marginal tax rate for an individual?

 

1. Dividends
2. Interest from a savings account
3. Long-term capital gains
4. Interest from a municipal bond

 

 

 

15. Which of the following is NOT tax deductible for a corporation?

 

1. dividends paid
2. interest paid
3. depreciation
4. all of the above are tax deductible

 

 

 

 

 

 

 

16. What does the statement of cash flows measure?

 

1. How the company's assets are financed.
2. How the company's cash account changed over a period of time.
3. How the company's retained earnings changed over a period of time.
4. The market value of the company's assets and equity.

 

 

 

17. Assets and equity on a non-financial company's balance sheet are reported at
    1. 1. market value

b. book value

c. present value

d. future value

 

18. Which of the following defines net cash flow?
    1. 1. net income
       2. net income minus dividends
       3. net income plus net working capital

d. net income plus depreciation

 

19. Which of the following makes up the change in cash on the balance sheet over a period of time?