Missouri Southern State University ECON 350 Financial Management Chapter 4 Quiz 1)The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method used for             purposes

Missouri Southern State University

ECON 350

Financial Management

Chapter 4 Quiz

1)The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method used for            

purposes.

1. 1. financial reporting

B) tax

3. managerial
4. cost accounting

2. A corporation

A) may use different depreciation methods for tax and financial reporting purposes.

2. must use different depreciation methods for tax and financial reporting purposes.
3. must use the same depreciation method for tax and financial reporting purposes.
4. must use different (than for tax purposes), but strictly mandated, depreciation methods for financial reporting purposes.

3. Under MACRS, an asset which originally cost $10,000 is being depreciated using a 5-year normal recovery period. What is the depreciation expense in year 3?

A) $1,500

B) $1,200

C) $1,900 D) $2,100

4. The cash flows from operating activities of the firm include
   1. dividends paid.
   2. interest expense.

C) cost of raw materials.

D) stock repurchases.

5. All of the following are uses of cash EXCEPT
   1. dividends.
   2. a decrease in notes payable.

1. 3. an increase in inventory.

D) a decrease in accounts receivable.

6. Cash flows associated with purchase and sale of both fixed assets and business interests are called

A) investment flows.

2. financing flows.
3. operating flows.
4. none of the above.

7. A corporation raises $500,000 in long-term debt to acquire additional plant capacity. This is considered

A) a financing cash flow and investment cash flow, respectively.

2. an investment cash flow.
3. a financing cash flow and operating cash flow, respectively.
4. a financing cash flow.

8. A firm has just ended the calendar year making a sale in the amount of $150,000 of merchandise purchased during the year at a total cost of $112,500. Although the firm paid in full for the merchandise during the year, it has yet to collect at year end from the customer. The net profit and cash flow for the year are
   1. $37,500 and -$150,000 respectively.

B) $37,500 and -$112,500 respectively.

3. $0 and $150,000 respectively.
4. $150,000 and $112,500 respectively.

9. The financial planning process begins with                       plans.
   1. operating financial
   2. production
   3. sales

D) strategic financial

10. Inputs to short-term financial plans include all of the following EXCEPT
    1. sales forecasts.
    2. production plans.
    3. fixed asset outlays.

D) all of the above.

11. Cash receipts in the cash budget include
    1. cash sales.
    2. collections of accounts receivable.
    3. interest received.

D) all of the above.

12. Net cash flow equals

A) cash receipts minus cash disbursements.

2. ending cash balance minus the desired minimum cash balance.
3. operating cash flow minus net fixed asset investment.
4. cash flow from financing activities plus cash flow from financing activities.

13. The percent-of-sales method for developing a pro forma income statement expresses the various income statement items as
    1. percentages of historical sales.
    2. net of sales.

1. 3. percentages of assets.

D) percentages of projected sales.

14. A positive value for “external financing required” on the pro forma balance sheet means
    1. the firm’s forecast financing is in excess of its needs.

B) the firm must raise funds externally to support the forecast level of operation.

3. the firm is about to enter bankruptcy.
4. the total assets do not equal the total liabilities and stockholders’ equity.

15. Free cash flow represents the amount of cash flow available to
    1. management.
    2. employees.

C) investors.

D) potential stockholders.