BUSI 320 Read & Interact Block, Hirt, & Danielsen Chapter 2 solutions complete answers

BUSI 320 Read & Interact Block, Hirt, & Danielsen Chapter 2 solutions complete answers

 

The potential impact of federal income taxes should not be an issue considered in financial decisions due to their volatile nature.

 

True or false: Free cash flow is the balance available for special financing activities.

 

Which method(s) translates income from operations from an accrual to cash basis?

 

The firm has total assets of $2,500,000, total liabilities of $1,500,000, preferred stock obligation of $75,000, and 100,000 shares of common stock outstanding. What is the firm's book value (or net worth) per share? (Enter the dollar sign and commas, as appropriate)

 

__________ is defined by economists as the change in real worth that occurs between the beginning and the end of a specified period of time.

 

True or false: The U.S. accounting community is moving away from International Financial Reporting Standards (IFRS).

 

Items that can be converted to cash within one year or within the normal operating cycle of the firm are called

 

Beginning in 2018, one of the major changes is the reduction of the corporation tax rate from as high as 35 percent to a flat rate of        percent.

 

Using the following information, determine the cash flow from operating activities. Net income is $75,000 and depreciation expense for the year is $50,000.

 

The cash flow from operating activities is    .

 

A company sells 500 shirts at a price of $15 each with a cost of goods sold of $2 per shirt. The company has selling and administrative expenses of $2,500, depreciation expenses of $500, interest expenses of $1,000, and a tax rate of 35%. Calculate the operating profit (EBIT)? 

 

The P/E ratio can be used by the investor to

 

Which of the following represents an attempt to allocate the initial cost of an asset over its useful life?

 

What impact would a net loss have on a firm’s retained earnings?

 

Earnings before taxes (EBT) is equal to

 

Which of the following is determined by subtracting selling and administrative expense and depreciation expense from the gross profit in the income statement of a company?

 

The statement of cash flows provides a detail of the firm's _____ over a period of time.

 

Which of the following definitions best describes progressive tax rates?

 

The repurchase or retirement of the firm’s securities are     activities that affect the cash flow of a corporation.

 

Given the following information, the firm's cash flow from financing activities is _____?

Equipment with a book value of $75,000 was sold for $50,000; investments in ABC Corporation's stocks, purchased for $125,000 one year ago, were sold for $150,000; cash dividends of $30,000 were paid; the firm sold $200,000 of its common stock.

 

Items that would fall in the investing activities section of the statement of cash flows include:

 

Which of the following entities would normally look at free cash flows to determine whether there are sufficient excess funds to pay back a loan associated with a leveraged buyout.

 

The sum of operating, investing, and financing activities represents the net increase or decrease in ___ ___ for the company.

 

Depreciation is considered to be a ____ deduction or expenditure.

 

The income statement provides a detail of the firm's ____ over a period of time.

 

Using the following information, determine the cash flow from operating activities for the year 2014. Net income is $75,000 and depreciation expense for the year is $50,000.

 

The cash flow from operating activities is    .

 

A company sells 500 shirts at a price of $15 each with a cost of goods sold of $2 per shirt. The company has selling and administrative expenses of $2,500, depreciation expenses of $500, interest expenses of $1,000, and a tax rate of 35%. Calculate the EAT?

 

Depreciation is a non-cash expense that is deducted from revenues to arrive at net income; therefore, it must be _____ net income to determine the actual amount of funds on hand.

 

Items that would fall in the financing activities section of the statement of cash flow include:

 

Given the following information, XYZ Corporation's cash flow from investing activities is equal to negative _____.

Equipment was sold for $50,000; investments in ABC Corporation's stocks, purchased for $125,000 one year ago, were sold for $150,000; land costing $500,000 was purchased for speculative purposes; bonds in XYZ Corporation were sold for $200,000.

 

The income statement and the balance sheet use the ___ method of accounting.

 

Property, plant and equipment includes

 

The balance sheet provides a detail of the firm's _____ as of one day in time.

 

Operating profit is equal to

 

In order to determine cash flows from operating activities, firms may use the _____ method in which net income represents the starting point and then adjustments are made to convert net income to cash flows from operations.

 

Match the account on the left with its definition on the right.

 

As of January 1, 2014, the company has $300,000 in retained earnings. During the year the company had earnings/net income of $150,000 and paid cash dividends of $50,000. What is the amount of retained earnings as of Dec. 31, 2014?

 

Depreciation is purely an accounting entry that does not directly involve the movement of funds. It is an attempt to match the annual expenses or plant and equipment ownership against the     being produced.

 

The P/E Ratio can be used by investors to 

 

Which of the following would be classified as an investment?

 

A company's earnings after taxes are $200,000 and the firm pays preferred stockholders $18,000 in dividends. The company has 91,000 shares of common stock outstanding. Earnings per share is equal to ___ dollars.

 

Identify the steps in the order necessary to compute net cash flow from operating activities using the indirect method.

 

Which of the following items are included in total stockholders' equity?

 

The current year’s depreciation expense charge is referred to as:

 

Gross Profit is equal to

 

A company has $80,000 in depreciation expense and a tax rate of 35%. The amount of the tax shield benefit is _____.

 

Which of the following are current liabilities?

 

What impact would an increase in net income have on a firm's retained earnings if the firm did not pay a cash dividend?

 

The firm has a tax rate of 40% and interest expense of $200,000. The after-tax cost of the interest is _____.

 

Company A has depreciation of $50,000 and earnings after taxes of $210,000. Company B has no depreciation and earnings after taxes of $240,000. Company A enjoys a higher level of cash flows form operation than company B by the amount of ______.

 

While the income statement purports to show the profitability of the firm, the balance sheet delineates the firm's

 

Short and long-term financial obligations of the firm are referred to as _____.

 

Match the accounts on the left with the placement number on the right with regard to the order in which the account would normally appear on the balance sheet.

 

Which of the following factors influence the price-earnings (P/E) ratio?

 

The company has a price-earnings ratio of 15 times and earnings per share were $3. What is the market value of each share of stock?

 

 

5.
 
 
A firm has earnings after taxes of $200,000, depreciation expense of $50,000, accounts receivable increased by $25,000, inventory increased by $10,000, accounts payable increased by $15,000, and accrued expenses decreased by $5,000. The firm's cash flow from operating activities is _____.
7.
 
 
If the firm has depreciation expense of $75,000 and a net loss of $50,000, what is the amount of cash flow for the period?
a. $25,000
b. $0
c. $100,000
d, $125,000
8.
 
 
As of January 1, 2014, the company has $500,000 in retained earnings. During the year the company had a net loss of $50,000 and paid cash dividends of $100,000. What is the amount of retained earnings as of December 31, 2014?
a. $350,000
b. $450,000
c. $200,000
d. $400,000
10.
 
 
The ability to match revenues and expenses in the period in which they occur in order to appropriately measure profit is a primary _____ of the accrual method of accounting.
a. advantage
b. disadvantage
11.
 
 
Plant an equipment includes: (select all that apply)
a. buildings
b. land
c. equipment
d. investments
12.
 
 
Includes an allowance for bad debts to determine their collection value
14.
 
 
A limitation of the income statement is the flexibility in the reporting of transactions. For example, a company can choose to value inventory using FIFO, LIFO, of the weighted average. Therefore, similar events may result in:
a. differing measurements of income
b. insider trading
c. differing turnover ratios
d. differing measurements of leverage
15.
 
 
Each of the following is tax deductible to a corporation, except:
a. dividends
b. salary expense
c. cost of goods sold
d. interest paid
16.
 
 
Firms expected to provide returns greater than those for the market, with equal or less risk, often have P/E ratios that are _____ the market P/E ratio,
a. higher than
b. equal to
c. lower than
17.
 
 
_____ is/are defined by economists as the change in real worth that occurs between the beginning and the end of a specified period of time.
a. income
b. depreciation
c. interest
d. dividends
18.
 
 
When a firm's earnings are dropping rapidly, its stock price, though declining too, may not match the magnitude of the falloff in earnings. This process can give the appearance of an _____ P/E ratio under adversity.
a. increasing
b. decreasing
20.
 
 
Investments represent a(n):
a. long-term commitment of funds
b. temporary expenditure
c. short-term commitment of funds
d. a fully depreciated asset
 
 
 
 
 
 
 

22.
 
 
Which of the following sections are included in the statement of cash flows: (select all that apply)
a. operating activities
b. financing activities
c. historical activities
d. investing activities
24.
 
 
The sale of investments represents a _____ of funds in determining cash flows from investing activities.
a. source
b. use
25.
 
 
Depreciation is considered to be a _____ of funds?
a. source
b. use
27.
 
 
The purchase of investments represents a _____ of funds in determining cash flows from investing activities.
a. use
b. source
28.
 
 
A company's profit can be: (select all that apply)
a. used to purchase an acquisition
b. retained for subsequent investments
c. used to pay governmental entities
d. used to pay dividends
29.
 
 
The beginning balance in a firm's cash account is $20,000 and the ending balance is $5,000. So, the net change in cash flows is:
a. +$15,000
b. ($15,000)
c. ($5,000)
d. +$5,000
32.
 
 
Classifying items on the balance sheet on a historical or original cost may be problematic because it may not reflect the _____ value of the item.
a. future
b. current
c. combined
d. prior
33.
 
 
Which of the following processes can give the appearance of an increasing P/E ratio of a firm under adversity?
a. earnings of a firm are falling at the same pace as the stock price
b. earnings of a firm are falling more rapidly as compared to the stock price
c. stock price of a firm is dropping more rapidly as compared to the earnings of the firm
 

34.
 
 
_____ is calculated by subtracting capital expenditures necessary to maintain normal activities, as well as, dividend payments necessary to keep shareholders satisfied, from cash flows from operating activities. 
a. investing cash flow
b. free cash flow
c. financing cash flow
d. special cash flow
35.
 
 
The difference between the cost of purchased or manufactured goods and the revenue generated by such costs is called:
a. earnings before taxes
b. gross profit
c. earnings before interest and taxes
d. operating profit
36.
 
 
Depreciation is a non-cash expense that shields some of a firm's _____ from taxes.
a. expenses
b. income
c. liabilities
d. dividends
37.
 
 
Which of the following are examples of primary financial decisions that would be likely to be influenced by income tax considerations? (select all that apply)
a. temporary labor versus full-time employees
b. lease versus purchase decisions
c. issuance of common stock verses debt decisions
d. decisions on whether to replace assets
e. decisions on which suppliers to use
38.
 
 
The debt-equity structure of the firm, the dividend payment policy, the quality of management, and the earnings and sales growth of the firm are a few of the factors that influence the:
a. depreciation expense
b. price-earnings ratio
c. cost of goods sold
d. liquidity ratio
39.
 
 
Corporate tax rates are _____, meaning lower levels of income are taxed at lower rate and higher levels of income are taxed at higher rates.
a. flat
b. progressive
c. regressive
d. average
42.
 
 
A device for measuring the changes in earnings retained in the business.
a. balance sheet
b. statement of retained earnings
c. statement of net income
d. statement of cash flows
43.
 
 
The total contribution and ownership interest of preferred and common stockholders is referred to as which of the following?
a. assets
b. stockholder's equity
c. liabilities
d. retained earnings
44.
 
 
Common stockholders are sensitive to the number of shares outstanding because the greater the shares outstanding:
a. the lower the dividends available to preferred stockholders.
b. the lower the earnings per share
c. the higher the earnings per share
d. the higher the dividends available to preferred stockholders
45.
 
 
The book value of an asset is measured by its original value minus:
a. book value
b. net present value
c. accumulated depreciation
d. depreciated expense
 

47.
 
 
Before issuing new shares of stock, the financial manager must ensure that the additional shares will generate sufficient earnings to avoid a reduction in which of the following:
a. dividends paid to preferred stockholders
b. depreciation
c. EPS
d. liquidity
48.
 
 
Which of the following values is of primary concern to stockholders, financial managers, and security analysts.
a. book value of the firm
b. cost of the firm
c. market value of the firm
d. net worth of the firm
50.
 
 
The multiplier applied to earnings per share to determine current value of the common stock:
a. liquidity ratio
b. earnings per share
c. price-earnings ratio
d. return on capital
51.
 
 
Total assets are financed through: (select all that apply)
a. accounts receivable
b. accumulated depreciation
c. stockholders' equity
d. liabilities
53.
 
 
Corporate federal tax rates have changed four times since 1980. According to the textbook, the current top rate is _____.
a. 25%
b. 30%
c. 40%
d. 35%
56.
 
 
A financial statement that measures a firm's worth as of one day in time.
a. income statement
b. statement of cash flows
c. statement of retained earnings
d. balance sheet
57.
 
 
The financial statement that emphasizes a firm's inflows and outflows of cash over a period of time is the _____.
a. balance sheet
b. statement of retained earnings
c. income statement
d. statement of cash flows
59.
 
 
Finished goods, goods in process, or raw materials
60.
 
 
Tax deductible expenses, such as interest, end up costing the business substantially (more or less) _____ than the amount expended on an after-tax basis.
62.
 
 
Asset accounts are listed on the balance sheet in order of _____.
63.
 
 
A temporary investment of excess cash
 

64.
 
 
Future expense items that are already paid for
65.
 
 
The sale of the firm's securities represents a (use or source) _____ of funds in determining cash flows from financing activities.
 

 

1.
Accounting income is a function of
 
 
2.
The accrual method of accounting records revenues and expenses when
 
 
5.
A building cost the firm $500,000, has a fair value of $800,000, and accumulated depreciation of $200,000. the book value of the building is
 
 
6.
classifying items on the balance sheet on a historical or original cost may be problematic b/c it may not reflect the _______ value of the firm
 
 
7.
common stockholders are sensitive to the number of shares outstanding b/c the greater the shares outstanding
 
 
10.
A company's profit can be
 
 
11.
Corporate tax rates are ____________, meaning lower levels of income are taxed at lower rates and higher levels of income are taxed at higher rates
 
 
14.
A disadvantage of the ________ method of accounting is that attention is not given to the actual cash flow position of the firm.
 
 
16.
The financial statement that emphasizes a firm's inflow and outflows of cash over a period of time is the
 
 
17.
A financial statement that measures a firm's profitability over a period of time
 
 
19.
Firms expected to provide returns greater than those for the market, with equal or less risk, often have P/E rations that are _____ the market P/E ratio
 
 
20.
Global companies can utilize the international financial markets in their search for
 
 
22.
If the firm has depreciation expense of $75000 and a net lost of $50000, what is the amount of cash flow for the period?
 
 
24.
In order to determine cash flows form operating activities, firms may use a ____ method in which every item on the income statement is adjusted from accrual accounting to cash accounting
 
 
26.
________ is/are defines by economists as the change in real worth that occurs between the beginning and the end of a specified period of time
 
 
27.
Issues of corporate governance are problems related to
 
 
28.
Items that fall in the investing activities section of the statement of cash flows include:
 
 
31.
A limitation of the income statement is the flexibility in the reporting of transactions. For example, a company can chose to value inventory using FIFO, LIFO, or the weighted average. Therefore, similar events result in
 
 
32.
Markets dealing with short-term securities are referred to as....
 
 
33.
A measure of how efficient management is in generating revenues and controlling expenses
 
 
34.
The multiplier applied to earnings per share to determine current valve of common stock
 
 
35.
Plant and equipment are carried in the accounting records at their original costminus
 
 
36.
profits reinvested into the firm theoretically belong to the stockholders, who hope is that they will provide future
 
 
37.
The sale of investments represent a _____ of funds in determining cash flows from investing activities.
 
 
 
 
 
 
 
 
 

38.
The sale of the firm's securities represents a (use or source) _____ of funds in determining cash flows from financing activites
 
 
39.
The statement of cash flows accounts for changes in the firm's
 
 
40.
stockholder's equity minus the preferred stock component represents the ____ of the firm
 
 
41.
Total assets are financed through
 
 
42.
Total stockholder's equity consists of which of the following categories?
 
 
43.
True/False: free cash flow is the balance available for special financing activities
 
 
44.
The two major categories of accrued expenses for most firms are:
 
 
46.
When a firm's earnings are dropping rapidly, its stock price, though declining too, may not match the magnitude of the falloff in earnings. This process can give the appearance of an _______ P/E ratio under adversity
 
 
47.
Which factors must the financial manager take into consideration when making decisions that will increase the firm's overall valuation?
 
 
49.
Which of the following are examples of primary financial decisions that would be likely to be influenced by income tax considerations?
 
 
52.
Which of the following sections are included in the statement of cash flows?
 
 
53.
While the income statement purports to show profitability of the firm, the balance sheet delineates the firms
 
 
 

 

1.
Accounts Receivable
 
 
2.
The accrual method of accounting records revenues and expenses
 
 
4.
Before issuing new shares of stock, the financial manager must ensure that the additional shares will generate sufficient earning to avoid a reduction in
 
 
5.
CF Operating Activities - $1,000
less: capital expenditures $600
less: dividends required $100
equals FCF (free cash flow)
 
 
6.
Classifying items on the balance sheet on a historical or original cost may be problematic because it may not reflect the ___________ value of the item
 
 
7.
Common stockholder's are sensitive to the number of shares outstanding because the greater the shares outstanding:
 
 
10.
A company sells 500 shirts at a price of $15 each with a cost of goods sold of $2 per shirt. The Company has selling and administrative expenses of $2,500, depreciation expenses of $500, interest expenses of $1,000, and a tax rate of 35%. Calculate the gross profit
 
 
11.
defined by economists as the change in real worth that occurs between the beginning and the end of a specified period of time.
 
 
12.
depreciation is non-cash that shields some of the firm's ________ from taxes
 
 
14.
Depreciation is __________ to net income (or loss) to determine cash flow
 
 
15.
disadvantage of accrual accounting
 
 
16.
earnings per share
 
 
18.
Examples of primary financial decisions that would be likely to be influenced by income tax considerations.
 
 
19.
Federal corporate tax rates have changed four times since 1980. The current top rate is _______
 
 
20.
a financial statement that measures a firm's worth as of one day at a time
 
 
22.
the firm's cumulative earnings since inception less dividends and any other adjustments is referred to as
 
 
24.
In order to determine cash flows from operating activities, firms may use __________ in which every item on the income statement is adjusted from accrual to cash accounting
 
 
26.
Inventory
 
 
27.
Investments represents
 
 
28.
items that fall in the Investing activities section of the statement of cash flows
 
 
29.
a limitation of the income statement is the flexibility in the reporting of transaction. For example, a company can choose to value inventory using FIFO, LIFO, or weighted average. Therefore, similar events may result in
 
 
30.
marketable securities
 
 
31.
Net Worth/Book Value
 
 
 
 
 
 
 
 
 

33.
Order necessary to compute net cash flow from operating activities using the indirect method
 
 
35.
Prepaid Expenses
 
 
36.
price-earnings ratio (P/E Ratio)
 
 
37.
Progressive tax rate
 
 
39.
The repurchase or retirement of the firm's securities represents a ________ of funds in determining cash flows from financing activities.
 
 
42.
The statement of cash flows shows the changes that took place in the firm's:
 
 
43.
total assets of $2,500,000; total liabilities of $1,500,000; preferred stock obligation $75,000; 100,000 shares of common stock outstanding. What's the firm's book value (net worth) per share?
 
 
44.
total contribution and ownership interest of preferred and common stockholders is referred to as
 
 
45.
the two major categories of accrued expenses for most firms are
 
 
46.
What can a company's profit be used for?
 
 
47.
What impact would the payment of a cash dividend have on a firm's retained earnings.
 
 
50.
which of the following processes can give the appearance of an increasing P/E ratio of a firm under adversity
 
 
 

51.
while the income statement purports to show the profitability of the firm, the balance sheet delineates the firm's
 
 
52.
Who normally looks at free cash flows to determine whether there are sufficient excess funds to pay back a loan associated with a leveraged buyout.
 
 
53.
The XYZ Corporation purchases plant and equipment of $200,000 and sold its investment in ABS Corporation's bonds for $100,000. What is the firm's cash flows from investing activities?
 
 
 

 

1.
Accounting income is a function of
 
 
2.
The accrual method of acct records revenues and expenses when
 
 
3.
Common stockholders are sensitive to the number of shares outstanding because the greater the shares outstanding
 
 
4.
Corporate federal tax rates have changed four times since 1980. The current top rate is ___
 
 
6.
Depreciation is an attempt to match the annual expenses of plant and equipment ownership against the ___ being produced.
 
 
10.
Earnings available to common stockholders =
 
 
12.
A financial statement that measures a firm's worth as of one day in time.
 
 
13.
The firm's cumulative earnings since inception less dividends and any other adjustments is referred to as
 
 
14.
Firms expected to provide returns than those for the market, with equal or less risk, often have P/E ratios that are __ than the market P/E ratio.
 
 
15.
Gross profit is equal to
 
 
17.
A limitation of the income statement is the flexibility in the reporting transactions (FIFO, LIFO..) Similar events may result in
 
 
19.
A measure of the earnings available to common stockholders per share of stock owned.
 
 
20.
The multiplier applied to earnings per share to determine current value of the common stock.
 
 
21.
Plant and equipment are carried in the acct records at their original cost minus
 
 
22.
Reinvested funds, also known as retained earnings, belong to ___
 
 
23.
The repurchase or retirement of the firm's securities represents a use of funds in determining cash flows from ___ activities.
 
 
24.
Short and long-term financial obligations of the firm are referred to as
 
 
25.
Steps in order to compute net cash flow from operating activities using the indirect method.
 
 
26.
T/F: Investments made for more than a year are current assets.
 
 
27.
The two major categories of accrued expenses for most firms are:
 
 
28.
What activities are included in the statement of cash flows?
 
 
29.
Which factors influence the price-earnings (P/E) ratio?
 
 
30.
Which of the following are examples of primary financial decisions that would be likely to be influenced by income tax considerations?
 
 
31.
Which of the following processes can give the appearance of an increasing P/E ratio of a firm under adversity?
 
 
32.
Which of the following values is of primary concern to stockholder, financial managers and security analysts?
 
 
33.
While the income statement purports to show the profitability of the firm, the balance sheet delineates the firm's
 
 
34.
Who would normally look at free cash flows to determine whether there are sufficient excess funds to pay back a loan associated with a leverage bailout?
 
 
 
 
 
 
 
 
 

 

1.
As of January 1, 2014 the company has $300,000 in retained earnings. During the year the company had earnings/net income of $150,000 and paid cash dividends of $50,000. What 9s the amount of retained earnings as of December 31, 2014?
 
 
2.
As of January 1, 2014 the company has 500,000 in retained earnings. During the year the company had a net loss of 50,000 and paid cash dividends of 100,000. What is the amount of retrained earnings as of December 31, 2014
 
 
3.
The book value of an assets is measured by its original value minus
 
 
4.
A building cost the firm $500,000 has a fair value of $800,000 and accumulated depreciation of $200,000. The book value of the building is?
 
 
5.
Common stockholders are sensitive to the number of shares outstanding because the greater the shares outstanding
 
 
6.
Company A has depreciation of $50,000 and earnings after taxes of 210,000. Company B has no depreciation and earnings after taxes of $240,000. Company A enjoys a higher level of cash flows from operations than company B by the amount of
 
 
7.
A company has $80,000 in depreciation expense and a tax rate of 35%. The amount of the tax shield benefits is
 
 
8.
Current assets include of the following except
 
 
10.
The debt-equity of the firm, the dividend payment policy, the quality of management and the earnings and sales growth of the firm are a few of the factors that influence the
 
 
12.
A device for measuring the changes in earnings retained in the business
 
 
13.
A disadvantage of the ___ method of accounting is that attention is not given to the actual cash flow position of the firm.
 
 
15.
Expectations of returns and P/E ratios change over time:
 
 
16.
A financial statement that measures a firm's profitability over a period of time
 
 
17.
Gross profit is equal to
 
 
18.
If the firm has depreciation expense of $75,000 and a net loss of $50,000, what is the amount of cash flow for the period?
 
 
21.
In the indirect method, depreciation is added back to net income in order to determine net cash flow from operating activities because depreciation is a ___ expense.
 
 
23.
A limitation of the income statement is the flexibility in the reporting of transactions. For example a company can choose to value inventory using fifo, lifo or the weighted average. Therefore, similar events may result in
 
 
24.
The majority of companies use ___ method(s) to determine cash flows from operations
 
 
26.
A measure of the earnings available to common stockholders per share of stock owned
 
 
27.
The multiplier applied to earnings per share to determine current value of the common stock
 
 
28.
Obligations due within one year are referred to as which of the following?
 
 
29.
Plant and equipment are carried in the accounting records as their original cost minus
 
 
31.
Reinvested funds, also known as retained earnings, belong to whom?
 
 
32.
The repurchase or retirement of the firm's securities represents a use of funds in determining cash flows from ___ activities.
 
 
33.
The sale of investments represents a ___ of funds in determining cash flows from investing activities.
 
 
34.
Short and long-term financial obligations of the firm are referred to as liabilities
 
 
35.
Stockholder's equity minus the preferred stock component represents the ____ of the firm
 
 
37.
The total contribution and ownership interest of preferred and common stockholders in referred to as which of the following?
 
 
38.
True or false: the income statement covers a defined period of time, whether it is one month, three months, or a year
 
 
 
 
 
 
 
 
 

39.
What are the steps in the order necessary to compute net cash flow from operating activities using the indirect method.
 
 
40.
Which of the following are current liabilities?
 
 
41.
Which of the following processes can give the appearance of an increasing P.E ratio of a firm under adversity?
 
 
42.
Which of the following processes can give the appearance of an increasing P/E ratio of a firm under adversity?
 
 
43.
Which of the following questions can be answered by examining a firms balance sheet
 
 
45.
While the income statement purports to show the profitability of the firm, the balance sheet delineates the firms
 
 
 

 

1.
the accrual method of accounting records revenues and expenses when
 
 
2.
as of january 1, 2014, the company has $500k in retained earnings. during the year the company had a net loss of $50k and paid cash dividends of $100k. what is the amount of retained earnings as of december 31, 2014?
 
 
4.
Book value of corporation can be calculated by taking the sum of:
 
 
5.
a building cost the firm $500k, has a fair value of $800k, and accumulated depreciation of $200k. What is the book value (BV) of the building?
 
 
6.
classified as an investment
 
 
7.
a company has $80k in depreciation expense and a tax rate of 35%. the amount of the tax shield benefit is _____
 
 
8.
a company's earnings after taxes are $200,000 and the firm pays preferred stockholders $18,000 in dividends. the company has 91,000 shares of common stock outstanding. Earnings per share is equal to _____ dollars
 
 
9.
a company sells 500 shirts at a price of $15 each with a cost of goods sold of $2 per shirt. the company has selling and administrative expenses of $2,500, depreciation expenses of $500, interest expenses of $1,000, and a tax rate of 35%. calculate the EBT?
 
 
10.
current liabilites
 
 
11.
the debt-equity structure of the firm, the dividend payment policy, the quality of management, and the earnings and sales growth of the firm are a few of the factors that influence the
 
 
12.
depreciation is a non-cash expense that shields some of a firm's _____ from taxes
 
 
14.
depreciation is purely an accounting entry that does not directly involve the movement of funds, it is an attempt to match the annual expenses of plant and equipment ownership against the _____ being produced
 
 
15.
the firm has a tax rate of 40% and interest expense of $200k. the after-tax cost of the interest is _____
 
 
16.
a firm has earnings after taxes of $200k, depreciation expense of $50k, AR increased by $25k, inventory increased by $10k, AP increased by $15k, and accrued expenses decreased by $5k the firms cash from from operating activities is _____
 
 
17.
firms expected to provide returns greater than those for the market, with equal or less risk, often have P/E ratios that are _____ the market P/E ratio
 
 
18.
the following sections are included on the statement of cash flows
 
 
19.
given the following information, xyz corporation's cash flow from investing activities is equal to negative $_____ equipment was sold for $50k; investments in ABC corporation stocks purchased for $125k one year ago, were sold for $150k, land costing $500k was purchased or speculative purposes; bonds in XyZ corporation were sold for $200k
 
 
20.
gross profit is equal to
 
 
22.
_____ influence the price-earnings (P/E) ratio
 
 
23.
in order to determine cash flows from operating activities, firms may use a _____ method in which every item on the income statement is adjusted from accrual accounting to cash accounting
 
 
24.
marketable security
accounts receivable
inventory 
prepaid expenses
 
 
25.
a measure of how efficient management is in generating revenues and controlling expenses
 
 
26.
the multiplier applied to earnings per share to determine current value of the common stock
 
 
27.
plant and equipment are carried in the accounting records at their original cost minus
 
 
28.
plant and equipments includes
 
 
29.
the repurchase or retirement of the firm's securities represents a _____ of funds in determining cash flows from financing activities
 
 
30.
short and long-term financial obligations of the firm are referred to as
 
 
 
 
 
 
 
 
 

33.
tax deductible expenses, such as interest, end up costing the business substantially _____ than the amount expended on an after-tax basis
 
 
34.
total SHE consists of
 
 
35.
two major categories of accrued expenses for most firms are:
 
 
36.
what impact would an increase in net income have on a firm's retained earnings if the firm did not pay cash dividend
 
 
38.
while the income statement purports to show the profitability of the firm, the balance sheet delineated the firm's