Question 1

The managers of a firm wish to expand the firm's operations and are trying to determine the amount of debt financing the firm should obtain versus the amount of equity financing that should be raised.The managers have asked you to explain the effects that both of these forms of financing would have on the cash flows of the firm.Write a short response to this request.

Accepted Answer

Debt financing will require cash outflow...

Question 2

The 2010 balance sheet of The Beach Shoppe showed long-term debt of $2.1 million, and the 2011 balance sheet showed long-term debt of $2.3 million.The 2011 income statement showed an interest expense of $250,000.What was the cash flow to creditors for 2011?

Accepted Answer

A)  -$200,000
B)  -$150,000
C)  $50,000
D)  $200,000
E)  $450,000F) C) and D)
G) B) and D) C

Question 3

Which one of the following represents the most liquid asset?

Accepted Answer

A)  $100 account receivable that is discounted and collected for $96 today
B)  $100 of inventory which is sold today on credit for $103
C)  $100 of inventory which is discounted and sold for $97 cash today
D)  $100 of inventory that is sold today for $100 cash
E)  $100 accounts receivable that will be collected in full next weekF) C) and D)
G) B) and E)

Question 4

Cash flow from assets is also known as the firm's:

Accepted Answer

A)  capital structure.
B)  equity structure.
C)  hidden cash flow.
D)  free cash flow.
E)  historical cash flow.F) B) and E)
G) C) and D)

Question 5

What is the change in the net working capital from 2010 to 2011?

Accepted Answer

A)  -$1,194
B)  $1,306
C)  $1,887
D)  $4,780
E)  $5,172F) C) and D)
G) A) and B)

Question 6

You recently purchased a grocery store.At the time of the purchase, the store's market value equaled its book value.The purchase included the building, the fixtures, and the inventory.Which one of the following is most apt to cause the market value of this store to be lower than the book value?

Accepted Answer

A)  a sudden and unexpected increase in inflation
B)  the replacement of old inventory items with more desirable products
C)  improvements to the surrounding area by other store owners
D)  construction of a new restricted access highway located between the store and the surrounding residential areas
E)  addition of a stop light at the main entrance to the store's parking lotF) D) and E)
G) B) and E)

Question 7

Boyer Enterprises had $200,000 in 2011 taxable income.What is the firm's average tax rate based on the rates shown in the following table?

Accepted Answer

A)  28.25 percent
B)  30.63 percent
C)  32.48 percent
D)  36.50 percent
E)  39.00 percentF) None of the above
G) B) and D)

Question 8

As of 2012, which one of the following statements concerning corporate income taxes is correct?

Accepted Answer

A)  The largest corporations have an average tax rate of 39 percent.
B)  The lowest marginal rate is 25 percent.
C)  A firm's tax is computed on an incremental basis.
D)  A firm's marginal tax rate will generally be lower than its average tax rate once the firm's income exceeds $50,000.
E)  When analyzing a new project, the average tax rate should be used.F) A) and B)
G) B) and D)

Question 9

What is the operating cash flow for 2011?

Accepted Answer

A)  $2,114
B)  $2,900
C)  $2,985
D)  $3,536
E)  $4,267F) C) and D)
G) A) and C)

Question 10

The cash flow related to interest payments less any net new borrowing is called the:

Accepted Answer

A)  operating cash flow.
B)  capital spending cash flow.
C)  net working capital.
D)  cash flow from assets.
E)  cash flow to creditors.F) A) and E)
G) A) and D)

Question 11

Discuss the difference between book values and market values and explain which one is more important to the financial manager and why.

Accepted Answer

The accounts on the balance sheet are generally carried at historical cost, not market valuesAlthough the book value of the current assets and the liabilities may closely approximate market values, the same cannot be said for the rest of the balance sheet accountsMarket values are more relevant as they reflect today's values whereas the balance sheet reflects historical costs as adjusted by various accounting methodsTo determine the current value of a firm, and its worth to the shareholders, financial managers must monitor market values

Question 12

Which one of the following statements related to an income statement is correct? Assume accrual accounting is used.

Accepted Answer

A)  The addition to retained earnings is equal to net income plus dividends paid.
B)  Credit sales are recorded on the income statement when the cash from the sale is collected.
C)  The labor costs for producing a product are expensed when the product is sold.
D)  Interest is a non-cash expense.
E)  Depreciation increases the marginal tax rate.F) A) and E)
G) B) and E)

Question 13

Which of the following is (are)  included in the market value of a firm but are excluded from the firm's book value?
I.value of management skills
II.value of a copyright
III.value of the firm's reputation
IV.value of employee's experience

Accepted Answer

A)  I only
B)  II only
C)  III and IV only
D)  I, II, and III only
E)  I, III, and IV onlyF) A) and C)
G) C) and D)

Question 14

During 2011, RIT Corp.had sales of $565,600.Costs of goods sold, administrative and selling expenses, and depreciation expenses were $476,000, $58,800, and $58,800, respectively.In addition, the company had an interest expense of $112,000 and a tax rate of 32 percent.What is the operating cash flow for 2009? Ignore any tax loss carry-back or carry-forward provisions.

Accepted Answer

A)  $17,920
B)  $21,840
C)  $30,800
D)  $52,600
E)  $77,840F) B) and E)
G) None of the above

Question 15

Which one of the following is classified as an intangible fixed asset?

Accepted Answer

A)  accounts receivable
B)  production equipment
C)  building
D)  trademark
E)  inventoryF) A) and E)
G) A) and B)

Question 16

Which one of these is most apt to be a fixed cost?

Accepted Answer

A)  raw materials
B)  manufacturing wages
C)  management bonuses
D)  office salaries
E)  shipping and freightF) None of the above
G) A) and E)

Question 17

What is the cash flow to stockholders for 2011?

Accepted Answer

A)  $0
B)  $133
C)  $268
D)  $1,709
E)  $1,515F) C) and E)
G) A) and B) A

Question 18

Depreciation:

Accepted Answer

A)  reduces both taxes and net income.
B)  increases the net fixed assets as shown on the balance sheet.
C)  reduces both the net fixed assets and the costs of a firm.
D)  is a noncash expense which increases the net income.
E)  decreases net fixed assets, net income, and operating cash flows.F) A) and E)
G) C) and D)

Question 19

Jensen Enterprises paid $1,300 in dividends and $920 in interest this past year.Common stock increased by $1,200 and retained earnings decreased by $310.What is the net income for the year?

Accepted Answer

A)  -$210
B)  $990
C)  $1,610
D)  $1,910
E)  $2,190F) B) and E)
G) None of the above

Question 20

Suppose you are given the following information for Bayside Bakery: sales = $30,000; costs = $15,000; addition to retained earnings = $4,221; dividends paid = $469; interest expense = $1,300; tax rate = 30 percent.What is the amount of the depreciation expense?

Accepted Answer

A)  $4,820
B)  $5,500
C)  $7,000
D)  $8,180
E)  $9,500F) A) and C)
G) B) and D)

Exam 2: Corporate Governance

Correct Answer
verified
Debt financing will require cash outflow...
View Answer

The 2010 balance sheet of The Beach Shoppe showed long-term debt of $2.1 million, and the 2011 balance sheet showed long-term debt of $2.3 million.The 2011 income statement showed an interest expense of $250,000.What was the cash flow to creditors for 2011?

Correct Answer
verified
C

Which one of the following represents the most liquid asset?

Correct Answer
verified

Cash flow from assets is also known as the firm's:

Correct Answer
verified

What is the change in the net working capital from 2010 to 2011?

Correct Answer
verified

You recently purchased a grocery store.At the time of the purchase, the store's market value equaled its book value.The purchase included the building, the fixtures, and the inventory.Which one of the following is most apt to cause the market value of this store to be lower than the book value?

Correct Answer
verified

Boyer Enterprises had $200,000 in 2011 taxable income.What is the firm's average tax rate based on the rates shown in the following table?

Correct Answer
verified

As of 2012, which one of the following statements concerning corporate income taxes is correct?

Correct Answer
verified

What is the operating cash flow for 2011?

Correct Answer
verified

The cash flow related to interest payments less any net new borrowing is called the:

Correct Answer
verified

Discuss the difference between book values and market values and explain which one is more important to the financial manager and why.

Which one of the following statements related to an income statement is correct? Assume accrual accounting is used.

Correct Answer
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Which of the following is (are) included in the market value of a firm but are excluded from the firm's book value? I.value of management skills II.value of a copyright III.value of the firm's reputation IV.value of employee's experience

Correct Answer
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Correct Answer
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Which one of the following is classified as an intangible fixed asset?

Correct Answer
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Which one of these is most apt to be a fixed cost?

Correct Answer
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What is the cash flow to stockholders for 2011?

Correct Answer
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A

Depreciation:

Correct Answer
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Jensen Enterprises paid $1,300 in dividends and $920 in interest this past year.Common stock increased by $1,200 and retained earnings decreased by $310.What is the net income for the year?

Correct Answer
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Suppose you are given the following information for Bayside Bakery: sales = $30,000; costs = $15,000; addition to retained earnings = $4,221; dividends paid = $469; interest expense = $1,300; tax rate = 30 percent.What is the amount of the depreciation expense?

Correct Answer
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Exam 2: Corporate Governance

Correct AnswerverifiedDebt financing will require cash outflow...View AnswerShow Answer

The 2010 balance sheet of The Beach Shoppe showed long-term debt of $2.1 million, and the 2011 balance sheet showed long-term debt of $2.3 million.The 2011 income statement showed an interest expense of $250,000.What was the cash flow to creditors for 2011?

Correct AnswerverifiedC

Which one of the following represents the most liquid asset?

Correct AnswerverifiedShow Answer

Cash flow from assets is also known as the firm's:

Correct AnswerverifiedShow Answer

What is the change in the net working capital from 2010 to 2011?

Correct AnswerverifiedShow Answer

You recently purchased a grocery store.At the time of the purchase, the store's market value equaled its book value.The purchase included the building, the fixtures, and the inventory.Which one of the following is most apt to cause the market value of this store to be lower than the book value?

Correct AnswerverifiedShow Answer

Boyer Enterprises had $200,000 in 2011 taxable income.What is the firm's average tax rate based on the rates shown in the following table?

Correct AnswerverifiedShow Answer

As of 2012, which one of the following statements concerning corporate income taxes is correct?

Correct AnswerverifiedShow Answer

What is the operating cash flow for 2011?

Correct AnswerverifiedShow Answer

The cash flow related to interest payments less any net new borrowing is called the:

Correct AnswerverifiedShow Answer

Discuss the difference between book values and market values and explain which one is more important to the financial manager and why.

Which one of the following statements related to an income statement is correct? Assume accrual accounting is used.

Correct AnswerverifiedShow Answer

Which of the following is (are) included in the market value of a firm but are excluded from the firm's book value? I.value of management skills II.value of a copyright III.value of the firm's reputation IV.value of employee's experience

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following is classified as an intangible fixed asset?

Correct AnswerverifiedShow Answer

Which one of these is most apt to be a fixed cost?

Correct AnswerverifiedShow Answer

What is the cash flow to stockholders for 2011?

Correct AnswerverifiedA

Depreciation:

Correct AnswerverifiedShow Answer

Jensen Enterprises paid $1,300 in dividends and $920 in interest this past year.Common stock increased by $1,200 and retained earnings decreased by $310.What is the net income for the year?

Correct AnswerverifiedShow Answer

Suppose you are given the following information for Bayside Bakery: sales = $30,000; costs = $15,000; addition to retained earnings = $4,221; dividends paid = $469; interest expense = $1,300; tax rate = 30 percent.What is the amount of the depreciation expense?

Correct AnswerverifiedShow Answer

Correct Answer
verified
Debt financing will require cash outflow...
View Answer

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C

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A

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