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1、 CHAPTER 2 Financial Statements&Cash Flow Multiple Choice Questions:I.DEFINITIONS BALANCE SHEET b 1.The financial statement showing a firms accounting value on a particular date is the:a.income statement.b.balance sheet.c.statement of cash flows.d.tax reconciliation statement.e.shareholders equity s
2、heet.Difficulty level:Easy CURRENT ASSETS c 2.A current asset is:a.an item currently owned by the firm.b.an item that the firm expects to own within the next year.c.an item currently owned by the firm that will convert to cash within the next 12 months.d.the amount of cash on hand the firm currently
3、 shows on its balance sheet.e.the market value of all items currently owned by the firm.Difficulty level:Easy LONG-TERM DEBT b 3.The long-term debts of a firm are liabilities:a.that come due within the next 12 months.b.that do not come due for at least 12 months.c.owed to the firms suppliers.d.owed
4、to the firms shareholders.e.the firm expects to incur within the next 12 months.Difficulty level:Easy NET WORKING CAPITAL e 4.Net working capital is defined as:a.total liabilities minus shareholders equity.b.current liabilities minus shareholders equity.c.fixed assets minus long-term liabilities.d.t
5、otal assets minus total liabilities.e.current assets minus current liabilities.Difficulty level:Easy LIQUID ASSETS d 5.A(n)_ asset is one which can be quickly converted into cash without significant loss in value.word文档 可自由复制编辑 a.current b.fixed c.intangible d.liquid e.long-term Difficulty level:Eas
6、y INCOME STATEMENT a 6.The financial statement summarizing a firms performance over a period of time is the:a.income statement.b.balance sheet.c.statement of cash flows.d.tax reconciliation statement.e.shareholders equity sheet.Difficulty level:Easy NONCASH ITEMS d 7.Noncash items refer to:a.the cre
7、dit sales of a firm.b.the accounts payable of a firm.c.the costs incurred for the purchase of intangible fixed assets.d.expenses charged against revenues that do not directly affect cash flow.e.all accounts on the balance sheet other than cash on hand.Difficulty level:Easy MARGINAL TAX RATES e 8.You
8、r _ tax rate is the amount of tax payable on the next taxable dollar you earn.a.deductible b.residual c.total d.average e.marginal Difficulty level:Easy AVERAGE TAX RATES d 9.Your _ tax rate measures the total taxes you pay divided by your taxable income.a.deductible b.residual c.total d.average e.m
9、arginal Difficulty level:Easy CASH FLOW FROM OPERATING ACTIVITIES a 10._ refers to the cash flow that results from the firms ongoing,normal business activities.word文档 可自由复制编辑 a.Cash flow from operating activities b.Capital spending c.Net working capital d.Cash flow from assets e.Cash flow to credito
10、rs Difficulty level:Medium CASH FLOW FROM INVESTING b 11._ refers to the changes in net capital assets.a.Operating cash flow b.Cash flow from investing c.Net working capital d.Cash flow from assets e.Cash flow to creditors Difficulty level:Medium NET WORKING CAPITAL c 12._ refers to the difference b
11、etween a firms current assets and its current liabilities.a.Operating cash flow b.Capital spending c.Net working capital d.Cash flow from assets e.Cash flow to creditors Difficulty level:Easy CASH FLOW OF OPERATIONS d 13._ refers to the net total cash flow of the firm available for distribution to i
12、ts creditors and stockholders.a.Operating cash flow b.Capital spending c.Net working capital d.Cash flow from operations e.Cash flow to creditors CASH FLOW TO CREDITORS e 14._ refers to the firms interest payments less any net new borrowing.a.Operating cash flow b.Capital spending c.Net working capi
13、tal d.Cash flow from shareholders e.Cash flow to creditors CASH FLOW TO STOCKHOLDERS e 15._ refers to the firms dividend payments less any net new equity raised.a.Operating cash flow b.Capital spending c.Net working capital d.Cash flow from creditors word文档 可自由复制编辑 e.Cash flow to stockholders EARNIN
14、GS PER SHARE a 16.Earnings per share is equal to: income divided by the total number of shares income divided by the par value of the common stock.c.gross income multiplied by the par value of the common stock.d.operating income divided by the par value of the common income divided by total sharehol
15、ders equity.DIVIDENDS PER SHARE b 17.Dividends per share is equal to dividends paid:a.divided by the par value of common stock.b.divided by the total number of shares outstanding.c.divided by total shareholders equity.d.multiplied by the par value of the common stock.e.multiplied by the total number
16、 of shares outstanding.II.CONCEPTS CURRENT ASSETS a 18.Which of the following are included in current assets?I.equipment II.inventory III.accounts payable IV.cash a.II and IV only b.I and III only c.I,II,and IV only d.III and IV only e.II,III,and IV only CURRENT LIABILITIES b 19.Which of the followi
17、ng are included in current liabilities?I.note payable to a supplier in eighteen months II.debt payable to a mortgage company in nine months III.accounts payable to suppliers IV.loan payable to the bank in fourteen months a.I and III only b.II and III only c.III and IV only d.II,III,and IV only e.I,I
18、I,and III only BALANCE SHEET d 20.An increase in total assets:a.means that net working capital is also increasing.b.requires an investment in fixed assets.c.means that shareholders equity must also increase.d.must be offset by an equal increase in liabilities and shareholders equity.e.can only occur
19、 when a firm has positive net income.word文档 可自由复制编辑 LIQUIDITY c 21.Which one of the following accounts is generally the most liquid?a.inventory b.building c.accounts receivable d.equipment e.patent LIQUIDITY e 22.Which one of the following statements concerning liquidity is correct?a.If you sold an
20、asset today,it is a liquid asset.b.If you can sell an asset next year at a price equal to its actual value,the asset is highly liquid.c.Trademarks and patents are highly liquid.d.The less liquidity a firm has,the lower the probability the firm will encounter financial difficulties.e.Balance sheet ac
21、counts are listed in order of decreasing liquidity.LIQUIDITY d 23.Liquidity is:a.a measure of the use of debt in a firms capital structure.b.equal to current assets minus current liabilities.c.equal to the market value of a firms total assets minus its current liabilities.d.valuable to a firm even t
22、hough liquid assets tend to be less profitable to own.e.generally associated with intangible assets.SHAREHOLDERS EQUITY d 24.Which of the following accounts are included in shareholders equity?I.interest paid II.retained earnings III.capital surplus IV.long-term debt a.I and II only b.II and IV only
23、 c.I and IV only d.II and III only e.I and III only BOOK VALUE b 25.Book value:a.is equivalent to market value for firms with fixed assets.b.is based on historical cost.c.generally tends to exceed market value when fixed assets are included.d.is more of a financial than an accounting valuation.e.is
24、adjusted to market value whenever the market value exceeds the stated book value.MARKET VALUE a 26.When making financial decisions related to assets,you should:a.always consider market values.b.place more emphasis on book values than on market values.word文档 可自由复制编辑 c.rely primarily on the value of a
25、ssets as shown on the balance sheet.d.place primary emphasis on historical costs.e.only consider market values if they are less than book values.INCOME STATEMENT d 27.As seen on an income statement:a.interest is deducted from income and increases the total taxes incurred.b.the tax rate is applied to
26、 the earnings before interest and taxes when the firm has both depreciation and interest expenses.c.depreciation is shown as an expense but does not affect the taxes payable.d.depreciation reduces both the pretax income and the net income.e.interest expense is added to earnings before interest and t
27、axes to get pretax income.EARNINGS PER SHARE a 28.The earnings per share will:a.increase as net income increases.b.increase as the number of shares outstanding increase.c.decrease as the total revenue of the firm increases.d.increase as the tax rate increases.e.decrease as the costs decrease.word文档
28、可自由复制编辑 DIVIDENDS PER SHARE e 29.Dividends per share:a.increase as the net income increases as long as the number of shares outstanding remains constant.b.decrease as the number of shares outstanding decrease,all else constant.c.are inversely related to the earnings per share.d.are based upon the di
29、vidend requirements established by Generally Accepted Accounting Procedures.e.are equal to the amount of net income distributed to shareholders divided by the number of shares outstanding.REALIZATION PRINCIPLE b 30.According to Generally Accepted Accounting Principles,a.income is recorded based on t
30、he matching principle.b.income is recorded based on the realization principle.c.costs are recorded based on the liquidity income is recorded based on the realization principle.e.depreciation is recorded as it affects the cash flows of a firm.MATCHING PRINCIPLE c 31.According to Generally Accepted Ac
31、counting Principles,costs are:a.recorded as incurred.b.recorded when paid.c.matched with revenues.d.matched with production levels.e.expensed as management desires.NONCASH ITEMS a 32.Depreciation:a.is a noncash expense that is recorded on the income statement.b.increases the net fixed assets as show
32、n on the balance sheet.c.reduces both the net fixed assets and the costs of a firm.d.is a non-cash expense which increases the net operating income.e.decreases net fixed assets,net income,and operating cash flows.MARGINAL TAX RATE c 33.When you are making a financial decision,the most relevant tax r
33、ate is the _ rate.a.average b.fixed c.marginal d.total e.variable OPERATING CASH FLOW a 34.An increase in which one of the following will cause the operating cash flow to increase?a.depreciation b.change in net working capital working capital d.taxes e.costs word文档 可自由复制编辑 CHANGE IN NET WORKING CAPI
34、TAL e 35.A firm starts its year with a positive net working capital.During the year,the firm acquires more short-term debt than it does short-term assets.This means that:a.the ending net working capital will be negative.b.both accounts receivable and inventory decreased during the year.c.the beginni
35、ng current assets were less than the beginning current liabilities.d.accounts payable increased and inventory decreased during the year.e.the ending net working capital can be positive,negative,or equal to zero.CASH FLOW TO CREDITORS c 36.The cash flow to creditors includes the cash:a.received by th
36、e firm when payments are paid to suppliers.b.outflow of the firm when new debt is acquired.c.outflow when interest is paid on outstanding debt.d.inflow when accounts payable decreases.e.received when long-term debt is paid off.CASH FLOW TO STOCKHOLDERS a 37.Cash flow to stockholders must be positive
37、 when:a.the dividends paid exceed the net new equity raised.b.the net sale of common stock exceeds the amount of dividends paid.c.no income is distributed but new shares of stock are sold.d.both the cash flow to assets and the cash flow to creditors are negative.e.both the cash flow to assets and th
38、e cash flow to creditors are positive.BALANCE SHEET b 38.Which equality is the basis for the balance sheet?a.Fixed Assets=Stockholders Equity+Current Assets b.Assets=Liabilities+Stockholders Equity c.Assets=Current Long-Term Debt+Retained Earnings d.Fixed Assets=Liabilities+Stockholders Equity e.Non
39、e of the above.BALANCE SHEET a 39.Assets are listed on the balance sheet in order of:a.decreasing liquidity.b.decreasing size.c.increasing size.d.relative life.e.None of the above.DEBT e 40.Debt is a contractual obligation that:a.requires the payout of residual flows to the holders of these instrume
40、nts.b.requires a repayment of a stated amount and interest over the period.c.allows the bondholders to sue the firm if it defaults.d.Both A and B.e.Both B and C.word文档 可自由复制编辑 CARRYING VALUE a 41.The carrying value or book value of assets:a.is determined under GAAP and is based on the cost of the as
41、set.b.represents the true market value according to GAAP.c.is always the best measure of the companys value to an investor.d.is always higher than the replacement cost of the assets.e.None of the above.GAAP d 42.Under GAAP,the value of all the firms assets are reported at:a.market value.b.liquidatio
42、n value.c.intrinsic value.d.cost.e.None of the above.INCOME STATEMENT e 43.Which of the following statements concerning the income statement is true?a.It measures performance over a specific period of time.b.It determines after-tax income of the firm.c.It includes deferred taxes.d.It treats interest
43、 as an expense.e.All of the above.GAAP INCOME RECOGNITION b 44.According generally accepted accounting principles(GAAP),revenue is recognized as income when:a.a contract is signed to perform a service or deliver a good.b.the transaction is complete and the goods or services are delivered.c.payment i
44、s requested.d.income taxes are paid.e.All of the above.OPERATING CASH FLOW b 45.Which of the following is not included in the computation of operating cash flow?a.Earnings before interest and taxes b.Interest paid c.Depreciation d.Current taxes e.All of the above are included.NET CAPITAL SPENDING b
45、46.Net capital spending is equal to: additions to net working capital.b.the net change in fixed income plus depreciation.d.total cash flow to stockholders less interest and dividends paid.e.the change in total assets.CASH FLOW TO STOCKHOLDERS word文档 可自由复制编辑 d 47.Cash flow to stockholders is defined
46、as:a.interest payments.b.repurchases of equity less cash dividends paid plus new equity sold.c.cash flow from financing less cash flow to creditors.d.cash dividends plus repurchases of equity minus new equity financing.e.None of the above.FREE CASH FLOW d 48.Free cash flow is:a.without cost to the i
47、ncome plus taxes.c.an increase in net working capital.d.cash flow in excess of that required to fund profitable capital projects.e.None of the above.CASH FLOW d 49.The cash flow of the firm must be equal to:a.cash flow to equity minus cash flow to debtholders.b.cash flow to debtholders minus cash fl
48、ow to equity.c.cash flow to governments plus cash flow to equity.d.cash flow to equity plus cash flow to debtholders.e.None of the above.STATEMENT OF CASH FLOWS a 50.Which of the following are all components of the statement of cash flows?a.Cash flow from operating activities,cash flow from investin
49、g activities,and cash flow from financing activities b.Cash flow from operating activities,cash flow from investing activities,and cashflow from divesting activities c.Cash flow from internal activities,cash flow from external activities,and cash flow from financing activities d.Cash flow from broke
50、ring activities,cash flow from profitable activities,and cash flow from non-profitable activities e.None of the above.III.PROBLEMS CURRENT ASSETS b 51.A firm has$300 in inventory,$600 in fixed assets,$200 in accounts receivables,$100 in accounts payable,and$50 in cash.What is the amount of the curre