On the Statement of Cash Flows, which of the following are considered operating activities?

On the Statement of Cash Flows, which of the following are considered operating activities?

I. costs of goods sold
II. decrease in accounts payable
III. interest paid
IV. dividends paid


a. I and III only

b. III and IV only

c. I, II, and III only

d. I, II, and III only

e. I, II, III, and IV


Answer: C

On the statement of Cash Flows, which of the following are considered financing activities?

On the statement of Cash Flows, which of the following are considered financing activities?

I. increase in long-term debt
II. decrease in accounts payable
III. interest paid
IV. dividends paid


a. I and IV only

b. III and IV only

c. II and III only

d. I, III, and IV only

e. I, II, III, and IV




Answer: E

Which one of the following is a use of cash?

Which one of the following is a use of cash?

a. increase in notes payable

b. decrease in inventory

c. increase in long-term debt

d. decrease in accounts receivables

e. decrease in common stock

Answer: E

Which one of the following is a source of cash?

Which one of the following is a source of cash?

a. increase in accounts receivable

b. decrease in notes payable

c. decrease in common stock

d. increase in accounts payable

e. increase in inventory

Answer: D

The sources and uses of cash over a stated period of time are reflected on the:

The sources and uses of cash over a stated period of time are reflected on the:

a. income statement

b. balance sheet

c. tax reconciliation statement

d. statement of cash flows

e. statement of operating position

Answer: D

A firm has a debt-equity ratio of 57 percent, a total asset turnover of 1.12, and a profit margin of 4.9 percent. The total equity is $511,640. What is the amount of the net income?

A firm has a debt-equity ratio of 57 percent, a total asset turnover of 1.12, and a profit margin of 4.9 percent. The total equity is $511,640. What is the amount of the net income?

a. $28,079

b. $35,143

c. $44,084

d. $47,601

e. $52,601

Answer: C

The Meat Market has $747,000 in sales. The profit margin is 4.1 percent and the firm has 7,500 shares of stock outstanding. The market price per share is $27. What is the price-earning ratio?

The Meat Market has $747,000 in sales. The profit margin is 4.1 percent and the firm has 7,500 shares of stock outstanding. The market price per share is $27. What is the price-earning ratio?

a. 6.61

b. 8.98

c. 11.42

d. 13.15

e. 14.27

Answer: A

The Purple Martin has annual sales of $687,400, total debt of $210,000, total equity of $365,000, and a profit margin of 5.20 percent. What is the return on assets?

The Purple Martin has annual sales of $687,400, total debt of $210,000, total equity of $365,000, and a profit margin of 5.20 percent. What is the return on assets?

a. 6.22 percent

b. 6.48 percent

c. 7.02 percent

d. 7.78 percent

e. 9.79 percent

Answer: A

A firm has total debt of $4,620 and a debt-equity ratio of 0.57. What is the value of the total assets?

A firm has total debt of $4,620 and a debt-equity ratio of 0.57. What is the value of the total assets?

a. $6,128.05

b. $7,253.40

c. $9,571.95

d. $11,034.00

e. $12,725.26

Answer: E

During the year, Kitchen Supply increased its accounts receivable by $130, decreased its inventory by $75, and decreased its accounts payable by $40. How did these three accounts affect the firm's cash flow for the year?

During the year, Kitchen Supply increased its accounts receivable by $130, decreased its inventory by $75, and decreased its accounts payable by $40. How did these three accounts affect the firm's cash flow for the year?

a. $245 use of cash

b. $165 use of cash

c. $95 use of cash

d. $95 source of cash

e. $165 source of cash

Answer: C

The cash flow of a firm which is available for distribution to the firm's creditors and stockholders is called the:

The cash flow of a firm which is available for distribution to the firm's creditors and stockholders is called the:

a. operating cash flow

b. net capital spending

c. net working capital

d. cash flow from assets

e. cash flow to stockholders

Answer: D

Noncash items refer to :

Noncash items refer to :

a. inventory items purchased using credit

b. the ownership of intangible assets such as patents

c. the ownership of intangible assets such as patents

d. expenses which do not directly affect cash flows

e. sales which are made using store credit

Answer: D

The Lakeside Inn had operating cash flow of $48,450. Depreciation was $6,700 and interest paid was $2,480. A net total of $2,620 was paid on long-term debt. The firm spent $24,000 on fixed assets and decreased net working capital by $1,330. What is the amount of the cash flow to stockholders?

The Lakeside Inn had operating cash flow of $48,450. Depreciation was $6,700 and interest paid was $2,480. A net total of $2,620 was paid on long-term debt. The firm spent $24,000 on fixed assets and decreased net working capital by $1,330. What is the amount of the cash flow to stockholders?

a. $5,100

b. $7,830

c. $18,020

d. $19,998

e. $20,680

Answer: E

At the beginning of the year, the long-term debt of a firm was $72,918 and total debt was $138,407. At the end of the year, long-term debt was $68,219 and total debt was $145,838. The interest paid was $6,430. What is the amount of the cash flow to creditors?

At the beginning of the year, the long-term debt of a firm was $72,918 and total debt was $138,407. At the end of the year, long-term debt was $68,219 and total debt was $145,838. The interest paid was $6,430. What is the amount of the cash flow to creditors?

a. -$18,348

b. -$1,001

c. $11,129

d. $13,861

e. $19,172

Answer: C

Crandall Oil has total sales of $1,349,800 and cost of $903,500. Depreciation is $42,700 and the tax rate is 34 percent. The firm does not have any interest expense. What is the operating cash flow?

Crandall Oil has total sales of $1,349,800 and cost of $903,500. Depreciation is $42,700 and the tax rate is 34 percent. The firm does not have any interest expense. What is the operating cash flow?

a. $129,152

b. $171,852

c. $179,924

d. $281,417

e. $309,076

Answer: E

Andre's Bakery has sales of $687,000 with costs of $492,000. Interest expense is $26,000 and depreciation is $42,000. The tax rate is 35 percent. What is the net income?

Andre's Bakery has sales of $687,000 with costs of $492,000. Interest expense is $26,000 and depreciation is $42,000. The tax rate is 35 percent. What is the net income?

a. $42,750

b. $44,450

c. $82,550

d. $86,450

Answer: C

A firm has net working capital of $640. Long-term debt is $4,180, total assets are $6,230, and fixed assets are $3,910. What is the amount of the total liabilities?

A firm has net working capital of $640. Long-term debt is $4,180, total assets are $6,230, and fixed assets are $3,910. What is the amount of the total liabilities?

a. $2,050

b. $2,690

c. $4,130

d. $5,590

e. $5,860



Answer: E

A firm has $520 in inventory, $1,860 in fixed assets, $190 in accounts receivables, $210 in accounts payable, and $70 in cash. What is the amount of the current assets?

A firm has $520 in inventory, $1,860 in fixed assets, $190 in accounts receivables, $210 in accounts payable, and $70 in cash. What is the amount of the current assets?

a. $710

b. $780

c. $990

d. $2,430

e. $2,640

Answer: B

Which one of the following is an agency cost?

Which one of the following is an agency cost?

a. accepting an investment opportunity that will add value to the firm

b. increasing the quarterly dividend

c. investing in a new project that creates firm value

e. hiring outside accountants to audit the company's financial statements

e. closing a division of the firm that is operating at a loss

Answer: E

Which one of the following actions by a financial manager is most apt to create an agency problem?

Which one of the following actions by a financial manager is most apt to create an agency problem?

a. refusing to borrow money when doing so will create losses for the firm

b. refusing to lower selling prices if doing so will reduce the net profits

c. refusing to expand the company if doing so will lower the value of the equity

d. agreeing to pay bonuses based on the market value of the company stock rather than on the firm's level of sales

e. increasing current profits when doing so lowers the value of the firm's equity

Answer: E