| Question 1 | 2.5 / 2.5 points |
Which group of people would be the most concerned about the ability of a firm to make interest and principal payments?
Question options:
|
| Auditors | ||
|
| Customers | ||
|
| Creditors | ||
|
| Investors | ||
| Question 2 | 2.5 / 2.5 points | ||
__________ ratios measure the extent of a firm's financing with debt relative to equity and its ability to cover interest and other fixed charges.
Question options:
|
| Leverage | ||
|
| Quick | ||
|
| Activity | ||
|
| Turnover | ||
| Question 3 | 2.5 / 2.5 points | ||
A __________ statement contains useful information about the board of directors and executive compensation, option grants, audit-related matters, related party transactions and proposals to be voted on by shareholders.
Question options:
|
| auditor's | ||
|
| 10-K | ||
|
| proxy | ||
|
| manager's discussion and analysis | ||
| Question 4 | 2.5 / 2.5 points | ||
Which ratios help assess the firm's ability to meet cash needs as they arise?
Question options:
|
| Current ratio and cash flow liquidity ratio | ||
|
| Average collection period and net profit margin | ||
|
| Debt ratio and dividend payout | ||
|
| Operating profit margin and return on equity | ||
| Question 5 | 2.5 / 2.5 points | ||
What is in-process research and development?
Question options:
|
| In-process research and development is the ongoing research a firm conducts to innovate and produce new products. | ||
|
| In-process research and development is the one-time charge taken at the time of an acquisition for research that is not deemed viable. | ||
|
| In-process research and development is research done during the process of manufacturing. | ||
|
| In-process research and development is purchased research and development that the firm intends to use in the future. | ||
| Question 6 | 2.5 / 2.5 points | ||
How can the depreciation expense amount impact the quality of earnings?
Question options:
|
| Firms may not choose from a variety of methods to record depreciation. | ||
|
| Firms cannot choose how long they expect an asset to last. | ||
|
| Firms may record operating expenses as capital expenditures. | ||
|
| Firms may not record operating expenses as capital expenditures. | ||
| Question 7 | 2.5 / 2.5 points | ||
Use the following selected financial information for Wilcox Corporation to answer the question below.
Wilcox's debt ratio is:
Question options:
|
| 40.11% | ||
|
| 43.02% | ||
|
| 55.80% | ||
|
| 56.32% | ||
| Question 8 | 2.5 / 2.5 points | ||
__________ ratios measure a firm's ability to meet cash needs as they arise.
Question options:
|
| quick | ||
|
| Liquidity | ||
|
| turnover | ||
|
| computational | ||
| Question 9 | 2.5 / 2.5 points | ||
FASB Statement No. 154 changed the requirements for disclosures of accounting changes. Why could this be a concern to the analyst?
Question options:
|
| The new disclosure rules cause the income statements to be inconsistent from year to year. | ||
|
| This is not a concern to the analyst as the new rules have improved financial reporting. | ||
|
| The rule change has caused U.S. income statements to differ from income statements prepared using the international accounting rules. | ||
|
| The new rules may encourage firms to change methods for the purpose of boosting earnings since the accounting change is no longer prominently displayed on the income statement. | ||
| Question 10 | 2.5 / 2.5 points | ||
Use the following selected financial information for Wilcox Corporation to answer the question below.
Wilcox's days payable outstanding is:
Question options:
|
| 7 days | ||
|
| 11 days | ||
|
| 16 days | ||
|
| 22 days | ||
| Question 11 | 2.5 / 2.5 points | ||
Supplementary schedules, such as data related to the breakdown of key financial figures by operating segment,:
Question options:
|
| are helpful to financial statement analysts. | ||
|
| are not helpful to financial statement analysts. | ||
|
| are not applicable for financial statement analysts. | ||
|
| cannot be used by financial statement analysts. | ||
| Question 12 | 2.5 / 2.5 points | ||
The __________ of a financial statement analysis will vary depending on the perspective of the financial statement user.
Question options:
|
| costs | ||
|
| objectives | ||
|
| outcomes | ||
|
| taxes | ||
| Question 13 | 2.5 / 2.5 points | ||
What is vendor financing?
Question options:
|
| Lending money to customers so they can purchase the lender's products or services. | ||
|
| Borrowing money from vendors to purchase supplies needed by a firm. | ||
|
| The extent to which a firm finances with debt. | ||
|
| The issuance of common stock. | ||
| Question 14 | 2.5 / 2.5 points | ||
The Du Pont System shows which of the following series of relationships?
Question options:
|
| Net profit margin x total asset turnover = Return on investment | ||
|
| Net profit margin x financial leverage = Return on equity | ||
|
| Net profit margin x total asset turnover = Return on investment and Return on investment x financial leverage = Return on equity | ||
|
| Net profit margin x total asset turnover = Return on equity and Return on equity x financial leverage = Return on investment | ||
| Question 15 | 2.5 / 2.5 points | ||
Use the following selected financial information for Wilcox Corporation to answer the question below.
Wilcox's quick ratio is:
Question options:
|
| 0.85 | ||
|
| 2.00 | ||
|
| 1.00 | ||
|
| 0.75 | ||
| Question 16 | 0 / 2.5 points | ||
Three ratios that help the financial analyst assess short-term solvency are the:
Question options:
|
| Current ratio, the turnover ratio, and the cash flow liquidity ratio | ||
|
| Sbsolute ratio, the quick ratio and the cash flow liquidity ratio | ||
|
| Absolute ratio, the turnover ratio, and the cash flow liquidity ratio | ||
|
| Current ratio, the quick ratio, and the cash flow liquidity ratio | ||
| Question 17 | 2.5 / 2.5 points | ||
Use the following selected financial information for Wilcox Corporation to answer the question below.
Wilcox's times interest earned ratio is:
Question options:
|
| 1.50 | ||
|
| 4.50 | ||
|
| 6.63 | ||
|
| 8.60 | ||
| Question 18 | 2.5 / 2.5 points | ||
__________ ratios measure the liquidity of specific assets and the efficiency of managing assets.
Question options:
|
| Activity | ||
|
| Quick | ||
|
| Computational | ||
|
| Turnover | ||
| Question 19 | 2.5 / 2.5 points | ||
Use the following selected financial information for Wilcox Corporation to answer the question below.
Wilcox's cash flow margin is:
Question options:
|
| 5.23% | ||
|
| 5.85% | ||
|
| 6.24% | ||
|
| 6.67% | ||
| Question 20 | 2.5 / 2.5 points | ||
What is a "Big Bath"?
Question options:
|
| The elimination of expenses by hiding them in a reserve. |
|
| Large charges classified as restructuring charges used to clean up a firm's balance sheet. |
|
| One-time charges taken during an acquisition. |
|
| The expensing of stock options. |
| Lesson 6 Exam | |
| Question 21 | 2.5 / 2.5 points |
Which of the following could be indicative of cash flow problems or a result of an expansion?
Question options:
|
| Increasing accounts receivable and decreasing inventories | ||
|
| Increasing accounts receivable and increasing inventories | ||
|
| Decreasing accounts receivable and increasing inventories | ||
|
| Decreasing accounts receivable and decreasing inventories | ||
| Question 22 | 2.5 / 2.5 points | ||
Jesse Corporation reported the following information for the current year:
(1) Net income is $205 million.
(2) Acquisitions were $32 million.
(3) Customer accounts receivable increased by $12 million.
(4) Dividends paid to common shareholders were $8 million.
(5) Depreciation expense was $41 million.
(6) Income tax payable decreased by $11 million.
(7) Long-term debt increased by $28 million.
(8) Accounts payable decreased by $6 million.
(9) Inventories increased by $17 million.
Required: Based on the above information, calculate the cash flow from operating activities.
Question options:
|
| $720 million | ||
|
| $600 million | ||
|
| $405 million | ||
|
| $200 million | ||
| Question 23 | 2.5 / 2.5 points | ||
Identify the following as operating (O), financing (F), or investing (I) activities:
Current portion of long-term debt; Accounts receivable
Question options:
|
| Operating; Financing | ||
|
| Financing; Operating | ||
|
| Operating; Investing | ||
|
| Financing; Investing | ||
| Question 24 | 2.5 / 2.5 points | ||
Which of the following items are included in the adjustments to net income to obtain cash flow from operating activities?
Question options:
|
| Payment of dividends and depreciation expense | ||
|
| The change in accounts receivable and the acquisition of land | ||
|
| The gain from an asset sale and the payment of dividends | ||
|
| The change in inventory and depreciation expense | ||
| Question 25 | 2.5 / 2.5 points | ||
The following question is based on the indirect method of presenting cash flow from operating activities. Indicate whether the following items will be added or subtracted from net income to obtain cash flow from operating activities.
How will a gain from an asset sale and a decrease in an accrued liability affect net income?
Question options:
|
| A gain from an asset sale will be added to net income to obtain cash <br /> flow from operating activities; A decrease in an accrued liability will <br /> be added to net income to obtain cash flow from operating activities | ||
|
| A gain from an asset sale will be added to net income to obtain cash <br /> flow from operating activities; A decrease in an accrued liability will <br /> be subtracted from net income to obtain cash flow from operating activities | ||
|
| A gain from an asset sale will be subtracted from net income to obtain <br /> cash flow from operating activities; A decrease in an accrued liability <br /> will be added to net income to obtain cash flow from operating activities | ||
|
| A gain from an asset sale will be subtracted from net income to obtain <br /> cash flow from operating activities; A decrease in an accrued liability <br /> will be subtracted from net income to obtain cash flow from operating activities | ||
| Question 26 | 2.5 / 2.5 points | ||
Jesse Corporation reported the following information for the current year:
(1) Net income is $205 million.
(2) Acquisitions were $32 million.
(3) Customer accounts receivable increased by $12 million.
(4) Dividends paid to common shareholders were $8 million.
(5) Depreciation expense was $41 million.
(6) Income tax payable decreased by $11 million.
(7) Long-term debt increased by $28 million.
(8) Accounts payable decreased by $6 million.
(9) Inventories increased by $17 million.
Required: Based on the above information, calculate the cash flow from investing activities.
Question options:
|
| ($16) million | ||
|
| ($24) million | ||
|
| ($32) million | ||
|
| ($40) million | ||
| Question 27 | 2.5 / 2.5 points | ||
Depreciation and amortization should be __________ to convert net income
to cash flow from operating activities. A gain on sale of asset should
be __________ to convert net income to cash flow from operating
activities.
Question options:
|
| subtracted; subtracted | ||
|
| subtracted; added | ||
|
| added; subtracted | ||
|
| added; added | ||
| Question 28 | 2.5 / 2.5 points | ||
Indicate whether each of the following items would result in net cash flow from operating activities being higher (H) or lower (L) than net income.
Increase in inventory; Increase in accounts payable; Amortization expense
Question options:
|
| Higher; Lower; Higher | ||
|
| Lower; Higher; Higher | ||
|
| Lower; Higher; Lower | ||
|
| Higher; Higher; Lower | ||
| Question 29 | 2.5 / 2.5 points | ||
Indicate whether each of the following items would result in net cash flow from operating activities being higher (H) or lower (L) than net income.
Decrease in deferred tax assets; Increase in deferred revenue; Decrease in income taxes payable
Question options:
|
| Higher; Lower; Higher | ||
|
| Lower; Higher; Higher | ||
|
| Lower; Higher; Lower | ||
|
| Higher; Higher; Lower | ||
| Question 30 | 2.5 / 2.5 points | ||
Jesse Corporation reported the following information for the current year:
(1) Net income is $205 million.
(2) Acquisitions were $32 million.
(3) Customer accounts receivable increased by $12 million.
(4) Dividends paid to common shareholders were $8 million.
(5) Depreciation expense was $41 million.
(6) Income tax payable decreased by $11 million.
(7) Long-term debt increased by $28 million.
(8) Accounts payable decreased by $6 million.
(9) Inventories increased by $17 million.
Required: Based on the above information, calculate the cash flow from financing activities.
Question options:
|
| $8 million | ||
|
| $12 million | ||
|
| $20 million | ||
|
| $40 million | ||
| Question 31 | 2.5 / 2.5 points | ||
An increase in inventory should be __________ to convert net income to cash flow from operating activities. An increase in accounts payable should be __________ to convert net income to cash flow from operating activities.
Question options:
|
| subtracted; subtracted | ||
|
| subtracted; added | ||
|
| added; subtracted | ||
|
| added; added | ||
| Question 32 | 2.5 / 2.5 points | ||
Identify the following as operating (O), financing (F), or investing (I) activities:
Repurchase of a firm's own shares; Cash collections from loans to others
Question options:
|
| Financing; Investing | ||
|
| Investing; Operating | ||
|
| Operating; Financing | ||
|
| Operating; Operating | ||
| Question 33 | 2.5 / 2.5 points | ||
Which of the following items would be classified as financing activities on the statement of cash flows?
Question options:
|
| Payments for inventory, payments to lenders, and payments for taxes | ||
|
| Loans to others, returns from loans to others, and acquisition of land | ||
|
| Proceeds from borrowing, payment of dividends, and repayment of debt | ||
|
| Sales of goods, repayment of debt, and loans to others | ||
| Question 34 | 2.5 / 2.5 points | ||
Which of the following items would be classified as operating activities on the statement of cash flows?
Question options:
|
| Acquisitions of equipment, payment of dividends, and revenue | ||
|
| Payments for inventory, payments for salaries, and cash received from sale of goods | ||
|
| Proceeds from borrowing, payments of dividends, and purchases of supplies | ||
|
| Payments on loans, payments for taxes, and payments for rent | ||
| Question 35 | 2.5 / 2.5 points | ||
What is implied if the accounts receivable account has increased?
Question options:
|
| Cash flow from operating activities is greater relative to net income. | ||
|
| Cash flow from operating activities is less relative to net income. | ||
|
| The firm's sales have increased relative to the prior year. | ||
|
| None of the above | ||
| Question 36 | 2.5 / 2.5 points | ||
Identify the following as operating (O), financing (F), or investing (I) activities:
Proceeds from borrowing; Purchases of property, plant and equipment
Question options:
|
| Financing; Investing | ||
|
| Investing; Operating | ||
|
| Operating; Financing | ||
|
| Operating; Operating | ||
| Question 37 | 2.5 / 2.5 points | ||
A decrease in accrued liabilities should be __________ to convert net income to cash flow from operating activities. A decrease in accounts receivable should be __________ to convert net income to cash flow from operating activities.
Question options:
|
| subtracted; subtracted | ||
|
| subtracted; added | ||
|
| added; subtracted | ||
|
| added; added | ||
| Question 38 | 2.5 / 2.5 points | ||
Identify the following as operating (O), financing (F), or investing (I) activities:
Payments for purchase of inventory; Payments for taxes
Question options:
|
| Financing; Investing | ||
|
| Investing; Operating | ||
|
| Operating; Financing | ||
|
| Operating; Operating | ||
| Question 39 | 2.5 / 2.5 points | ||
Use the indirect method to answer the question below. The following information is available for Casey Company:
| Net income | $200 | Increase in plant and equip. | $90 |
| Depreciation expense | 50 | Payment of dividends | 25 |
| Increase in accts. receiv. | 30 | Increase in long-term debt | 100 |
| Decrease in inventories | 10 | Decrease in accounts payable | 20 |
What is the change in cash for Casey Company?
Question options:
|
| $85 | ||
|
| $375 | ||
|
| $125 | ||
|
| $195 | ||
| Question 40 | 2.5 / 2.5 points | ||
Analyzing cash inflows is important to determine in a firm. What is the preferred method of generating cash?
Question options:
|
| Securing cash from external sources because this demonstrates longevity potential |
|
| Securing cash from external sources because this is the preferred method |
|
| Securing little cash from operations because this has potential for possible failure |
|
| Securing more cash from operations because this is the preferred method |
