Questions:
Question 1
Pro forma financial statements are used to:
a. find the contribution margin
b. show the results of some assumed event
c. predict the sensitivity of different output variables
d. show the results of an actual event
Question 2
An example of an investing activity is:
a. Issuing new corporate stock
b. Paying corporate income taxes
c. Buying new computers
d. Taking out a new loan.
Question 3
The value of debt and equity securities is based upon:
a. The type of investment vehicle
b. The growth potential of the asset
c. The accounting method used for recording the asset
d. The present value of the cash flows that the securities are expected to provide.
Question 4
Which of the following is defined as the systematic allocation of the cost of an asset over more than one period?
a. Deferral
b. Expensing
c. Optimization
d. Depreciation
Question 5
Peerless believes that its sales next year will increase 20 percent from the current level of $800,000. Management calculates that assets must increase $110,000 to support the new sales level, and current liabilities will increase $70,000. What total financing will be needed?
a. $40,000
b. $1,600
c. $33,600
d. $8,000
Question 6
In preparing a statement of cash flows, the ____ method involves adjusting net income to reconcile it to net cash flows from operating activities.
a. direct
b. indirect
c. accrual
d. none of the above
Question 7
Ship-to-Shore earned $280,000 after taxes last year. Its expenses included depreciation of $55,000, interest expenses of $40,000 and deferred taxes of $20,000. The company also purchased two new fresh water fishing boats for $40,000 ($20,000) each. What is Ship-to-Shore?s after-tax cash flow for last year?
a. $395,000
b. $355,000
c. $315,000
d. $280,000
Question 8
Dippity Doo-Dah Party Dips has revenues of $50,000, general & administrative expenses of $35,000, interest expense of $4,000 and depreciation expense of $4200. The firm is in the 38% tax bracket. What would be the firm s cash flow from operations?
a. $4216
b. $4000
c. $8416
d. $6,800
Question 9
The financial statement that shows the effects of a company?s operating, investing, and financing activities on its cash balance is known as the:
a. cash budget statement
b. pro forma financial statement
c. statement of cash flows
d. breakeven analysis
Question 10
To decrease the additional financing needed to support an increase in sales, management can
a. decrease notes payable
b. retire common stock
c. increase the dividend payout
d. cut dividends
Question 11
In the percent-of-sales forecasting method, which of the following is (are) assumed to increase proportionately with sales?
a. Cash
b. accounts receivable
c. accounts payable
d. all of the above
Question 12
Cash budgeting can be employed effectively by management to
a. identify potential cash flow problems in advance
b. aid them in capital budgeting
c. control retained earnings
d. coordinate cash and deferred expenses
Question 13
All the following current liabilities normally vary directly with the sales except:
a. accounts payable
b. notes payable
c. accrued wages
d. accrued taxes
Question 14
Using a cash budget is more useful than the percentage of sales method because: I. It can more precisely estimate the amount of financing needed. II. It can better estimate the time of financing need.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
Question 15
A good operational plan incorporates a plan for:
a. the unionization of its business.
b. a solid organizational chart with detailed job descriptions.
c. the resources a firm will need to obtain its long term objectives.
d. all of the above