Test Bank for Analysis For Financial Managemen
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,t 13th Edition Robert Higgins, Jennifer Koski, Todd Mitton
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Student name: vb
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
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1) Current liabilities are defined as liabilities with a maturity of less than one year.
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⊚ true
⊚ false
2) A decline in the Net Property, Plant, and Equipment account between year-end 2020
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and year-end 2021 is a clear indication that fixed assets were sold during 2021.
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⊚ true
⊚ false
3) When reporting financial performance for tax purposes, U.S. companies prefer to
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use accelerated depreciation methods over the straight-line method.
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⊚ true
⊚ false
4) Accounting rules require U.S. companies to depreciate research and development
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(R&D) expenditures using the straight-line method.
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⊚ true
⊚ false
5) You can construct a sources and uses statement for 2021 if you have a company’s
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year- end balance sheets for 2021 and 2022.
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⊚ true
⊚ false
6) A reduction in long-term debt is a use of cash.
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⊚ true
⊚ false
,7) The accrual principle requires that revenue not be recognized until payment from a
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sale is received.
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⊚ true
⊚ false
8) An increase in cash and cash equivalents should appear as a use of cash on the
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sources and uses statement.
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⊚ true
⊚ false
9) A cash flow statement places each source or use of cash into one of three
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broad categories: operating activities, investing activities, or financing activities.
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⊚ true
⊚ false
10) The cost of equity is usually reported on the income statement right below
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interest expense.
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⊚ true
⊚ false
11) The United States was one of the first countries to adopt International
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Financial Reporting Standards.
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⊚ true
⊚ false
MULTIPLE CHOICE - Choose the one alternative that best completes the statement or
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answers the question.
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12) Which of the following statements concerning a firm’s cash flows and profits is false?
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, A) Managers must be at least as concerned with cash flows as with profits.
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B) A company that sells merchandise at a profit can be assured of generating cash
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soon enough to replenish cash flows required for continued production.
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C) The cash flows generated in a given time period can differ from the profits reported.
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D) Profits are no assurance that cash flow will be sufficient to maintain solvency.
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E) Due to required cash investments in current assets, fast-growing and
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profitable companies can literally “grow broke”.
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13) Which of the following is NOT a typical reason for differences between profits and
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cash flow?
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A) Goodwill
B) Depreciation expense vb
C) Changes in accounts receivable vb vb vb
D) Accrual accounting practices vb vb
14) Which one of the following is the financial statement that shows a financial
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snapshot, taken at a point in time, of all the assets the company owns and all the
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claims against those assets?
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A) Income statement vb
B) Creditor’s statement vb
C) Balance sheet vb
D) Cash flow statement vb vb
E) Sources and uses statement vb vb vb
15) A balance sheet reports the value of a firm’s assets, liabilities, and equity
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A) over an annual period.vb vb vb
B) over any period of time.
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C) at any point in time.
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D) at the end of the year only.
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vb vb v b vb vb vb
,t 13th Edition Robert Higgins, Jennifer Koski, Todd Mitton
vb vb vb vb vb vb vb vb
Student name: vb
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
vb vb vb vb vb vb vb vb vb vb vb vb vb vb vb
1) Current liabilities are defined as liabilities with a maturity of less than one year.
vb vb vb vb vb vb vb vb vb vb vb vb vb
⊚ true
⊚ false
2) A decline in the Net Property, Plant, and Equipment account between year-end 2020
vb vb vb vb vb vb vb vb vb vb vb vb
and year-end 2021 is a clear indication that fixed assets were sold during 2021.
vb vb vb vb vb vb vb vb vb vb vb vb vb vb
⊚ true
⊚ false
3) When reporting financial performance for tax purposes, U.S. companies prefer to
vb vb vb vb vb vb vb vb vb vb
use accelerated depreciation methods over the straight-line method.
vb vb vb vb vb vb vb vb
⊚ true
⊚ false
4) Accounting rules require U.S. companies to depreciate research and development
vb vb vb vb vb vb vb vb vb
(R&D) expenditures using the straight-line method.
vb vb vb vb vb vb
⊚ true
⊚ false
5) You can construct a sources and uses statement for 2021 if you have a company’s
vb vb vb vb vb vb vb vb vb vb vb vb vb vb
year- end balance sheets for 2021 and 2022.
vb vb vb vb vb vb vb vb
⊚ true
⊚ false
6) A reduction in long-term debt is a use of cash.
vb vb vb vb vb vb vb vb vb
⊚ true
⊚ false
,7) The accrual principle requires that revenue not be recognized until payment from a
vb vb vb vb vb vb vb vb vb vb vb vb
sale is received.
vb vb vb
⊚ true
⊚ false
8) An increase in cash and cash equivalents should appear as a use of cash on the
vb vb vb vb vb vb vb vb vb vb vb vb vb vb vb
sources and uses statement.
vb vb vb vb
⊚ true
⊚ false
9) A cash flow statement places each source or use of cash into one of three
vb vb vb vb vb vb vb vb vb vb vb vb vb vb
broad categories: operating activities, investing activities, or financing activities.
vb vb vb vb vb vb vb vb vb
⊚ true
⊚ false
10) The cost of equity is usually reported on the income statement right below
vb vb vb vb vb vb vb vb vb vb vb vb
interest expense.
vb vb
⊚ true
⊚ false
11) The United States was one of the first countries to adopt International
vb vb vb vb vb vb vb vb vb vb vb
Financial Reporting Standards.
vb vb vb
⊚ true
⊚ false
MULTIPLE CHOICE - Choose the one alternative that best completes the statement or
vb vb vb vb vb vb vb vb vb vb vb vb
answers the question.
vb vb vb
12) Which of the following statements concerning a firm’s cash flows and profits is false?
vb vb vb vb vb vb vb vb vb vb vb vb vb
, A) Managers must be at least as concerned with cash flows as with profits.
vb vb vb vb vb vb vb vb vb vb vb vb
B) A company that sells merchandise at a profit can be assured of generating cash
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soon enough to replenish cash flows required for continued production.
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C) The cash flows generated in a given time period can differ from the profits reported.
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D) Profits are no assurance that cash flow will be sufficient to maintain solvency.
vb vb vb vb vb vb vb vb vb vb vb vb
E) Due to required cash investments in current assets, fast-growing and
vb vb vb vb vb vb vb vb vb
profitable companies can literally “grow broke”.
vb vb vb vb vb vb
13) Which of the following is NOT a typical reason for differences between profits and
vb vb vb vb vb vb vb vb vb vb vb vb vb
cash flow?
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A) Goodwill
B) Depreciation expense vb
C) Changes in accounts receivable vb vb vb
D) Accrual accounting practices vb vb
14) Which one of the following is the financial statement that shows a financial
vb vb vb vb vb vb vb vb vb vb vb vb
snapshot, taken at a point in time, of all the assets the company owns and all the
vb vb vb vb vb vb vb vb vb vb vb vb vb vb vb vb vb
claims against those assets?
vb vb vb vb
A) Income statement vb
B) Creditor’s statement vb
C) Balance sheet vb
D) Cash flow statement vb vb
E) Sources and uses statement vb vb vb
15) A balance sheet reports the value of a firm’s assets, liabilities, and equity
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A) over an annual period.vb vb vb
B) over any period of time.
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C) at any point in time.
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D) at the end of the year only.
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