ACG 3173: UCF - Exam 3 Practice
Questions and Correct Answers.
If you were interested in evaluating the profitability of a company and could have only limited
historical data, would you prefer to know operating income or net income for the past five
years? - Answer operating income
Which series of data is more meaningful?
operating income OR net income - Answer Operating income
Assets = - Answer Liabilities + PIC + RE
Ending RE = - Answer Beginning RE + NI - Div
What accounts for the difference between issued shares and outstanding shares? - Answer
Treasury Stock
When would an investor prefer to receive cash dividends rather than stock dividends? - Answer
If I needed current income from my investment, I would want Cash dividends.
When would an investor prefer to receive stock dividends rather than cash dividends? - Answer
If the company can reinvest its retained earnings at a higher ROI than I could earn on the money
paid to me in dividends.
ROE will ALWAYS be higher when using debt - Answer True
Income Statement (Multiple Step) - Answer Sales
- COGS
= Gross Profit
- Operating Expenses
= Operating Income
- Interest Expense
+/- Gain/Loss from Operations
= EBT
- Income Tax Expense
, = Net Income/Loss
Most financially healthy company? - Answer Company with HIGHEST operating income
Company with the most questionable earnings quality? - Answer Company with the LOWEST
Cash provided by Operating Activities
Company most likely will need to seek external financing? - Answer Company with the
LOWEST cash provided by Investing Activities
Cash Flows from Operating Activities - Answer Net Income
+/- Depreciation Expense
+/- Amortization
+/- Change in AR
+/- Change in Merchandise Inventory
+/- Change in AP
+/- Change in Other Accrued Liabilities
Cash Flows from Investing Activities - Answer +/- Changes in Production Equipment (PPE)
Cash Flows from Financing Activities (Short Term Notes Payable) - Answer +/- Common Stock
+/- Payment of Dividends
+/- Payment of Long Term Debt
Operating Activities - Answer - Change in Current Assets
- Change in Current Liabilities
Investing activities - Answer Change in Long-Term Assets
Financing Activities - Answer - Change in Long-Term Liabilities
- Change in Equity
Finding Operating Activities - Answer + Cash collected from customers
- Interest & Taxes Paid
- Cash paid to suppliers & employees
Questions and Correct Answers.
If you were interested in evaluating the profitability of a company and could have only limited
historical data, would you prefer to know operating income or net income for the past five
years? - Answer operating income
Which series of data is more meaningful?
operating income OR net income - Answer Operating income
Assets = - Answer Liabilities + PIC + RE
Ending RE = - Answer Beginning RE + NI - Div
What accounts for the difference between issued shares and outstanding shares? - Answer
Treasury Stock
When would an investor prefer to receive cash dividends rather than stock dividends? - Answer
If I needed current income from my investment, I would want Cash dividends.
When would an investor prefer to receive stock dividends rather than cash dividends? - Answer
If the company can reinvest its retained earnings at a higher ROI than I could earn on the money
paid to me in dividends.
ROE will ALWAYS be higher when using debt - Answer True
Income Statement (Multiple Step) - Answer Sales
- COGS
= Gross Profit
- Operating Expenses
= Operating Income
- Interest Expense
+/- Gain/Loss from Operations
= EBT
- Income Tax Expense
, = Net Income/Loss
Most financially healthy company? - Answer Company with HIGHEST operating income
Company with the most questionable earnings quality? - Answer Company with the LOWEST
Cash provided by Operating Activities
Company most likely will need to seek external financing? - Answer Company with the
LOWEST cash provided by Investing Activities
Cash Flows from Operating Activities - Answer Net Income
+/- Depreciation Expense
+/- Amortization
+/- Change in AR
+/- Change in Merchandise Inventory
+/- Change in AP
+/- Change in Other Accrued Liabilities
Cash Flows from Investing Activities - Answer +/- Changes in Production Equipment (PPE)
Cash Flows from Financing Activities (Short Term Notes Payable) - Answer +/- Common Stock
+/- Payment of Dividends
+/- Payment of Long Term Debt
Operating Activities - Answer - Change in Current Assets
- Change in Current Liabilities
Investing activities - Answer Change in Long-Term Assets
Financing Activities - Answer - Change in Long-Term Liabilities
- Change in Equity
Finding Operating Activities - Answer + Cash collected from customers
- Interest & Taxes Paid
- Cash paid to suppliers & employees
