1. The stock price of a company increases and the market is deemed efficient. What assumption can be
made? A. A new, patented, product was introduced to the market.
B. New machinery was purchased with a useful life of 20 years.
C. Management is optimizing its resources and operating efficiently.
D. Management hired new employees and invested in a training program.
2. Which statement is true about how the global market affects the U.S.
A. A bad options trade executed by a foreign subsidiary of a Wall Street bank will affect layoffs overseas.
B. A Bad derivatives trade executed by a foreign subsidiary of a Wall Street bank will affect layoffs overseas.
C. American investors and fund managers make decisions based on financial reporting standards developed
and financial statements audited overseas.
D. Foreign investors and fund managers make decisions based on financial reporting standards developed
and financial statements audited overseas.
3. What are secondary markets?
A. Markets where securities are traded subsequent to the initial offering.
B. Markets were securities are issued for the first time.
C. Markets were securities are issued through a competitive sale.
D. Markets where securities are issued through a negotiated sale.
4. A special interest group in the U.S. has been lobbying intensely for protectionism through increased tariffs and
trade restrictions, with the argument that it will save jobs in the industry they represent. What is the most
likely result if they are successful?
A. Employees and shareholders of the domestic industry that produce the protective goods will be hurt and
the nation will benefit.
B. The overall economy will benefit from trade restrictions and tariffs.
C. Removing the trade restrictions and tariffs will result in a net economic loss to the overall U.S. economy.
D. Employees and shareholders of the domestic industry that produce the protected goods will benefit and the
nation will be hurt.
5. What do the content and structure of a balance sheet report?
The assets , liabilities , and equity at a point in time
6. What is the basis used to compute a company's income tax expense?
A. Pretax accounting income.
B. Taxable income.
C. Net operating
income. D. Taxes
payable.
7. What is the firm’s cash flow from financing, using the data above?
Net Income $1000
Depreciation Expense $300
Change in operating assets $600
Change in net PP&E $5000
Change in long-term Liabilities $1000
Dividends Paid $200
, A. $200 outflow
B. $800 outflow
C. $800 inflow
D. $1,000 inflow
8. A company reported an increase in accounts payable of $2000 for the current year. Half of this amount
is expected to be paid next period.
How will this change in accounts payable be reported on the statement of cash flows?
A. The change will increase cash flow from operations by $1000
B. The change will decrease cash flows from operations by $2,000
C. The change will decrease cash flows from operations by
$1000 D. The change will increase cash flow from operations by
$2000
9. A company's trial balance shows $900 in long-term debt. On which financial statement should this be
shown? E. The balance sheet
10. What do cash flows from financing activities generally relate to?
A. A firm's purchase and sale of long-term assets
B. A firm's non-cash transactions
C. A firms' debt and equity transactions
D. A firms sale of goods and services
11. What is true about the cash flow from the operating activities section of the statement of cash flows?
A. Increases in current liability accounts represents an inflow of cash and should be added to net income
B. Decreases in current liability accounts represent an outflow of cash and should be added to net income
C. Increases in current liability accounts represent an outflow of cash and should be subtracted from net income
D. Decreases in current liability accounts represent an inflow of cash and should be added to net income
12. Partial financial data for a company is as
follows. EBIT $250,000
Depreciation $10,000
Change in working capital
$2,000 Net capital expenditures
$3,000 Tax rate 30%
What is the company’s free cash
flow? A. $255,000
B. $178,000
C. $180,000
D. $265,000
13. An analyst is comparing the ratios of two firms and needs to address accounting differences. What would
be considered an accounting difference between the two firms?
made? A. A new, patented, product was introduced to the market.
B. New machinery was purchased with a useful life of 20 years.
C. Management is optimizing its resources and operating efficiently.
D. Management hired new employees and invested in a training program.
2. Which statement is true about how the global market affects the U.S.
A. A bad options trade executed by a foreign subsidiary of a Wall Street bank will affect layoffs overseas.
B. A Bad derivatives trade executed by a foreign subsidiary of a Wall Street bank will affect layoffs overseas.
C. American investors and fund managers make decisions based on financial reporting standards developed
and financial statements audited overseas.
D. Foreign investors and fund managers make decisions based on financial reporting standards developed
and financial statements audited overseas.
3. What are secondary markets?
A. Markets where securities are traded subsequent to the initial offering.
B. Markets were securities are issued for the first time.
C. Markets were securities are issued through a competitive sale.
D. Markets where securities are issued through a negotiated sale.
4. A special interest group in the U.S. has been lobbying intensely for protectionism through increased tariffs and
trade restrictions, with the argument that it will save jobs in the industry they represent. What is the most
likely result if they are successful?
A. Employees and shareholders of the domestic industry that produce the protective goods will be hurt and
the nation will benefit.
B. The overall economy will benefit from trade restrictions and tariffs.
C. Removing the trade restrictions and tariffs will result in a net economic loss to the overall U.S. economy.
D. Employees and shareholders of the domestic industry that produce the protected goods will benefit and the
nation will be hurt.
5. What do the content and structure of a balance sheet report?
The assets , liabilities , and equity at a point in time
6. What is the basis used to compute a company's income tax expense?
A. Pretax accounting income.
B. Taxable income.
C. Net operating
income. D. Taxes
payable.
7. What is the firm’s cash flow from financing, using the data above?
Net Income $1000
Depreciation Expense $300
Change in operating assets $600
Change in net PP&E $5000
Change in long-term Liabilities $1000
Dividends Paid $200
, A. $200 outflow
B. $800 outflow
C. $800 inflow
D. $1,000 inflow
8. A company reported an increase in accounts payable of $2000 for the current year. Half of this amount
is expected to be paid next period.
How will this change in accounts payable be reported on the statement of cash flows?
A. The change will increase cash flow from operations by $1000
B. The change will decrease cash flows from operations by $2,000
C. The change will decrease cash flows from operations by
$1000 D. The change will increase cash flow from operations by
$2000
9. A company's trial balance shows $900 in long-term debt. On which financial statement should this be
shown? E. The balance sheet
10. What do cash flows from financing activities generally relate to?
A. A firm's purchase and sale of long-term assets
B. A firm's non-cash transactions
C. A firms' debt and equity transactions
D. A firms sale of goods and services
11. What is true about the cash flow from the operating activities section of the statement of cash flows?
A. Increases in current liability accounts represents an inflow of cash and should be added to net income
B. Decreases in current liability accounts represent an outflow of cash and should be added to net income
C. Increases in current liability accounts represent an outflow of cash and should be subtracted from net income
D. Decreases in current liability accounts represent an inflow of cash and should be added to net income
12. Partial financial data for a company is as
follows. EBIT $250,000
Depreciation $10,000
Change in working capital
$2,000 Net capital expenditures
$3,000 Tax rate 30%
What is the company’s free cash
flow? A. $255,000
B. $178,000
C. $180,000
D. $265,000
13. An analyst is comparing the ratios of two firms and needs to address accounting differences. What would
be considered an accounting difference between the two firms?
