Test-Bank-for-Fundamentals-of-Corporate-Finance-10th-Edition-by-Ross

Chapter 02 Financial Statements, Taxes, and Cash Flow Multiple Choice Questions 1. Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date? A. income statement B. creditor's statement C. balance sheet D. statement of cash flows E. dividend statement 2. Net working capital is defined as: A. total liabilities minus shareholders' equity. B. current liabilities minus shareholders' equity. C. fixed assets minus long-term liabilities. D. total assets minus total liabilities. E. current assets minus current liabilities. 3. The common set of standards and procedures by which audited financial statements are prepared is known as the: A. matching principle. B. cash flow identity. C. Generally Accepted Accounting Principles. D. Financial Accounting Reporting Principles. E. Standard Accounting Value Guidelines. 4. Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time? A. income statement B. balance sheet C. statement of cash flows D. tax reconciliation statement E. market value report 5. Noncash items refer to: A. accrued expenses. B. inventory items purchased using credit. C. the ownership of intangible assets such as patents. D. expenses which do not directly affect cash flows. E. sales which are made using store credit. 6. The percentage of the next dollar you earn that must be paid in taxes is referred to as the tax rate. A. mea n B. residu al C. tot al D. averag e E. margin al 7. The tax rate is equal to total taxes divided by total taxable income. A. deductib le B. residu al C. tot al D. averag e E. margin al 8. The cash flow of a firm which is available for distribution to the firm's creditors and stockholders is called the: A. operating cash flow. B. net capital spending. C. net working capital. D. cash flow from assets. E. cash flow to stockholders. 9. Which term relates to the cash flow which results from a firm's ongoing, normal business activities? A. operating cash flow B. capital spending C. net working capital D. cash flow from assets E. cash flow to creditors 10 Cash flow from assets is also known as the firm's: . A. capital structure. B. equity structure. C. hidden cash flow. D. free cash flow. E. historical cash flow. 11 The cash flow related to interest payments less any net new borrowing . is called the: A. operating cash flow. B. capital spending cash flow. C. net working capital. D. cash flow from assets. E. cash flow to creditors. 12 Cash flow to stockholders is defined as: . A. the total amount of interest and dividends paid during the past year. B. the change in total equity over the past year. C. cash flow from assets plus the cash flow to creditors. D. operating cash flow minus the cash flow to creditors. E. dividend payments less net new equity raised. 13 Which one of the following is classified as an intangible fixed asset? . A. accounts receivable B. production equipment C. buildin g D. tradema rk E. invento ry 14 Which of the following are current assets? . I. patent II. inventory III. accounts payable IV. cash A. I and III only B. II and IV only C. I, II, and IV only D. I, II and IV only E. II, III, and IV only 15 Which one of the following is included in a firm's market value but yet is . excluded from the firm's accounting value? A. real estate investment B. good reputation of the company C. equipment owned by the firm D. money due from a customer E. an item held by the firm for future sale 16 Which of the following are included in current liabilities? . I. note payable to a supplier in eight months II. amount due from a customer next month III. account payable to a supplier that is due next week IV. loan payable to the bank in fourteen months A. I and III only B. II and III only C. I, II, and III only D. I, III, and IV only E. I, II, III, and IV 17 Which one of the following will increase the value of a firm's net . working capital? A. using cash to pay a supplier B. depreciating an asset C. collecting an accounts receivable D. purchasing inventory on credit E. selling inventory at a profit 18 Which one of the following statements concerning net working capital is . correct? A. Net working capital increases when inventory is purchased with cash. B. Net working capital must be a positive value. C. Total assets must increase if net working capital increases. D. A decrease in the cash balance may or may not decrease net working capital. E. Net working capital is the amount of cash a firm currently has available for spending.