Test Bank for Essentials of Corporate Finance 10th Edition Ross All Chapters Included

Essentials of Corporate Finance, 10e (Ross) Chapter 2 Financial Statements, Taxes, and Cash Flow 1) Net working capital is defined as: A) the depreciated book value of a firm's fixed assets. B) the value of a firm's current assets. C) available cash minus current liabilities. D) total assets minus total liabilities. E) current assets minus current liabilities. Answer: E Difficulty: 1 Easy Section: 2.1 The Balance Sheet Topic: Net working capital Learning Objective: 02-01 Differentiate between accounting value (or book value) and market value. Bloom's: Remember AACSB: Analytical Thinking 2) The accounting statement that measures the revenues, expenses, and net income of a firm over a period of time is called the: A) statement of cash flows. B) income statement. C) GAAP statement. D) balance sheet. E) net working capital schedule. Answer: B Difficulty: 1 Easy Section: 2.2 The Income Statement Topic: Income statement Learning Objective: 02-02 Distinguish accounting income from cash flow. Bloom's: Remember AACSB: Analytical Thinking DOWNLOAD THE Test Bank for Essentials of Corporate Finance 10th Edition Ross 2 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 3) The financial statement that summarizes a firm's accounting value as of a particular date is called the: A) income statement. B) cash flow statement. C) liquidity position. D) balance sheet. E) periodic operating statement. Answer: D Difficulty: 1 Easy Section: 2.1 The Balance Sheet Topic: Balance sheet Learning Objective: 02-01 Differentiate between accounting value (or book value) and market value. Bloom's: Remember AACSB: Analytical Thinking 4) Which one of the following decreases net income but does not affect the operating cash flow of a firm that owes no taxes for the current year? A) Indirect cost B) Direct cost C) Noncash item D) Period cost E) Variable cost Answer: C Difficulty: 1 Easy Section: 2.2 The Income Statement Topic: Noncash items Learning Objective: 02-02 Distinguish accounting income from cash flow. Bloom's: Remember AACSB: Analytical Thinking DOWNLOAD THE Test Bank for Essentials of Corporate Finance 10th Edition Ross 3 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 5) Which one of the following terms is defined as the total tax paid divided by the total taxable income? A) Average tax rate B) Variable tax rate C) Marginal tax rate D) Absolute tax rate E) Contingent tax rate Answer: A Difficulty: 1 Easy Section: 2.3 Taxes Topic: Taxes Learning Objective: 02-03 Explain the difference between average and marginal tax rates. Bloom's: Remember AACSB: Analytical Thinking 6) The tax rate that determines the amount of tax that will be due on the next dollar of taxable income earned is called the: A) average tax rate. B) variable tax rate. C) marginal tax rate. D) fixed tax rate. E) ordinary tax rate. Answer: C Difficulty: 1 Easy Section: 2.3 Taxes Topic: Taxes Learning Objective: 02-03 Explain the difference between average and marginal tax rates. Bloom's: Remember AACSB: Analytical Thinking 7) Cash flow from assets is defined as: A) the cash flow to shareholders minus the cash flow to creditors. B) operating cash flow plus the cash flow to creditors plus the cash flow to shareholders. C) operating cash flow minus the change in net working capital minus net capital spending. D) operating cash flow plus net capital spending plus the change in net working capital. E) cash flow to shareholders minus net capital spending plus the change in net working capital. Answer: C Difficulty: 1 Easy Section: 2.4 Cash Flow Topic: Cash flow from assets Learning Objective: 02-04 Determine a firm's cash flow from its financial statements. Bloom's: Remember AACSB: Analytical Thinking DOWNLOAD THE Test Bank for Essentials of Corporate Finance 10th Edition Ross 4 Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 8) Operating cash flow is defined as: A) a firm's net profit over a specified period of time. B) the cash that a firm generates from its normal business activities. C) a firm's operating margin. D) the change in the net working capital over a stated period of time. E) the cash that is generated and added to retained earnings. Answer: B Difficulty: 1 Easy Section: 2.4 Cash Fl