F03 Lesson 4 & 5 Exam SCORE 93 PERCENT

Question 1

2.5 / 2.5 points

Which are examples of cash outflows for investing activities?

Question options:

	Short-lived assets, purchases of securities, and loans to others
	Short-lived assets, sales of securities, and loans to others.
	Long-lived assets, sales of securities, and loans to others.
	Long-lived assets, purchases of securities, and loans to others.
Question 2			0 / 2.5 points

Depreciation and amortization expense __________ net income because they represent the recognition of a cash expense.

Question options:

	are subtracted from
	are not included in
	are added back to
	have no effect on
Question 3			0 / 2.5 points

Payments for purchases of inventory, dividends, and acquisitions are all examples of __________ cash flows.

Question options:

	financing
	investing
	operating
	marketing
Question 4			2.5 / 2.5 points

Which are examples of cash outflows for operating activities?

Question options:

	Payments for purchases of inventories, supplies, financing expenses, interest. and taxes
	Payments for sales of inventories, supplies, investing expenses, interest. and taxes
	Payments for purchases of inventories, supplies, operating expenses, interest. and taxes
	Payments for sales of inventories, supplies, operating expenses, interest. and taxes
Question 5			2.5 / 2.5 points

What is implied if the accounts receivable account has increased?

Question options:

	Cash flow from operating activities is greater relative to net income.
	Cash flow from operating activities is less relative to net income.
	The firm's sales have increased relative to the prior year.
	Nothing can be implied from this information because the type of accounts receivables must first be determined.
Question 6			2.5 / 2.5 points

What impact does depreciation have on the cash account?

Question options:

	Depreciation results in an increase to cash.
	Depreciation results in a decrease to cash.
	Depreciation has no impact on the cash account.
	Depreciation only impacts the cash account if inflation has occurred.
Question 7			2.5 / 2.5 points

Use the indirect method to answer the question below. The following information is available for Casey Company:

Net income	$200	Increase in plant and equip.	$90
Depreciation expense	50	Payment of dividends	25
Increase in accts. receiv.	30	Increase in long-term debt	100
Decrease in inventories	10	Decrease in accounts payable	20

What is cash flow from operating activities for Casey Company?

Question options:

	$195
	$310
	$210
	$290
Question 8			2.5 / 2.5 points

Cash flows are segregated on a statement of cash flows by __________ activities, __________ activities, and __________ activities.

Question options:

	cash; investing; financing
	operating; investing; future
	cash; investing; future
	operating; investing; financing
Question 9			2.5 / 2.5 points

The statement of cash flows shows the changes in the __________ accounts between periods.

Question options:

	profit
	income summary
	balance sheet
	losses
Question 10			2.5 / 2.5 points

Which item may be of concern when analyzing cash flow from operating activities?

Question options:

	Increasing inventories
	Decreasing accounts receivable
	Repayment of debt
	Payments of dividends
Question 11			2.5 / 2.5 points

There are two formats the FASB allows, the __________ and the __________ method, for presenting cash flows from operating activities.

Question options:

	cost; indirect
	cash; indirect
	direct; cost
	direct; indirect
Question 12			2.5 / 2.5 points

If net cash provided or used by operating, financing and investing activities are added together, the result is:

Question options:

	net income.
	the change in cash.
	cash outflow.
	cash inflow.
Question 13			0 / 2.5 points

Generating cash from __________ activities is the preferred method for obtaining excess cash.

Question options:

	operating
	financing
	investing
	sales
Question 14			2.5 / 2.5 points

A change in the retained earnings account is the result of the __________ for the period and the payment of __________.

Question options:

	net income; earnings
	net income; dividends
	net profit; earnings
	net profit; dividends
Question 15			2.5 / 2.5 points

Which of the following items would be classified as investing activities on the statement of cash flows?

Question options:

	Sale of property, purchase of equity securities, and loans to others
	Sale of goods, receipt of dividends, and repurchase of firm's own stock
	Proceeds from borrowing, payment of dividends, and receipt of dividends
	Payment to lenders, proceeds from issuing common stock, and revenue
Question 16			2.5 / 2.5 points

How would you know if a statement of cash flows had been prepared using the direct or the indirect method?

Question options:

	The indirect method begins with net income and adds and subtracts adjustments to obtain cash flow from operating activities.
	The direct method adjusts for deferrals and accruals.
	Depreciation will be subtracted from net income.
	The direct method starts with cash flow from operating activities and adds and subtracts adjustments to obtain net income.
Question 17			2.5 / 2.5 points

Which are examples of cash inflows for investing activities?

Question options:

	Purchases of long-lived assets, sales of securities, and returns from loans to others
	Sales of long-lived assets, purchases of securities, and returns from loans to others
	Sales of long-lived assets, sales of securities, and returns from loans to others
	Purchases of long-lived assets, purchases of securities, and returns from loans to others
Question 18			2.5 / 2.5 points

What type of accounts are accounts receivable and accounts payable?

Question options:

	Cash accounts
	Operating accounts
	Financing accounts
	Investing accounts
Question 19			2.5 / 2.5 points

Analyzing the statement of cash flows helps determine the future __________ financing needs of a business firm.

Question options:

	internal
	external
	potential
	internal equity
Question 20			2.5 / 2.5 points

Cash outflows result from __________ in asset accounts and __________ in liability and equity accounts.

Question options:

	increases; decreases
	decreases; increases
	increases; increases
	decreases; decreases
Lesson 4 Exam

 

Question 21

2.5 / 2.5 points

Which of the following is an acceptable method to report total comprehensive income?

Question options:

	On the face of the balance sheet
	Total comprehensive income does not have to be reported
	In the operating section of the cash flow statement
	In the statement of stockholders' equity
Question 22			2.5 / 2.5 points

What is another term frequently used when referring to operating profit?

Question options:

	Earnings before interest and taxes (EBIT)
	Earnings before interest, taxes, depreciation and amortization (EBITDA)
	Net profit
	Earnings before interest (EBI)
Question 23			2.5 / 2.5 points

Use the following information for Jett Co. to answer the next question.

	2015	2014
Sales	1,200	1,000
COGS	850	700
Operating expenses	200	200
Income taxes	30	35

Jett Co.'s gross profit, operating profit and net profit margins for 2015 are:

Question options:

	50.0%, 32.5%, and 22.5% respectively.
	29.2%, 12.5%, and 10.0%, respectively.
	27.0%, 11.0%, and 10.5%, respectively.
	21.5%, 17.5%, and 12.0%, respectively.
Question 24			2.5 / 2.5 points

When will volume changes cause volatility in the gross profit margin?

Question options:

	If cost of goods sold includes fixed costs which do not vary proportionately with volume changes
	In industries with little capital
	In industries having no fixed costs
	If cost of goods sold includes costs that vary proportionately with volume changes
Question 25			2.5 / 2.5 points

Why is the common-size income statement valuable to the analyst?

Question options:

	The common-size income statement shows the relative magnitude of revenues and expenses to total assets.
	The common-size income statement allows the analyst to compare the firm to itself from year-to-year, but not to its competitors.
	The common-size income statement shows the relative magnitude of revenues and expenses relative to profits.
	The common-size income statement shows the relative magnitude of expenses relative to net sales.
Question 26			2.5 / 2.5 points

Which item would not be classified as an operating expense?

Question options:

	Interest expense
	Rent expense
	Depreciation
	Repairs and maintenance
Question 27			2.5 / 2.5 points

Which equation represents an income statement?

Question options:

	Assets = liabilities + stockholders' equity
	Cash in – cash out = net income
	Revenues - expenses = net income
	Beginning retained earnings + revenues – expenses = ending retained earnings
Question 28			2.5 / 2.5 points

How is it possible for a U.S. firm to have increasing earnings but a lower effective tax rate?

Question options:

	The firm has expenses that are not deductible for tax purposes.
	Tax rates in foreign countries where the firm operates are higher.
	Tax rates in foreign countries where the firm operates are lower.
	It is not possible for a firm to have an effective tax rate different from the U.S. federal statutory tax rate.
Question 29			2.5 / 2.5 points

How should companies with more than one revenue source report revenue and cost of goods sold?

Question options:

	Each revenue source should be reported separately, but all cost of goods sold should be added together and reported as a single amount.
	The revenues and cost of goods sold should be netted together and reported as a single line item.
	All revenue sources should be added together and shown as one line item and all cost of goods sold should be added together and shown as one line item.
	Each revenue line should be shown separately with a corresponding cost of goods sold line for each revenue source.
Question 30			2.5 / 2.5 points

Selling and administrative expenses include which of the following income statement items?

Question options:

	Salaries, insurance, and interest
	Salaries, rent, and advertising
	Rent, interest, and cost of goods
	Advertising, research & development, and amortization
Question 31			2.5 / 2.5 points

Which of the items below would be included under "Other income and expense"?

Question options:

	Salaries, interest expense, and equity losses
	Equity earnings, gains from sale of assets, and interest income
	Research and development, dividend income, and interest expense
	Advertising, cost of goods sold, and selling and administrative expenses
Question 32			2.5 / 2.5 points

Which items below would be classified as operating expenses?

Question options:

	Depreciation, capital leases, and operating profit
	Interest expense, interest income, and rent expense
	Accounts payable, lease payments, and depreciation
	Advertising, selling and administrative, and repairs and maintenance
Question 33			2.5 / 2.5 points

Of what value is the calculation of gross profit margin?

Question options:

	The gross profit margin helps the analyst assess the capital structure of the firm.
	The gross profit margin allows the analyst to determine if the firm has been affected by inflation.
	The gross profit margin indicates the profitability of a firm after considering all operating expenses.
	The gross profit margin is the first step of profit measurement indicating how much profit the firm generates after deducting cost of goods sold.
Question 34			2.5 / 2.5 points

How does the equity method distort earnings?

Question options:

	Income is recognized even though cash may never be received.
	Equity earnings are recorded even if the investor cannot exercise influence over the investee's policies.
	Equity earnings are only recorded on a cash basis of accounting.
	Equity earnings are recorded when investment ownership is 100%.
Question 35			2.5 / 2.5 points

How should gross profit margin be analyzed for firms having more than one revenue source?

Question options:

	The overall gross profit margin should be calculated for all revenue sources.
	Gross profit margin cannot be analyzed if a firm has multiple revenue sources.
	A separate gross profit margin for each revenue source should be calculated.
	The gross profit margins from each revenue source should be calculated and then averaged.
Question 36			2.5 / 2.5 points

How is earnings per common share calculated?

Question options:

	Operating profit divided by the average number of common stock shares outstanding
	Net profit divided by the average number of common and preferred stock shares outstanding
	Operating profit divided by the average number of repurchased common stock shares
	Net profit divided by the average number of common stock shares outstanding
Question 37			2.5 / 2.5 points

Which of the following statements is false?

Question options:

	It is important to analyze operating expenses over which management exercises discretion and that have considerable impact on the firm's profitability.
	Impairment charges do not need to be analyzed since they are generally a non-recurring expense.
	Operating expenses should be tracked in terms of trends, absolute amounts, relationship to sales, and relationship to industry competitors.
	Operating expenses can be easily analyzed by preparing a common-size income statement.
Question 38			2.5 / 2.5 points

What are the two basic formats of the income statement?

Question options:

	Multiple-step and single-step
	Cash basis and single-step
	Accrual basis and single-step
	Accrual basis and multiple-step
Question 39			2.5 / 2.5 points

Which of the following statements is true?

Question options:

	In stable industries, such as retailers, the gross profit margin is generally volatile from year to year.
	Gross profit margin and operating profit margin are complements of each other and the two percentages add up to 100%.
	Fixed costs do not vary proportionately with volume changes but remain the same within a relevant range of activity.
	In capital intensive industries sales volume changes result in a stable gross profit margin.
Question 40			2.5 / 2.5 points

What is amortization?

Question options:

	The process used to allocate the cost of natural resources
	The process used to allocate the cost of tangible fixed assets
	The process used to allocate the cost of capital leases, leasehold improvements and intangible assets
	The process used to allocate the cost of oil, gas, minerals and standing timber