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DBM5028 Business Finance / Chapter 2

TUTORIAL 2FINANCIAL STATEMENTS, TAXES, AND CASH FLOW

1. The financial statement summarizing the value of a firm's equity on a particular dateis the:A. income statement.B. balance sheet.C. statement of cash flo s.!. cash flo statement.

". #et or$ing capital is defined as:A. total liabilities minus shareholders' equity.B. current liabilities minus shareholders' equity.C. fi%ed assets minus long&term liabilities.

!. current assets minus current liabilities.

. A(n) **** asset is one hich can be quic$ly converted into cash ithout significantloss in value.A. tangibleB. fi%edC. intangible!. liquid

+. The common set of standards and procedures by hich audited financial statementsare prepared is $no n as the:A. ,atching principle.B. Cash flo identity.C. -enerally Accepted Accounting rinciples (-AA ).!. /inancial 0everage eporting rinciples (/0 ).

2. 3our ***** ta% rate is the amount of ta% payable on the ne%t ta%able dollar you earn.A. marginalB. residualC. total!. average

4. 5hich term relates to the cash flo hich results from a firm's ongoing6 normal business activities7A. operating cash floB. capital spendingC. net or$ing capital!. cash flo from assets

8. The net total cash flo of a firm hich is available for distribution to the firm'screditors and stoc$holders is called the:A. operating cash flo .B. net capital spending.C. net or$ing capital.

!. cash flo from assets.

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;. Cash flo from assets is also $no n as the firm's:A. capital structure.B. equity structure.C. hidden cash flo .!. free cash flo .

. cashA. == and => onlyB. = and === onlyC. =6 ==6 and => only!. === and => only

11. 5hich of the follo ing are included in current liabilities7=. note payable to a supplier in eight months==. amount due from a customer ne%t month===. account payable to a supplier that is due ne%t ee$ =>. loan payable to the ban$ in fourteen monthsA. = and === onlyB. == and === onlyC. === and => only!. ==6 ===6 and => only

1". ?hareholders' equity:A. increases anytime total assets increases.B. is equal to total assets plus total liabilities.C. includes long&term debt6 preferred stoc$6 and common stoc$.!. represents the residual value of a firm.

13. Liquidity can be defined as_______________________.A. the speed and ease of conversion to cash without significant loss of valueB. the speed and ease of conversion to asset without significant loss of valueC. the speed and ease of conversion to cash with significant loss of valueD. the speed and ease of conversion to asset with significant loss of value

1+. The boo$ value of a firm is:A. equivalent to the firm's mar$et value provided that the firm has some fi%ed assets.B. based on historical cost.C. generally greater than the mar$et value hen fi%ed assets are included.!. ad@usted to the mar$et value henever the mar$et value e%ceeds the stated boo$

value.

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12. As seen on an income statement:A. interest is deducted from income and increases the total ta%es incurred.B. the ta% rate is applied to the earnings before interest and ta%es hen the firm has

both depreciation and interest e%penses.C. depreciation is sho n as an e%pense but does not affect the ta%es payable.

!. depreciation reduces both the ta%able income and the net income.

14. A firm has ,4;9 in inventory6 ,"6 "9 in fi%ed assets6 ,";9 in accountsreceivables6 ,+

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Common stoc$ increased by ,299 and retained earnings decreased by ,"49.5hat is the net income for the year7

"". The ,ore 0ess paid ,+"9 in dividends and ,411 in interest e%pense. Theaddition to retained earnings is ,

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"91" ( ,) "91 ( ,)?alesCE-?=nterest!epreciation

CashAccounts receivablesCurrent liabilities=nventory0ong&term debt

#et fi%ed assetCommon stoc$ Ta% rate

16"

46374 tutorial 2

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