Ch.2 Quiz

Instructions
Read the questions carefully.

This assessment is worth 100 points.

  1. Stockholders' equity is equal to liabilities plus assets.   (5 points)

      
      

  2. Stockholders' equity is equal to assets minus liabilities.   (5 points)

      
      

  3. An increase in an asset represents a source of funds.   (5 points)

      
      

  4. The change in accumulated depreciation should always be equal to the depreciation expense charged in the income statement.   (5 points)

      
      

  5. Cash flow is equal to earnings before taxes minus depreciation.   (5 points)

      
      

  6. For corporations with low taxable income (less than $100,000), the effective tax rate can be as much as 40%.   (5 points)

      
      

  7. Federal corporate tax rates have changed four times since 1980.   (5 points)

      
      

  8. The investments account represents a commitment of funds of at least one year or more.   (5 points)

      
      

  9. Paying dividends to common shareholders will not affect cash flows from financing activities.   (5 points)

      
      

  10. The sale of a firm's securities is a source of funds, whereas the payment of dividends is a use of funds.   (5 points)

      
      

  11. Which of the following is not a primary source of capital to the firm?   (5 points)

    a.  
    b.  
    c.  
    d.  

  12. The major limitation of financial statements is   (5 points)

    a.  
    b.  
    c.  
    d.  

  13. Assuming a tax rate of 30%, the after-tax cost of interest expense of $200,000 is   (5 points)

    a.  
    b.  
    c.  
    d.  

  14. Depreciation tends to   (5 points)

    a.  
    b.  
    c.  
    d.  

  15. A statement of cash flows allows a financial analyst to determine   (5 points)

    a.  
    b.  
    c.  
    d.  

  16. A firm has $200,000 in current assets, $400,000 in long-term assets, $80,000 in current liabilities, and $200,000 in long-term liabilities. What is its net working capital?   (5 points)

    a.  
    b.  
    c.  
    d.  

  17. Which of the following would not be included in the balance sheet investment account?   (5 points)

    a.  
    b.  
    c.  
    d.  

  18. The statement of cash flows does not include which of the following sections?   (5 points)

    a.  
    b.  
    c.  
    d.  

  19. An increase in investments in long-term securities will:   (5 points)

    a.  
    b.  
    c.  
    d.  

  20. In the last decade, free cash flow has been associated with special financial activities such as:   (5 points)

    a.  
    b.  
    c.  
    d.  



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