Exam de finance PDF

Preview

Summary

Examen de finance...

Description

2. Basic financial statement If cash flows from operating activities is a positive amount, then: The company must have had a net profit for the year.

Owners’ equity in a business increases as a result of which of the following? Earnings from profitable operation of the business.

Profitability may be defined as : The ability to increase retained earnings.

A net profit results from having more revenues than liabilities. False According to the Sarbanes-Oxley Act, CEOs and CFOs must certify to the accuracy of their company's financial statements: Quarterly and Annually.

Twenty percent of the total assets of Shanahan Corporation have been financed through borrowing. The total liabilities of the company are $560,000. What is the amount of owners' equity? $2,240,000.

A strong statement of financial position shows: Large amounts of liquid assets relative to the liabilities due in the near future.

Total assets plus total liabilities must equal total owners' equity. False A strong statement of cash flows indicates that significant cash is being generated by: Opérating The practice of showing assets on the balance sheet at their cost, rather than at their current market value is explained, in part, by the fact that cost is supported by objective evidence that can be verified by independent experts. True The accounting principle that assumes that a company will operate in the foreseeable future is: Going concern.

Any business event that might affect the future profitability of a business should be reported in its balance sheet. False The change in owners' equity due to only revenue and expense transactions is explained by the: Income statement.

The owner of Westhampton Fish Eatery purchased a new car for his daughter who is away at college at a cost of $43,000 and reported this amount as Delivery Vehicle in the restaurant's balance sheet. The reporting of this item in this manner violated the: Business entity concept.

The purchase of an asset, such as office equipment, for cash will cause owners' equity to decrease. False To appear in a balance sheet of a business entity, an asset need not: Have a ready market value.

If a company purchases equipment for $65,000 by issuing a note payable:

Total assets will increase by $65,000.

From an accounting viewpoint, when is a business considered as an entity separate from its owner(s)? Corporation Which of the following is correct if at the end of Crystal Imports’ first year of operations, Assets are $800,000 and Owners' Equity is $720,000? Liabilities are $80,000.

A transaction caused a $60,000 increase in both total assets and total liabilities. This transaction could have been which of the following? Purchase of office equipment for $120,000, paying $60,000 cash and issuing a note payable for the balance.

3. Management Accounting Which of the following is not a product cost? Advertising? The cost of the employee who computes total manufacturing costs would be considered: Administrative costs.

Until the related goods are sold, product costs are viewed as: Assets.

Costs to repair equipment are considered a direct cost. True In an aircraft factory, the inventory of direct materials would not include: Completed aircraft, available for sale.

Since manufacturing costs (direct materials, direct labor, and overhead) are incurred in the process of manufacturing units of product, these costs are credited to: The Direct Materials Inventory, Direct Labor, and Manufacturing Overhead accounts respectively.

Manufacturing overhead is considered an indirect cost, since overhead costs generally cannot be traced conveniently and directly to specific units of product. True When products held in inventory are sold Finished Goods Inventory is credited.

Which of the following is not one of the three types of inventories of a manufacturing company? Product inventory

Alton Company produces metal belts. During the current month, the company incurred the following product costs: Raw materials $82,000 Direct labor $51,000 Electricity used in the Factory $21,000 Factory foreperson salary $2,800 Maintenance of factory machinery $1,900 Alton Company's total product costs: $158,700.

Alton Company produces metal belts. During the current month, the company incurred the following product costs: Raw materials $100,000; Direct labor $75,000; Electricity used in the Factory $25,000; Factory foreperson salary $3,750; and Maintenance of factory machinery $2,000. Alton Company's indirect product costs totaled: $30,750.

Period costs are deducted from sales to arrive at gross profit. True In a manufacturing company, the cost of goods sold is equal to: The beginning inventory of work in process, plus total manufacturing costs, less the ending inventory of work in process.

Product costs are charged directly to expense accounts. False Which of the following costs would not be considered part of the manufacturing overhead of a furniture manufacturer? The cost of wood used in furniture construction

Manufacturing overhead is a term used to describe all manufacturing costs other than direct materials and direct labor. True Management accounting systems are designed to assist organizations in the performance of all of the following functions except: The preparation of income tax returns.

The cost of the employee who installs the leather on the seats of a new automobile would be considered: Direct labor Prime costs include direct materials and direct labor used in the production of goods and services. True The set of linked activities and resources needed to create and deliver a product or service to the customer is referred to as: Value chain 4. CVP When cost-volume-profit analysis is used, the need for a cost accounting system is eliminated. False The volume of output that causes fixed costs to be equal in amount to total revenue is called the break-even point. False The Gillett Company's breakeven point in units is 25,000. Assuming that variable costs are 50% and fixed costs are $500,000, what is the company's projected operating income if sales are $1,250,000? 125000

Executive salaries are typically considered variable costs. False In order to calculate break-even sales units, fixed costs are divided by the: Contribution margin ratio Sales of products with high contribution margins often are described as quantity sales. False The contribution margin ratio is computed as: % OF REVENUE If the monthly sales volume required to break even is $190,000 and monthly fixed costs are $55,900, the contribution margin ratio is closest to: Contribution margin is total revenue less variable costs. True The contribution margin is the amount by which revenue exceeds variable costs. True The contribution margin ratio is expressed as: A percentage of revenue.

If the unit sales price is $12, variable costs are $6 per unit, and fixed costs are $36,000, what sales volume (in dollars) is necessary to breakeven? $72,000

A company's relevant range of production is: The production range that covers fixed but not variable costs.

Glow Worm Corporation makes flashlights and batteries. Its monthly fixed costs average $1,690,000. The company has provided the following information about its two product lines. BE : 6500000 TR : 19500000

If unit sales prices are $20 and variable costs are $12 per unit, how many units would have to be sold to break-even if fixed costs equal $15,000? 37500 Margin of safety is the dollar amount by which actual sales volume exceeds the break-even sales volume. TRUE If the unit sales price is $18, variable costs are $9 per unit and fixed costs are $18,000, how many units must be sold to earn an income of $180,000? (Round your final answer to the next whole number.) 22000 If the unit sales price is $30, variable costs are $15 per unit and fixed costs are $32,000 what is the contribution margin ratio per unit? 50% In the area of cost-volume-profit analysis, the contribution margin ratio shows how much each dollar of sales contributes to: Cover the fixed costs of the business and providing operating income.

Arrow Products typically earns a contribution margin ratio of 25 percent and has current fixed costs of $80,000. Arrow’s general manager is considering spending an additional $20,000 to do one of the following. Start a new ad campaign that is expected to increase sales revenue by 5 percent. License a new computerized ordering system that is expected to increase Arrow's contribution margin ratio to 30 percent. Sales revenue for the coming year was initially forecast to equal $1,200,000 (that is, without implementing either of the above options). a-1. Compute the projected operating income for each option? a-2. For each option, how much will projected operating income increase or decrease relative to initial predictions? b. By what percentage would sales revenue need to increase to make the ad campaign as attractive as the ordering system? Ad campaign : 215000 Ordering system : 260000 Decrease by 5000 if Ad … Increase by 40000 if order 20% The following information is available regarding the total manufacturing overhead of Bursa Mfg. Co. for a recent fourmonth period.

The high-low method is the only method to be used when determining semivariable costs. True A fixed cost may include all of the following except: Sales commisions

In cost-volume-profit analysis, the number of units sold is assumed to be equal to the number of units produced. True

Within the relevant range, fixed costs: Rise as sales volume falls.

As volume increases, per unit variable costs will decrease on a per-unit basis and stay the same in total. True Executive salaries are typically considered variable costs. False As volume increases, total fixed costs remain the same. True In cost-volume-profit analysis, income tax expense: Is generally ignored

A 45% contribution margin ratio means that: 45% of the company's revenue is available to cover fixed costs and to contribute toward operating income.

Operating income can be calculated by: Multiplying the margin of safety by the contribution margin ratio.

Any business that operates at less than capacity will have smaller fixed costs than variable costs. False

Test 5

The statement of cash flows helps investors and creditors assess both the cash and noncash aspects of a company's investing and financing activities. True

Tyler, Inc.’s cash balance at December 31 of the current year, the end of its financial reporting year, was $155,000. During the year, cash provided by operations was $145,000, cash used in investing activities was $67,000, and cash provided by financing activities was $10,000. Calculate the amount of Tyler’s beginning cash balance at January 1, of the current year. 377000

n a statement of cash flows, the term "cash" includes: Bank accounts, cash on hand, and cash equivalents.

Early in 2018, Larsen Corporation purchased marketable securities at a cost of $97,000. In September, dividends of $7,300 were received; Larsen sold the securities in December at a gain of $6,300. How would these transactions be reported on Larsen's statement of cash flows for 2018?

$6,300 net cash provided by investing activities; $7,300 included in cash provided by operating activities.

In the statement of cash flows, the purchase of supplies is classified as: A. Operating activities. Which of the following is not classified among the operating activities in a statement of cash flows? paym ment of the principal amount owed on a bank loan.

Old South Company purchased investments for $55,000 and plant assets for $147,000 during the current year, during which it also sold plant assets for $66,000, at a gain of $6,000. The company also purchased treasury stock for $78,000 and sold a new issue of common stock for $523,000. Determine the amount of cash provided by or used for investing activities for the year. Used for 136000

All of the following are financing activities except: Lending money

Any "non-cash" investing and financing transactions should be disclosed in a supplementary schedule accompanying a statement of cash flows. TRUE

Whether one uses the direct or the indirect method of presentation of the statement of cash flows, the totals from each of the three sections (activities) will be the same regardless of the method used. TRUE

When applying the direct method in a statement of cash flows, the amount of depreciation is added to net income. FALSE Depreciation expense reduces net income but does not reduce the net cash flow from operating activities. TRUE

The comparative balance sheets of Apollo Rocket, Inc. show a net increase in inventory of $87,000 and a net decrease in accounts payable of $46,000 during 2018. In computing net cash flow from operating activities under the indirect method, net income for 2018 should be: Reduced by $133,000.

Under the indirect method, when machinery is sold at a gain, the gain is added in the operating section of the statement of cash flows and the cost is added in the investing

section. FALSE

At the end of the first year of operations, Meacham's balance sheet showed the following: Accounts Receivable, $13,400; Inventory, $9,400; and Accounts Payable, $14,650. The company's income statement reports net income of $37,400, including depreciation expense of $10,400. Using only the given information, compute Meacham's net cash flow from operating activities using the indirect method. A. $65,250. B. $39,650. C. $24,350. D. $26,650. $37,400 - $13,400 - $9,400 + $14,650 + $10,400 = $39,650

Test 6

Avant dernier A comparative financial statement: Places two or more years of a financial statement side-by-side in order to compare results.

The term, classified financial statements, refers to: Financial statements in which items with certain characteristics are placed together in a group in an effort to develop useful subtotals.

Which of the following transactions would cause a change in the amount of a company's working capital? Selling merchandise at a price above its cost

Quick assets include which of the following? Cash, marketable securities, and receivables.

The gross profit rate is gross profit expressed as a percentage of net sales. True A company whose sales are growing at less than the rate of inflation may actually be selling less merchandise every year. True

Net income stated as a percentage of sales is one means of evaluating a company's ability to control its expenses. True

The more pessimistic investors' expectations regarding a company's future performance, the lower the price-earnings ratio is likely to be. True

-

The interest coverage ratio is computed by dividing:

Operating income by annual interest expense.

Return to question Cash Accounts receivable Inventory Total assets Current liabilities Noncurrent liabilities

$ $ $ $ $ $

84 144 285 945 390 420

- What is the quick ratio? 0.58 to 1. ($84 + $144) ÷ $390 = 0.58 to 1.

-

What is the current ratio? 1.32 to 1. ($84 + $144 + $285) ÷ $390 = 1.32 to 1.

-

What is the amount of working capital?

-

What is Compros' debt ratio? 85.71%.$810 ÷ $945 = 85.71%

-

One number expressed as a percentage of another is called: Ratios. In evaluating the quality of a company's earnings, which of the following factors is least important?

$123 $513 − $390 = $123

The dollar amount of earnings per share

-

The quick ratio is especially useful in evaluating the liquidity of a company with fast moving inventories. False

In a multiple-step income statement, interest expense usually is not classified as an operating expense because interest charges: Stem from the manner in which assets are financed, not the manner in which they are used in business operations.

-

Operating income excludes each of the following, except:depreciation

In a single-step income statement, all revenue items are listed, then all expense items are combined and deducted from total revenue. True

The yield rate on stock is measured by dividing dividends per share by market price per share. True

The interest coverage ratio is computed by dividing: Operating income by annual interest expense.

Last one Which of the following accounting system characteristics cannot generate motivation? Balancing debits and credits

Boris Jasper is the manager of an auto parts division for a large auto parts supplier. The division makes dampers and oil pumps. Identify three things Boris could do to increase the division’s ROI in the coming year.  Raise the sales revenue.checked  Decrease the cost of raw materials.checked  Decrease discretionary fixed cost.

The return on investment is calculated by: Multiplying the capital turnover by the return on sales.

To increase return on sales, a manager could decrease cost of goods sold while increasing revenues. True

Which of the following statements is most correct about Return on Investment, Economic Value Added, and Residual Income? EVA and RI were developed in response to criticisms levied against ROI.

The Meikle division has assets of $750,000, current liabilities of $150,000, and net operating income of $187,500. a. What is the division’s ROI? b. If the weighted-average cost of capital is 16 percent, what is the division’s EVA? c. Which is the better technique to measure performance?

Residual income is the difference between net operating income at breakeven and actual net operating income. False

Clancy Stores has sales of $1,724,000, cost of sales of $683,000, and operating expenses of $322,000. What is Clancy's return on sales? 41.71 Which of the following measures the amount of sales dollars generated from each dollar of capital invested in assets?

A common criticism of capital ROI as a performance measurement criterion is that it encourages a long-term orientation sometimes to the detriment of shorter-term planning. FALSE

EVA stands for "evaluating value added" performance. False

Final exam

Which of the following indicates cash receipts? Credit entries in the Marketable Securities account.

Depreciation is a non-cash expense. True

Companies that show profits on the income statement will always show positive cash flows from operating activities. False

If total current assets are $140,000 at the end of Year 1, increase by $50,000 by the end of Year 2, and increase by $50,000 in Year 3, the percentage increase over the preceding year is less in Year 3 than in Year 2. TRUE Which of the following is considered a return "on" investment? Dividends

Which financial statement is primarily concerned with reporting the financial position of a business at a particular time? Balance sheet The general purpose financial statements prepared annually by a corporation would not include the: A. Balance sheet. B. Income tax return. C. Income statement. D. Statement of cash flows.

If a company purchases equipment for $65,000 by issuing a note payable: Total assets will increase by 65000

Bob Bertolucci, owner of Bob’s Bazaar, also owns a personal residence that costs $575,000. The market value of his residence is $725,000. During preparation of the financial statements for Bob’s Bazaar, the accounting principle most relevant to the presentation of Bob’s home is: The concept of the business entity.

...