01 Jan Notes to the financial

Part 1 of 1 – Lesson 2 Questions 100.0 100.0 Points

Question 1 of 20

5.0 5.0 Points

Debts to be paid more than one year from now are claims against the firm’s assets; in other words, they are long-term liabilities. These claims are from __________ who have provided capital to the firm but whose entire repayment is not due during the coming year or operating cycle.

A. banks and bondholders

B. banks and stockholders

C. stockholders and bondholders

D. all long-term lenders

Question 2 of 20

5.0 5.0 Points

Net income is

A. not cash flow.

B. the cash flow from the operations of the company during the period.

C. the increase or decrease in cash flow for the period.

D. earnings before interest and taxes.

Question 3 of 20

5.0 5.0 Points

Understanding the sources and uses of cash in the recent past will enable a manager to __________ the cash flow for a potential project of the firm.

A. determine with perfect precision

B. forecast with perfect precision

C. predict more accurately

D. know today

Question 4 of 20

5.0 5.0 Points

Which one of the answers below is NOT one of the three components of the Cash Flow from Assets

A. Operating Cash Flow

B. Net Capital Spending

C. Noncash expenses

D. Change in Net Working Capital

Question 5 of 20

5.0 5.0 Points

The SEC has a site named EDGAR that

A. provides, at a cost, online access to a company’s financial reports.

B. offers investors free advice on what stocks to pick.

C. provides an online tutorial on how to understand the government’s role in affecting stock prices.

D. provides an online tutorial that will help new viewers find a company and its financial statements.

Question 6 of 20

5.0 5.0 Points

Three fundamental issues separate net income and cash flow. Which of the answers below is NOT one of these three fundamental issues

A. Accrual accounting

B. Noncash accounting

C. Noncash expense items

D. Interest expense

Question 7 of 20

5.0 5.0 Points

Which of the following items may be included on all income statements at

yahoo.finance.com, even though they may not be part of an individual

company’s income statement for that year

A. Cost of Revenue and Extraordinary Items

B. Goodwill and Effect of Accounting Changes

C. Effect of Accounting Changes and Deferred Long-Term Asset Charges

D. Cost of Revenue and Treasury Stock

Question 8 of 20

5.0 5.0 Points

To find operating cash flow for the business for the year, add depreciation expense to EBIT and then

A. subtract the interest expenses.

B. add the taxes.

C. subtract the taxes.

D. add interest expenses.

Question 9 of 20

5.0 5.0 Points

Which of the sections below is NOT contained in the annual report

A. Prediction of competitors’ returns

B. Company highlights

C. President’s letter to the shareholders

D. Description of the company’s activities (usually with pictures and graphs)

Question 10 of 20

5.0 5.0 Points

One of the key components to making financial decisions is to

A. understand the timing and amount of dividends.

B. understand the timing and amount of cash flow.

C. understand the timing of EBIT.

D. understand the amount of net income.

Question 11 of 20

5.0 5.0 Points

There are four primary financial statements that are used to measure the performance of a firm. Which of the choices below are included in these four

A. The balance statement and income statement

B. The income sheet and statement of retained earnings

C. The statement of cash flow and statement of balance

D. The balance sheet and statement of cash flow

Question 12 of 20

5.0 5.0 Points

Which of the following statements is false

A. Financial data on the Internet or via company annual reports provide a wealth of knowledge about the operations of the firm.

B. Knowing the relationship of the primary financial statements and how to utilize the data in each are important tools for all financial managers.

C. Although the annual report of a company is printed and mailed to owners and the SEC, much of the financial statement information is available at various financial websites.

D. EDGAR stands for Electronic Data Gathering Analysis and Retribution.

Question 13 of 20

5.0 5.0 Points

Which of the following statements is true

A. The finance manager uses the framework of the income statement to find

the operating income of the company (an accounting measure), which is

also the true cash flow from operations.

B. In accrual-based accounting, revenue is recorded at the time of sale if

the revenue has been received in cash.

C. Three fundamental issues separate net income and cash flow accrual

accounting, noncash expense items, and interest expense.

D. Generally Accepted Accounting Principles (GAAP) in the United States do

not allow the use of accrual accounting to record revenue.

Question 14 of 20

5.0 5.0 Points

Which of the statements below is true

A. Accounting Identity is Assets = Liabilities – Owners’ Equity.

B. Accounting Identity is Assets = Liabilities + Owners’ Equity.

C. Accounting Identity is Assets = Owners’ Equity – Liabilities.

D. Accounting Identity is Liabilities = Assets + Owners’ Equity.

Question 15 of 20

5.0 5.0 Points

Cash and Equivalents are $1,561; Short-Term Investments are $1,052; Accounts Receivables are $3,616; Accounts Payable is $5,173; Short-Term Debt is $288; Inventories are $1,816; Other Current Liabilities are $1,401; and Other Current Assets are $707. What is the amount of Total Current Liabilities

A. $8,752

B. $6,974

C. $6,862

D. $6,574

Question 16 of 20

5.0 5.0 Points

The purpose of studying financial statements is

A. to mechanically build portfolio analysis.

B. to understand those portions of the statements that have relevance for financial decision making.

C. to primarily investigate all portions of the statements that have relevance for dividend policy.

D. to mechanically learn how to read and understand footnotes.

Question 17 of 20

5.0 5.0 Points

The annual report of a company is

A. printed and mailed to owners and the SEC.

B. not available online.

C. not mailed to owners but only to the SEC.

D. always available online in more detail.

Question 18 of 20

5.0 5.0 Points

Which of the statements below is false

A. The income statement summaries and categorizes a company’s revenues and expenses for that period.

B. Typically, income statements are prepared quarterly and annually for distribution outside the company, but usually monthly for internal managers.

C. The income statement begins with revenue and subtracts various operating expenses until arriving at Earnings Before Interest and Taxes (EBIT).

D. The balance sheet reports the performance of the firm over the past period. It summarizes and categorizes a company’s revenues and expenses for that period.

Question 19 of 20

5.0 5.0 Points

Which of the following identities is true

A. Operating Cash Flow = EBIT + Depreciation – Taxes

B. Net Capital Spending = Ending Net Fixed Assets – Depreciation

C. Change in Net Working Capital (NWC) = Current Assets – Current Liabilities

D. Cash Flow from Assets = Operating Cash Flow + Net Capital Spending

Question 20 of 20

5.0 5.0 Points

Notes to the financial statements help explain many of the details necessary to gain a more complete picture of the firm’s

A. capital budget.

B. choice of management.

C. dividend policy.

D. performance.