Finance Questions

Capital spending is equal toA) the net purchases and sales of fixed assets.B) total cash flow to stockholders less interest and dividends paid.C) net income plus depreciation.D) the net change in total assets.E) the change in current assets minus the change in current liabilities.

What is the formula for computing operating cash flow?A) EBIT + Depreciation − Current taxesB) EBIT + Depreciation − Interest expense − Current taxesC) EBIT + NWC − DepreciationD) EBIT − Depreciation + Current taxesE) EBIT − Change in NWC + Depreciation − Current taxes

________ refers to the difference between a firm's current assets and its current liabilities.A) Operating cash flowB) Capital spendingC) Net working capitalD) Cash flow from assetsE) Cash flow to creditors

________ is calculated by adding back noncash expenses to earnings before interest and taxes, subtracting taxes, and adjusting for any changes in total assets or current liabilities that affect cash flows.A) Distributable cash flowB) Capital spendingC) Cash flow from assetsD) Cash flow from investing activitiesE) Cash flow to creditors

DepreciationA) reduces both the net fixed assets and the costs of a firm.B) decreases net fixed assets, net income, and operating cash flows.C) is a noncash expense that decreases the selling, general, and administrative expenses.D) is a noncash expense that reduces the pretax income.E) increases the net fixed assets as shown on the balance sheet.

________ refers to a firm's interest payments minus any net new borrowing.A) Operating cash flowB) Distributable cash flowC) Net working capitalD) Cash flow to stockholdersE) Cash flow to creditors

Noncash items refer toA) the credit sales of a firm.B) the accounts payable of a firm.C) all accounts on the balance sheet other than cash on hand.D) the costs incurred for the purchase of intangible fixed assets.E) expenses charged against revenues that do not directly affect cash flow.

The cash flow to creditors increases whenA) cash is used to reduce accounts payable.B) new shares of stock are sold for cash.C) interest is paid on outstanding debt.D) an asset is sold for cash.E) a long-term debt is incurred.

Which one of these, all else held constant, will increase the value of stockholders' equity?A) Decrease in accounts receivableB) Increase in long-term debtC) Decrease in retained earningsD) Increase in accounts payableE) Increase in fixed assets

Cash flow to stockholders must be positive whenA) the net sale of common stock exceeds the amount of dividends paid.B) no income is distributed but new shares of stock are sold.C) both the cash flow to assets and the cash flow to creditors are negative.D) both the cash flow to assets and the cash flow to creditors are positive.E) the dividends paid exceed the net new equity raised.

Your ________ tax rate measures the total taxes you pay divided by your total taxable income.A) averageB) marginalC) totalD) deductibleE) residual

Assume both current and deferred taxes are positive values. Given this, deferred taxes willA) reduce the current tax expense and thus increase net income.B) increase expenses and increase operating cash flows.C) increase expenses and lower operating cash flows.D) reduce net income but not affect the operating cash flows.E) reduce both net income and operating cash flows.

Earnings per share is computed asA) net income divided by total stockholders' equity.B) EBIT divided by total stockholders' equity.C) pretax income minus current taxes divided by total shares outstanding.D) the addition to retained earnings divided by total shares outstanding.E) net income divided by total shares outstanding.

Your ________ tax rate is the percentage of the next taxable dollar of income you earn that is payable as a tax.A) deductibleB) residualC) marginalD) averageE) total

Cash flow to stockholders is best defined asA) the total dividends paid.B) the cash flow from assets plus the cash flow to creditors.C) cash dividends plus repurchases of equity minus new equity financing.D) repurchases of equity less cash dividends paid plus new equity sold.E) the net change in common stock and capital surplus.

When you are making a financial decision, the most relevant tax rate is the ________ rate.A) averageB) fixedC) marginalD) totalE) variable

When making financial decisions related to assets, you shouldA) place primary emphasis on historical costs.B) place more emphasis on book values than on market values.C) rely primarily on the value of assets as shown on the balance sheet.D) always consider market values.E) only consider market values if they are less than book values.

Al's has a positive net income and a marginal tax rate of 34 percent. Given this, an increase in which one of the following will cause the operating cash flow to increase?A) Fixed assetsB) TaxesC) Net working capitalD) Cost of goods soldE) Depreciation

Which one of the following accounts is generally the most liquid?A) PatentB) BuildingC) Accounts receivableD) EquipmentE) Inventory

Liquidity isA) a measure of the use of debt in a firm's capital structure.B) equal to current assets minus current liabilities.C) equal to the market value of a firm's total assets minus its current liabilities.D) generally associated with intangible assets.E) valuable to a firm even though liquid assets tend to be less profitable to own.