IFM10 Ch 07 Test Bank

IFM10 Ch 07 Test Bank - CHAPTER 7 Accounting for Financial...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 7 Accounting for Financial Management (Difficulty: E = Easy, M = Medium, and T = Tough) True-False Easy: (7.1) Annual report Answer: a Diff: E 1 . The annual report contains four basic financial statements: the income statement; balance sheet; statement of cash flows; and statement of retained earnings. a. True b. False (7.1) Annual report and expectations Answer: a Diff: E 2 . The key importance of annual report information is that it is used by investors when they form their expectations about the firm's future earnings and dividends and the riskiness of those cash flows. a. True b. False (7.2) Financial statements Answer: b Diff: E 3 . The balance sheet is a financial statement measuring the flow of funds into and out of various accounts over time while the income statement measures the progress of the firm at a point in time. a. True b. False (7.2) Balance sheet Answer: b Diff: E 4 . On the balance sheet, total assets must always equal total liabilities. The amount remaining is what is used to finance the firm and includes equity and long-term debt. a. True b. False (7.3) Income statement Answer: a Diff: E 5 . The income statement measures the flow of funds into (i.e., revenue) and out of (i.e., expenses) the firm over a certain time period. It is always based on accounting data. a. True b. False Chapter 7: Accounting for Financial Management Page 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
(7.6) Non-cash assets Answer: a Diff: E 6 . Non-cash assets are expected to produce cash over time but the amount of cash they eventually produce could be higher or lower than the values at which the assets are carried on the books. a. True b. False (7.7) Net operating working capital Answer: a Diff: E 7 . Net operating working capital is equal to the operating current assets minus the operating current liabilities. a. True b. False (7.7) Total net operating capital Answer: b Diff: E 8 . Total net operating capital is equal to net fixed assets. a. True b. False (7.7) Net operating profit after taxes (NOPAT) Answer: a Diff: E 9 . Net operating profit after taxes (NOPAT) is the amount of profit a company would have from its operations if it had no interest income or interest expense. a. True b. False (7.9) Interest income Answer: b Diff: E 10 . The fact that a percentage of the interest income received by a corporation is excluded from taxable income has encouraged firms to use more debt financing relative to equity financing. a. True b. False (7.9) Interest expense Answer: b Diff: E 11 . If the tax laws stated that $0.50 out of every $1.00 of interest paid by a corporation was allowed as a tax-deductible expense, it would probably encourage companies to use more debt financing than they presently do, other things held constant. a. True
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/02/2012 for the course FIN 516 taught by Professor None during the Spring '11 term at DeVry Fremont.

Page1 / 38

IFM10 Ch 07 Test Bank - CHAPTER 7 Accounting for Financial...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online