Chapter 2--Analysis of Fina - Copy

True false 17 on the balance sheet total assets must

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True False 17. On the balance sheet, total assets must equal total liabilities plus stockholders equity. True False 18. One of the biggest noncash items on the income statement is depreciation which needs to be subtracted from net income to determine cash flows for the firm. True False 19. A firm's net income reported on its income statement must equal the operating cash flows on the statement of cash flows. True False 20. A statement reporting the impact of a firm's operating, investing, and financing activities on cash flows over an accounting is the statement of cash flows. True False 21. When a firm conducts a seasoned equity offering, it increases an equity account which is an example of a source of funds. True False 22. When a firm conducts a stock repurchase, it increases an equity account which is an example of a source of funds. True False 23. A liquid asset is an asset that can be easily converted into cash without a significant loss of its original value. True False 24. Genzyme Corporation has seen its days sales outstanding (DSO) decline from 38 days last year to 22 days this implying that more of the firm's suppliers are being paid on time. True False
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25. Funds supplied by common stockholders mainly includes capital stock, paid-in capital, and retained earnings, while total equity is comprised of common equity plus preferred stock. True False 26. Retained earnings is the cash that has been generated by the firm through its operations which has not been paid out to stockholders as dividends. Retained earnings are kept in cash or near cash accounts and thus, these cash accounts, when added together, will always be equal to the total retained earnings of the firm. True False 27. The financial position of companies whose business is seasonal can be dramatically different depending upon the time of year chosen to construct financial statements. This time sensitivity is especially true with respect to the firm's balance sheet. True False 28. In order to accurately estimate cash flow from operations, depreciation must be added back to net income. The reason for this is that even though depreciation is deducted from revenue it is really a non-cash charge. True False 29. In accounting, emphasis is placed on determining net income. In finance, the primary emphasis also is on net income because that is what investors use to value the firm. However, a secondary consideration is cash flow because that's what is used to run the business. True False 30. Current cash flow from existing assets is highly relevant to the investor. However, the value of the firm depends primarily upon its growth opportunities. As a result, profit projections from those opportunities are the only relevant future flows with which investors are concerned.
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