BA 620 exam
CHAPTER 2
FINANCIAL STATEMENTS, CASH FLOW, AND TAXES
True/False
Easy:
(2.1) Annual report F K
Answer: a
EASY
1.
The annual report contains four basic financial statements: the income statement, balance sheet, statement of cash flows, and statement of stockholders’ equity.
a.
True
b.
False
(2.1) Annual report and expectations F K
Answer: a
EASY
2.
The primary reason the annual report is important in finance is that it is used by investors when they form expectations about the firm 's future earnings and dividends, and the riskiness of those cash flows.
a.
True
b.
False
(2.2) Retained earnings versus cash C K
Answer: b
EASY
3.
Consider the balance sheet of Wilkes Industries as shown below. Because Wilkes has $800,000 of retained earnings, the company would be able to pay cash to buy an asset with a cost of $200,000.
Cash
$ 50,000
Accounts payable
$ 100,000
Inventory
200,000
Accruals
100,000
Accounts receivable 250,000
Total CL
$ 200,000
Total CA
$ 500,000
Debt
200,000
Net fixed assets
$ 900,000
Common stock
200,000
Retained earnings
800,000
Total assets
$1,400,000
Total L & E
$1,400,000
a.
True
b.
False
(2.2) Balance sheet F K
Answer: a
EASY
4.
On the balance sheet, total assets must always equal total liabilities and equity.
a.
True
b.
False
(2.2) Balance sheet: non-cash assets F K
Answer: a
EASY
5.
Assets other than cash 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 these assets are carried on the books.
a.
True
FINANCIAL STATEMENTS, CASH FLOW, AND TAXES
True/False
Easy:
(2.1) Annual report F K
Answer: a
EASY
1.
The annual report contains four basic financial statements: the income statement, balance sheet, statement of cash flows, and statement of stockholders’ equity.
a.
True
b.
False
(2.1) Annual report and expectations F K
Answer: a
EASY
2.
The primary reason the annual report is important in finance is that it is used by investors when they form expectations about the firm 's future earnings and dividends, and the riskiness of those cash flows.
a.
True
b.
False
(2.2) Retained earnings versus cash C K
Answer: b
EASY
3.
Consider the balance sheet of Wilkes Industries as shown below. Because Wilkes has $800,000 of retained earnings, the company would be able to pay cash to buy an asset with a cost of $200,000.
Cash
$ 50,000
Accounts payable
$ 100,000
Inventory
200,000
Accruals
100,000
Accounts receivable 250,000
Total CL
$ 200,000
Total CA
$ 500,000
Debt
200,000
Net fixed assets
$ 900,000
Common stock
200,000
Retained earnings
800,000
Total assets
$1,400,000
Total L & E
$1,400,000
a.
True
b.
False
(2.2) Balance sheet F K
Answer: a
EASY
4.
On the balance sheet, total assets must always equal total liabilities and equity.
a.
True
b.
False
(2.2) Balance sheet: non-cash assets F K
Answer: a
EASY
5.
Assets other than cash 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 these assets are carried on the books.
a.
True