FIN 300 Chapter Notes - Chapter 3: Reserve Requirement, Financial Statement

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greenskunk609

14 May 2012

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Fin 300 chapter 3: working with financial statements. 3. 1 cash flow and financial statements: a closer look. Firms do two different things: (1) generate cash and (2) spend it: cash generated from selling a product, an asset, or a security. Selling a security involves either borrowing or selling an equity interest: cash is spent by paying for materials and labour to produce a product and by purchasing assets. Paying to creditors and owners require spending cash. Sources of cash a firm"s activities that generate cash. Uses (or applications) of cash a firm"s activities in which cash is spent. An increase on the left-hand side (asset) or a decrease on the right-hand side (liability or equity) account is a use of cash. A decrease in the asset account or an increase in the liability or equity account is a source of cash. Net addition to cash is just the difference between sources and uses of cash.

Related Questions

Which of the following would not be a source of funds?

		a. decrease in an equity account
		b. increase in a liability account
		c. decrease in an asset account
		d. all the above are sources of funds

redelk350

Selected data for Kris Corporationâs comparative balance sheetsfor Year 1 and Year 2 are as follows:

	Year 1		Year 2
Assets
Cash	$	100,000	$	(50,000)
Accounts receivable (net)		50,000		100,000
Inventory		100,000		250,000
Equipment (net)		300,000		350,000
Total assets	$	550,000	$	650,000
Liabilities and Equity
Accounts payable	$	150,000		100,000
Income taxes payable		80,000		30,000
Bonds payable		100,000		80,000
Common stock		100,000		200,000
Retained earnings		120,000		240,000
Total liabilities and Equity	$	550,000	$	650,000

1. The change in the equipment balance would berecorded on the statement of cash flows as:

A) a decrease of $50,000 under investing activities.

B) an increase of $50,000 under investing activities.

C) a decrease of $150,000 under investing activities.

D) an increase of $150,000 under operating activities.

2. The change in the balance of the Bonds Payableaccount would be recorded on the statement of cash flowsas:

A) an increase of $20,000 under financing activities.

B) an increase of $80,000 under investing activities.

C) a decrease of $20,000 under financing activities.

D) a decrease of $80,000 under operating activities.

limebee696

1. Which of the following would result in a decrease in cash flow and a use of cash? A. A decrease in notes payable B. An increase in long-term debt C. A decrease in inventory D. A decrease in common stock

2. In the United States, for the 2007 tax year, federal corporate income tax rates never exceeded an average rate of A. 15%. C. 39%. B. 35%. D. 34%.

3. A firm has assets of $60,000 and ownersâ equity of $33,000. Which of the following is the correct balance of the firmâs liabilities? A. $33,000 C. $93,000 B. $27,000 D. $60,000

4. Which of the following would result in an increase in cash flow and a source of cash? A. A decrease in notes payable B. A decrease in long-term debt C. An increase in inventory D. An increase in common stock

5. A firm has current assets of $10,000 and current liabilities of $7,000. Which of the following is the correct net working capital for the firm? A. $10,000 C. $3,000 B. $7,000 D. $13,000

6. If a firm has an accounts receivable balance of $18,800 at the end of 2007 and $16,500 at the end of 2008, which of the following statements about accounts receivable is correct? A. Accounts receivable decreased by $2,300 and represented a use of cash. B. Accounts receivable increased by $2,300 and represented a source of cash. C. Accounts receivable decreased by $2,300 and represented a source of cash. D. Accounts receivable increased by $2,300 and represented a use of cash.

7. If a firm has revenues of $15,090 and expenses of $8,850, what is the firmâs taxable income? A. $15,090 C. $6,240 B. $8,850 D. $23,940

8. Which of the following statements about the issuance of an initial public offering (IPO) is correct? A. IPOs may be either underpriced or overpriced. B. IPOs are never overpriced. C. IPOs are never underpriced. D. IPOs are always correctly priced.

9. If a firm has revenues of $15,090, operating expenses of $8,850, and a tax expense of $2,120, what is the firmâs net income? A. $8,850 C. $6,240 B. $4,120 D. $8,360

10. When youâre preparing a common-sized balance sheet, which of the following measures is set to equal 100 percent? A. Total liabilities C. Total ownersâ equity B. Total assets D. Cash Examination, Lesson 1 35

11. Suppose that a corporation has a taxable income of $200,000. What is the firmâs corporate income tax for the current tax year? (You can use the following table to calculate the firmâs U.S. federal corporate tax.) Taxable Income More Than Taxable Income Less Than Tax Rate $0 $50,000 15% $50,001 $75,000 25% $75,001 $100,000 34% $100,001 $335,000 39% $335,001 $10,000,000 34% $10,000,001 $15,000,000 35% $15,000,001 $183,333,334 38% $18,333,334 35% A. $78,000 C. $39,000 B. $6,250 D. $61,250

12. Using the same table and information provided in Question 11, what is the firmâs average tax rate? A. 39% C. 34% B. 30.625% D. 31.625%

13. Using the same table and information provided in Question 11, what is the firmâs marginal tax rate? A. 39% C. 34% B. 30.625% D. 31.625%

14. Dilution refers to the loss of shareholder value, and may be represented by all of the following except dilution of A. ownership percentage. B. market value. C. the firmâs current ratio. D. book value per share.

15. If a firm has $6,940 in earnings before interest and taxes, $650 in depreciation expense, and $2,120 in taxes, what is the firmâs operating cash flow? A. $4,120 C. $6,240 B. $5,470 D. $9,710

16. The type of financial statement that summarizes the sources and uses of cash over a specified period of time is called the A. statement of cash flows. B. income statement. C. balance sheet. D. inventory ratio statement.

17. The current ratio falls within which of the following classifications of financial ratios? A. Long-term solvency measures B. Asset management or turnover measures C. Short-term solvency or liquidity measures D. Profitability measures

18. If a firm has an accounts payable balance of $34,400 at the end of 2007 and $31,200 at the end of 2008, which of the following statements about accounts payable is correct? A. Accounts payable decreased by $3,200 and represented a use of cash B. Accounts payable increased by $3,200 and represented a source of cash C. Accounts payable decreased by $3,200 and represented a source of cash D. Accounts payable increased by $3,200 and represented a use of cash

19. Which of the following is not one of the six costs of issuing securities? A. Rights offering C. Green Shoe option B. Abnormal returns D. Gross spread 20. In the United States, for the 2007 tax year, federal corporate income tax rates never exceeded a marginal rate of A. 15%. C. 39%. B. 35%. D. 34%.

20. In the United States, for the 2007 tax year, federal corporate income tax rates never exceeded a marginal rate of A. 15%. C. 39%. B. 35%. D. 34%.

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FIN 300 Chapter Notes - Chapter 3: Reserve Requirement, Financial Statement

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