(2) 
 
1.
_____ refers to the cash flow that results from the firm's ongoing, normal business activities.
Net working capital
Cash flow to creditors
Cash flow from operating activities
Cash flow from assets
Capital spending
(2) 
 
2.
Which of the following are included in current assets?
I. equipment
II. Inventory
III. accounts payable
IV. cash
II and IV only
III and IV only
II, III, and IV only
I and III only
I, II, and IV only
(2) 
 
3.
When making financial decisions related to assets, you should:
place more emphasis on book values than on market values.
always consider market values.
place primary emphasis on historical costs.
only consider market values if they are less than book values.
rely primarily on the value of assets as shown on the balance sheet.
(2) 
 
4.
Your _____ tax rate is the amount of tax payable on the next taxable dollar you earn.
residual
marginal
deductible
deductible
total
average
(0) 
 
5.
  
What is the cash flow to creditors for 2011?
→
-$35
$205
$170
$135
-$170
Cash flow to creditors = $35 - ($410 - $340) = -$35
(2) 
 
6.
_____ refers to the changes in net capital assets.
Cash flow from assets
Net working capital
Cash flow to creditors
Operating cash flow
Cash flow from investing
(0) 
 
7.
One of the reasons why cash flow analysis is popular is because:
cash flows are hard to understand.
it is easy to manipulate, or spin the cash flows.
None of these.
→
it is difficult to manipulate, or spin the cash flows.
cash flows are more subjective than net income.
(0) 
 
8.
Martha's Enterprises spent $2,500 to purchase equipment three years ago. This equipment is currently valued at $2,000 on today's balance sheet but could actually be sold for $2,200. Net working capital is $300 and long-term debt is $900. Assuming the equipment is the firm's only fixed asset, what is the book value of shareholders' equity?
→
$1,400
$1,600
The answer cannot be determined from the information provided
$1,900
$1,100
Book value of shareholders' equity = $2,000 + $300 - $900 = $1,400
(2) 
 
9.
_____ is calculated by adding back noncash expenses to net income and adjusting for changes in current assets and liabilities.
Operating cash flow
Cash flow from operations
Cash flow to creditors
Net working capital
Capital spending
(2) 
 
10.
Your _____ tax rate is the total taxes you pay divided by your taxable income.
residual
deductible
total
average
marginal
(2) 
 
11.
  
What is net capital spending for 2011?
$57
$0
-$57
$477
-$250
Net capital spending = $1,413 - $1,680 + $210 = -$57
(2) 
 
12.
A(n) ____ asset is one which can be quickly converted into cash without significant loss in value.
current
liquid
fixed
long-term
intangible
(0) 
 
13.
An increase in total assets:
can only occur when a firm has positive net income.
means that net working capital is also increasing.
requires an investment in fixed assets.
→
must be offset by an equal increase in liabilities and shareholders' equity.
means that shareholders' equity must also increase.

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