Question 1: Which of the following could lead to cash flow problems?
- Tightening of credit by suppliers
- Easing of credit by suppliers
- Reduction of inventory
- Improved quality of accounts receivable
- Selling of bonds
Question 2: Which of the following represents an internal source of cash?
- Cash inflows from financing activities
- Cash inflows from investing activities
- Cash inflows from selling land
- Cash inflows from operating activities
- Cash inflows from issuing stock
Question 3: Which of the following is not a typical cash flow under operating activities?
- cash inflows from sale of goods or services
- cash inflows from interest
- cash outflows to employees
- cash outflows to suppliers
- cash inflows from sale of property, plant, and equipment
Question 4: Working capital is defined as
- total assets less intangible assets
- current assets divided by current liabilities
- current assets less current liabilities
- total assets less current assets
- current assets less liabilities
Question 5: Management should use the statement of cash flows for which of the following purposes?
- To determine dividend policy
- To determine cash flow from operations
- To determine cash flow from investing activities
- To determine cash flow from financing activities
- To determine the balance in accounts receivable
Question 6: Notes to financial statements are beneficial in meeting the disclosure requirements of financial reporting. The notes should not be used to
- Describe depreciation methods employed by the company.
- Describe principles and methods peculiar to the industry in which the company operates when these principles and methods are predominately followed in that industry.
- Disclose the basis of consolidation for consolidated statements.
- Correct an improper presentation in the financial statements.
Question 7: The concept of conservatism is often considered important in accounting. The application of this concept means that in the event some doubt occurs as to how a transaction should be recorded, it should be recorded so as to
- Understate income and overstate assets
- Overstate income and overstate assets
- Understate income and understate assets
- Overstate income and understate assets
Question 8: Which of the following ratios would best disclose effective management of working capital by a given firm relative to other firms in the same industry?
- A high rate of financial leverage relative to the industry average
- A high number of days' sales uncollected relative to the industry average
- A high turnover of net working capital relative to the industry average
- A high number of days' sales in inventory relative to the industry average
Question 9: Which of the following would not be an example of the use of a multiple when valuing common equity?
- Multiperiod discounted earnings models
- Price-to-earnings (PE)
- Price-to-book
- Price-to-operating cash flow
Question 10: Which of the following was not given as a reason for acquirers paying too much in an acquisition?
- Overbidding
- Overuse of conventional financial statements
- Overoptimistic appraisal of market potential
- Overestimation of synergies