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Exam 2: Review of Accounting

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Question 41

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Compute the cash flows from operations using the indirect method if Star Corporation had $250,000 in net income, $30,000 in depreciation expense, a decrease of $20,000 in accounts receivable and an increase in bonds payable of $50,000.

A) $370,000
B) $300,000
C) $250,000
D) $310,000

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Question 42

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Balance sheet items consider inflation and market value when assigning the amount to assets, liabilities, and equity accounts.

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Question 43

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Dividing earnings after taxes (which includes all profits distributed to both preferred stockholders and common stockholders) by common shares outstanding produces earnings per share.

The investments account includes marketable securities.

Which of the following would not be classified as a current asset?

A statement of cash flows allows a financial analyst to determine

Consider the following information for Ball Corp. What is the operating profit for Ball Corp.?

How many of the following items are found on the income statement, rather than the balance sheet? •Sales •Notes payable (due in six months •Bonds payable (mature in 10 years •Common stock •Depreciation expense •Inventories •Capital in excess of par value •Net income (earnings after taxes) •Income tax payable

A decrease in bonds payable results in a cash outflow on the statement of cash flows.

Book value per share of stock and market value per share of stock are usually the same dollar amount.

The Statement of Cash Flows has three parts: operating, investing, and financing under both the indirect and direct method.

Sales minus cost of goods sold is equal to gross profit.

Free cash flow is equal to cash flow from operating activities plus depreciation.

Assuming a tax rate of 40%, the after-tax cost of interest expense of $1,000,000 is

Given the following, what is free cash flow? Cash flow from operating activities $200,000 Cash flow from investing activities $140,000 Cash flow from financing activities $56,000 Building purchases$50,000 Dividends Paid $20,000

Increasing interest expense will have what effect on Earnings Before Interest and Taxes (EBIT) ?

Another way of writing net income after tax is earnings after taxes (EAT).

An increase of $100,000 in inventory would result in a(n)

Price-earnings (P/E) ratio is influenced by all of the following BUT

The P/E ratio provides no indication of investors' expectations about the future of a company.