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Chapter 02 Financial Statements & Cash Flow




Question;33. When you are making a financial decision, the most;relevant tax rate is the _____ rate.;A. average;B. fixed;C. marginal;D. total;E. variable;34. An increase in which one of the following will;cause the operating cash flow to increase?;A. Change in net working capital;B. Taxes;C. Net working capital;D. Costs;E. Depreciation;35. A firm starts its year with a positive net working;capital. During the year, the firm acquires more short-term debt than it does;short-term assets. This means that;A. the ending net working capital will be negative.;B. both accounts receivable and inventory decreased during the year.;C. the beginning current assets were less than the beginning current;liabilities.;D. accounts payable increased and inventory decreased during the year.;E. the ending net working capital can be positive, negative, or equal to;zero.;36. The cash flow to creditors includes the;cash;A. received by the firm when payments are paid to suppliers.;B. outflow of the firm when new debt is acquired.;C. outflow when interest is paid on outstanding debt.;D. inflow when accounts payable decreases.;E. received when long-term debt is paid off.;37. Cash flow to stockholders must be positive;when;A. the net sale of common stock exceeds the amount of dividends paid.;B. no income is distributed but new shares of stock are sold.;C. both the cash flow to assets and the cash flow to creditors are;negative.;D. the dividends paid exceed the net new equity raised.;E. both the cash flow to assets and the cash flow to creditors are;positive.;38. Which equality is the basis for the balance;sheet?;A. Fixed Assets = Stockholder's Equity + Current Assets;B. Assets = Liabilities + Stockholder's Equity;C. Assets = Current Long-Term Debt + Retained Earnings;D. Fixed Assets = Liabilities + Stockholder's Equity;E. None of the above.;39. Assets are listed on the balance sheet in order;of;A. decreasing size.;B. decreasing liquidity.;C. relative life.;D. increasing size.;E. None of the above.;40. Debt is a contractual obligation that;A. requires the payout of residual flows to the holders of these;instruments.;B. requires a repayment of a stated amount and interest over the period.;C. allows the bondholders to sue the firm if it defaults.;D. Both A and B.;E. Both B and C.


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