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Chapter 02 Financial Statements & Cash Flow




Question;41. The carrying value or book value of assets;A. is always the best measure of the company's value to an investor.;B. represents the true market value according to GAAP.;C. is always higher than the replacement cost of the assets.;D. is determined under GAAP and is based on the cost of the asset.;E. None of the above.;42. Under GAAP, a firm's assets are reported at;A. market value.;B. liquidation value.;C. intrinsic value.;D. cost.;E. None of the above.;43. Which of the following statements concerning the;income statement is true?;A. It measures performance over a specific period of time.;B. It determines after-tax income of the firm.;C. It includes deferred taxes.;D. It treats interest as an expense.;E. All of the above.;44. According to generally accepted accounting;principles (GAAP), revenue is recognized as income when;A. the transaction is complete and the goods or services are delivered.;B. a contract is signed to perform a service or deliver a good.;C. payment is requested.;D. income taxes are paid.;E. All of the above.;45. Which of the following is not included in the;computation of operating cash flow?;A. Earnings before interest and taxes;B. Interest paid;C. Depreciation;D. Current taxes;E. All of the above are included.;46. Net capital spending is equal to;A. net additions to net working capital.;B. total cash flow to stockholders less interest and dividends paid.;C. net income plus depreciation.;D. the change in total assets.;E. the net change in fixed assets.;47. Cash flow to stockholders is defined as;A. interest payments.;B. cash dividends plus repurchases of equity minus new equity financing.;C. cash flow from financing less cash flow to creditors.;D. repurchases of equity less cash dividends paid plus new equity sold.;E. None of the above.;48. Free cash flow is;A. without cost to the firm.;B. net income plus taxes.;C. an increase in net working capital.;D. cash that the firm is free to distribute to creditors and stockholders.;E. None of the above.


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