FIN 3403 EXAM 1 QUESTIONS AND
ANSWERS ALL CORRECT
Which of these are generally considered to be short-run fixed costs? - Answer-
Management salaries
Property taxes
Overhead expenses
Depreciation is the accountant's estimate of the cost of _________ used up in the
production process - Answer- equipment
The more debt a firm has, the greater its: - Answer- degree of financial leverage
Which are true concerning product costs? - Answer- Product costs are reported as
costs of goods sold.
Product costs contain both fixed and variable costs.
Long term liabilities represent obligation of the firm lasting over ________. - Answer- 1
year
How is income defined? - Answer- Revenue minus expenses
On which side of the balance sheet do liabilities appear? - Answer- The right side
The short run for a firm is the period of time during which ________. - Answer- Output
can vary
Some costs are fixed
Which of the following are examples of short-run fixed costs? - Answer- Bond interest
Rent
Who is entitled to the residual value of a firm's cash flows? - Answer- Shareholders
Which of the following do not directly affect cash flow? - Answer- Depreciation
How is the average income tax rate computed? - Answer- Total tax bill/Total taxable
income
In the long-run, __________ are variable. - Answer- all costs
, A decrease in depreciation expense __________ earnings per share. - Answer-
increases
For financial decision-making purposes, the most important tax rate is the ________ tax
rate. - Answer- marginal
Increasing its non-cash liquid assets will enable a firm to do which of the following? -
Answer- Increase its ability to avoid financial distress.
Increase its ability to meet short-term obligations.
Which of the following are period costs? - Answer- Selling costs
General expenses
Administrative expenses
According to GAAP, when is income reported? - Answer- When it is earned or accrued
Which of the following is an example of a non-cash item on an income statement? -
Answer- Depreciation
Which of these questions can be answered by reviewing a firm's balance sheet? -
Answer- What is the total amount of assets the firm owns?
How much debt is used to finance the firm?
What does stockholders' equity represent? - Answer- A residual claim against the firm's
assets
Marginal tax rates are the most important tax rates because: - Answer- Financial
decisions are usually based on new cash flows.
Incremental cash flows are taxed at marginal tax rates.
Accountants usually distinguish between _______ costs and _______ costs. - Answer-
product; period
A good financial decision will do which of the following? - Answer- Increase
shareholders equity
Increase the value of the firm's existing stock
A corporation is a distinct ________ entity and as such can have a name and take
advantage of the legal powers of natural persons - Answer- legal
Some of the cash flow generated by a firm goes back to the financial markets in the
form of _____________? - Answer- dividends and debt payments
Which positions generally report to the CFO? - Answer- Controller
Treasurer
ANSWERS ALL CORRECT
Which of these are generally considered to be short-run fixed costs? - Answer-
Management salaries
Property taxes
Overhead expenses
Depreciation is the accountant's estimate of the cost of _________ used up in the
production process - Answer- equipment
The more debt a firm has, the greater its: - Answer- degree of financial leverage
Which are true concerning product costs? - Answer- Product costs are reported as
costs of goods sold.
Product costs contain both fixed and variable costs.
Long term liabilities represent obligation of the firm lasting over ________. - Answer- 1
year
How is income defined? - Answer- Revenue minus expenses
On which side of the balance sheet do liabilities appear? - Answer- The right side
The short run for a firm is the period of time during which ________. - Answer- Output
can vary
Some costs are fixed
Which of the following are examples of short-run fixed costs? - Answer- Bond interest
Rent
Who is entitled to the residual value of a firm's cash flows? - Answer- Shareholders
Which of the following do not directly affect cash flow? - Answer- Depreciation
How is the average income tax rate computed? - Answer- Total tax bill/Total taxable
income
In the long-run, __________ are variable. - Answer- all costs
, A decrease in depreciation expense __________ earnings per share. - Answer-
increases
For financial decision-making purposes, the most important tax rate is the ________ tax
rate. - Answer- marginal
Increasing its non-cash liquid assets will enable a firm to do which of the following? -
Answer- Increase its ability to avoid financial distress.
Increase its ability to meet short-term obligations.
Which of the following are period costs? - Answer- Selling costs
General expenses
Administrative expenses
According to GAAP, when is income reported? - Answer- When it is earned or accrued
Which of the following is an example of a non-cash item on an income statement? -
Answer- Depreciation
Which of these questions can be answered by reviewing a firm's balance sheet? -
Answer- What is the total amount of assets the firm owns?
How much debt is used to finance the firm?
What does stockholders' equity represent? - Answer- A residual claim against the firm's
assets
Marginal tax rates are the most important tax rates because: - Answer- Financial
decisions are usually based on new cash flows.
Incremental cash flows are taxed at marginal tax rates.
Accountants usually distinguish between _______ costs and _______ costs. - Answer-
product; period
A good financial decision will do which of the following? - Answer- Increase
shareholders equity
Increase the value of the firm's existing stock
A corporation is a distinct ________ entity and as such can have a name and take
advantage of the legal powers of natural persons - Answer- legal
Some of the cash flow generated by a firm goes back to the financial markets in the
form of _____________? - Answer- dividends and debt payments
Which positions generally report to the CFO? - Answer- Controller
Treasurer
