FOUNDATIONS OF BUSINESS
FINANCE (PEREGRINE) EXAM
QUESTIONS & ANSWERS UPDATED
VERSION
True or false: The one fixed asset that is not depreciated is land because it seldom
declines in value. - Correct Answer ✔✔ True
__________ liabilities are those due within one year. - Correct Answer ✔✔ Current
__________-__________ __________ liabilities are due after more than a year, and
may include bonds, mortgages, and long-term loans. - Correct Answer ✔✔ Long-term
debt
Name the three types of accounts listed as current liabilities on balance sheets. -
Correct Answer ✔✔ (1) Accounts Payable
(2) Notes Payable
(3) Accrued Expenses
Accounts payable - Correct Answer ✔✔ The amounts owed for credit purchases by a
firm
Notes payable - Correct Answer ✔✔ Outstanding short-term loans, typically from
commercial banks
Accrued expenses - Correct Answer ✔✔ Costs that have been incurred by a firm which
have not yet been paid; examples of accruals include taxes owed to the government
and unpaid wages
The __________ __________ section of a balance sheet provides information about
the claims against a firm held by investors who own preferred and common shares. -
Correct Answer ✔✔ Stockholders' equity
The Stockholders' equity section of the balance sheet is reflected in four types of
accounts. These include __________ __________, __________ __________,
__________-__________-__________ __________ ___________ __________
__________, and __________ __________. - Correct Answer ✔✔ (1) preferred stock
(2) common stock
(3) paid-in-capital excess of par
(4) retained earnings
, __________ __________ shows the total proceeds from the sale of preferred stock. -
Correct Answer ✔✔ Preferred stock
__________-__________-__________ __________ __________ __________
__________ equals the number of shares outstanding multiplied by the original selling
price of the shares, net of the par value. - Correct Answer ✔✔ Paid-in-capital in excess
of par
__________ __________ equals the number of outstanding common shares multiplied
by the par value per share. - Correct Answer ✔✔ Common stock
__________ __________ (often $1) is an artifact of earlier pre-computer accounting
methods used to track the number of outstanding shares. It has no relation to the actual
value of the shares. - Correct Answer ✔✔ Par value
__________ __________ are the cumulative total of the earnings that the firm has
reinvested in its assets and operations since its inception. - Correct Answer ✔✔
Retained earnings
The combined value of __________ __________ and __________-__________-
__________ equals the proceeds the firm received when it originally sold shares to
investors (including initial public offerings and rights offerings). - Correct Answer ✔✔
common stock, paid-in-capital
The __________ __________ entry on a balance sheet records the value of common
shares that a firm currently holds in reserve. - Correct Answer ✔✔ treasury stock
The __________ __________ __________ __________ provides a summary of what
cash has gone into and out of a firm because of its operations, investments, and
financing activities during a year. It isolates the firm's operating, investment, and
financing cash flows and reconciles them with changes in its cash and marketable
securities during the year. - Correct Answer ✔✔ statement of cash flows
A firm's total cash flows can be conveniently divided into three categories. These
include __________ flows, __________ flows, and __________ flows. - Correct Answer
✔✔ operating, investment, financing
Operating flows - Correct Answer ✔✔ Cash inflows and outflows directly related to the
production and sale of products or services
Investment flows - Correct Answer ✔✔ Cash flows associated with the purchase or sale
of fixed assets and business equity
Financing flows - Correct Answer ✔✔ Cash flows which result from debt and equity
financing transactions
FINANCE (PEREGRINE) EXAM
QUESTIONS & ANSWERS UPDATED
VERSION
True or false: The one fixed asset that is not depreciated is land because it seldom
declines in value. - Correct Answer ✔✔ True
__________ liabilities are those due within one year. - Correct Answer ✔✔ Current
__________-__________ __________ liabilities are due after more than a year, and
may include bonds, mortgages, and long-term loans. - Correct Answer ✔✔ Long-term
debt
Name the three types of accounts listed as current liabilities on balance sheets. -
Correct Answer ✔✔ (1) Accounts Payable
(2) Notes Payable
(3) Accrued Expenses
Accounts payable - Correct Answer ✔✔ The amounts owed for credit purchases by a
firm
Notes payable - Correct Answer ✔✔ Outstanding short-term loans, typically from
commercial banks
Accrued expenses - Correct Answer ✔✔ Costs that have been incurred by a firm which
have not yet been paid; examples of accruals include taxes owed to the government
and unpaid wages
The __________ __________ section of a balance sheet provides information about
the claims against a firm held by investors who own preferred and common shares. -
Correct Answer ✔✔ Stockholders' equity
The Stockholders' equity section of the balance sheet is reflected in four types of
accounts. These include __________ __________, __________ __________,
__________-__________-__________ __________ ___________ __________
__________, and __________ __________. - Correct Answer ✔✔ (1) preferred stock
(2) common stock
(3) paid-in-capital excess of par
(4) retained earnings
, __________ __________ shows the total proceeds from the sale of preferred stock. -
Correct Answer ✔✔ Preferred stock
__________-__________-__________ __________ __________ __________
__________ equals the number of shares outstanding multiplied by the original selling
price of the shares, net of the par value. - Correct Answer ✔✔ Paid-in-capital in excess
of par
__________ __________ equals the number of outstanding common shares multiplied
by the par value per share. - Correct Answer ✔✔ Common stock
__________ __________ (often $1) is an artifact of earlier pre-computer accounting
methods used to track the number of outstanding shares. It has no relation to the actual
value of the shares. - Correct Answer ✔✔ Par value
__________ __________ are the cumulative total of the earnings that the firm has
reinvested in its assets and operations since its inception. - Correct Answer ✔✔
Retained earnings
The combined value of __________ __________ and __________-__________-
__________ equals the proceeds the firm received when it originally sold shares to
investors (including initial public offerings and rights offerings). - Correct Answer ✔✔
common stock, paid-in-capital
The __________ __________ entry on a balance sheet records the value of common
shares that a firm currently holds in reserve. - Correct Answer ✔✔ treasury stock
The __________ __________ __________ __________ provides a summary of what
cash has gone into and out of a firm because of its operations, investments, and
financing activities during a year. It isolates the firm's operating, investment, and
financing cash flows and reconciles them with changes in its cash and marketable
securities during the year. - Correct Answer ✔✔ statement of cash flows
A firm's total cash flows can be conveniently divided into three categories. These
include __________ flows, __________ flows, and __________ flows. - Correct Answer
✔✔ operating, investment, financing
Operating flows - Correct Answer ✔✔ Cash inflows and outflows directly related to the
production and sale of products or services
Investment flows - Correct Answer ✔✔ Cash flows associated with the purchase or sale
of fixed assets and business equity
Financing flows - Correct Answer ✔✔ Cash flows which result from debt and equity
financing transactions
