Corporate Finance HK01
Can Tho University
Final Semester Practice Quiz
A. inventory
1. Which of the following are current assets?
I. patent
II. Inventory
III. accounts payable
IV. cash
A. I and III only
B. II and IV only
C. I, II, and IV only
D. I, II and III only
E. II, III, and IV only
2. Which of the following are included in current liabilities?
I. note payable to a supplier in eight months
II. amount due from a customer next month
III. account payable to a supplier that is due next week
IV. loan payable to the bank in fourteen months
A. I and III only
B. II and III only
C. I, II, and III only
D. I, III, and IV only
E. I, II, III, and IV
,3. Which one of the following will increase the value of a firm's net working capital?
a. using cash to pay a supplier
b. depreciating an asset
c. collecting an accounts receivable
d. purchasing inventory on credit
e. selling inventory at a profit
4. Which one of the following statements concerning net working capital is correct?
a. Net working capital increases when inventory is purchased with cash.
b. Net working capital must be a positive value.
c. Total assets must increase if net working capital increases.
d. A decrease in the cash balance also decreases net working capital.
e. Net working capital is the amount of cash a firm currently has available for
spending.
5. Which one of the following statements concerning net working capital is correct?
a. The lower the value of net working capital the greater the ability of a firm to meet
its current obligations.
b. An increase in net working capital must also increase current assets.
c. Net working capital increases when inventory is sold for cash at a profit.
d. Firms with equal amounts of net working capital are also equally liquid.
e. Net working capital is a part of the operating cash flow.
6. Which one of the following accounts is the most liquid?
a. inventory
b. building
c. accounts receivable
d. equipment
e. land
7. Which one of the following represents the most liquid asset?
a. $100 account receivable that is discounted and collected for $96 today
b. $100 of inventory which is sold today on credit for $103
c. $100 of inventory which is discounted and sold for $97 cash today
d. $100 of inventory that is sold today for $100 cash
e. $100 accounts receivable that will be collected in full next week
8. Shareholders' equity:
a. increases in value anytime total assets increases.
b. is equal to total assets plus total liabilities.
c. decreases whenever new shares of stock are issued.
d. includes long-term debt, preferred stock, and common stock.
e. represents the residual value of a firm.
, 9. The higher the degree of financial leverage employed by a firm, the:
a. higher the probability that the firm will encounter financial distress.
b. lower the amount of debt incurred.
c. less debt a firm has per dollar of total assets.
d. higher the number of outstanding shares of stock.
e. lower the balance in accounts payable.
10. Depreciation:
a. reduces both taxes and net income.
b. increases the net fixed assets as shown on the balance sheet.
c. reduces both the net fixed assets and the costs of a firm.
d. is a noncash expense which increases the net income.
e. decreases net fixed assets, net income, and operating cash flows.
11. Which one of the following statements related to an income statement is correct?
a. Interest expense increases the amount of tax due.
b. Depreciation does not affect taxes since it is a non-cash expense.
c. Net income is distributed to dividends and paid-in surplus.
d. Taxes reduce both net income and operating cash flow.
e. Interest expense is included in operating cash flow.
12. A firm has $520 in inventory, $1,860 in fixed assets, $190 in accounts receivables,
$210 in accounts payable, and $70 in cash. What is the amount of the current assets?
a. $710
b. $780
c. $990
d. $2,430
e. $2,640
13. A firm has net working capital of $640. Long-term debt is $4,180, total assets are
$6,230, and fixed assets are $3,910. What is the amount of the total liabilities?
a. $2,050
b. $2,690
c. $4,130
d. $5,590
e. $5,860
14. Your firm has total assets of $4,900, fixed assets of $3,200, long-term debt of $2,900,
and short-term debt of $1,400. What is the amount of net working capital?
a. -$100
b. $300
c. $600
d. $1,700
e. $1,800
15. At the beginning of the year, a firm had current assets of $121,306 and current
liabilities of $124,509. At the end of the year, the current assets were $122,418 and
the current liabilities were $103,718. What is the change in net working capital?
a. -$19,679
b. -$11,503
c. -$9,387
d. $1,809
e. $21,903
Can Tho University
Final Semester Practice Quiz
A. inventory
1. Which of the following are current assets?
I. patent
II. Inventory
III. accounts payable
IV. cash
A. I and III only
B. II and IV only
C. I, II, and IV only
D. I, II and III only
E. II, III, and IV only
2. Which of the following are included in current liabilities?
I. note payable to a supplier in eight months
II. amount due from a customer next month
III. account payable to a supplier that is due next week
IV. loan payable to the bank in fourteen months
A. I and III only
B. II and III only
C. I, II, and III only
D. I, III, and IV only
E. I, II, III, and IV
,3. Which one of the following will increase the value of a firm's net working capital?
a. using cash to pay a supplier
b. depreciating an asset
c. collecting an accounts receivable
d. purchasing inventory on credit
e. selling inventory at a profit
4. Which one of the following statements concerning net working capital is correct?
a. Net working capital increases when inventory is purchased with cash.
b. Net working capital must be a positive value.
c. Total assets must increase if net working capital increases.
d. A decrease in the cash balance also decreases net working capital.
e. Net working capital is the amount of cash a firm currently has available for
spending.
5. Which one of the following statements concerning net working capital is correct?
a. The lower the value of net working capital the greater the ability of a firm to meet
its current obligations.
b. An increase in net working capital must also increase current assets.
c. Net working capital increases when inventory is sold for cash at a profit.
d. Firms with equal amounts of net working capital are also equally liquid.
e. Net working capital is a part of the operating cash flow.
6. Which one of the following accounts is the most liquid?
a. inventory
b. building
c. accounts receivable
d. equipment
e. land
7. Which one of the following represents the most liquid asset?
a. $100 account receivable that is discounted and collected for $96 today
b. $100 of inventory which is sold today on credit for $103
c. $100 of inventory which is discounted and sold for $97 cash today
d. $100 of inventory that is sold today for $100 cash
e. $100 accounts receivable that will be collected in full next week
8. Shareholders' equity:
a. increases in value anytime total assets increases.
b. is equal to total assets plus total liabilities.
c. decreases whenever new shares of stock are issued.
d. includes long-term debt, preferred stock, and common stock.
e. represents the residual value of a firm.
, 9. The higher the degree of financial leverage employed by a firm, the:
a. higher the probability that the firm will encounter financial distress.
b. lower the amount of debt incurred.
c. less debt a firm has per dollar of total assets.
d. higher the number of outstanding shares of stock.
e. lower the balance in accounts payable.
10. Depreciation:
a. reduces both taxes and net income.
b. increases the net fixed assets as shown on the balance sheet.
c. reduces both the net fixed assets and the costs of a firm.
d. is a noncash expense which increases the net income.
e. decreases net fixed assets, net income, and operating cash flows.
11. Which one of the following statements related to an income statement is correct?
a. Interest expense increases the amount of tax due.
b. Depreciation does not affect taxes since it is a non-cash expense.
c. Net income is distributed to dividends and paid-in surplus.
d. Taxes reduce both net income and operating cash flow.
e. Interest expense is included in operating cash flow.
12. A firm has $520 in inventory, $1,860 in fixed assets, $190 in accounts receivables,
$210 in accounts payable, and $70 in cash. What is the amount of the current assets?
a. $710
b. $780
c. $990
d. $2,430
e. $2,640
13. A firm has net working capital of $640. Long-term debt is $4,180, total assets are
$6,230, and fixed assets are $3,910. What is the amount of the total liabilities?
a. $2,050
b. $2,690
c. $4,130
d. $5,590
e. $5,860
14. Your firm has total assets of $4,900, fixed assets of $3,200, long-term debt of $2,900,
and short-term debt of $1,400. What is the amount of net working capital?
a. -$100
b. $300
c. $600
d. $1,700
e. $1,800
15. At the beginning of the year, a firm had current assets of $121,306 and current
liabilities of $124,509. At the end of the year, the current assets were $122,418 and
the current liabilities were $103,718. What is the change in net working capital?
a. -$19,679
b. -$11,503
c. -$9,387
d. $1,809
e. $21,903
