,Test Bank for Analysis For Financial Management 13th Edition Robert Higgins,
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Jennifer Koski, Todd Mitton
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Student name: st
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
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1) Current liabilities are defined as liabilities with a maturity of less than one year.
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⊚ true
⊚ false
2) A decline in the Net Property, Plant, and Equipment account between year-
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end 2020 and year-end 2021 is a clear indication that fixed assets were sold during 2021.
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⊚ true
⊚ false
3) When reporting financial performance for tax purposes, U.S. companies prefer to use ac
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celerated depreciation methods over the straight-line method.
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⊚ true
⊚ false
4) Accounting rules require U.S. companies to depreciate research and development (R&D) ex
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penditures using the straight-line method.
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⊚ true
⊚ false
5) You can construct a sources and uses statement for 2021 if you have a company’s year-
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end balance sheets for 2021 and 2022.
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⊚ true
⊚ false
6) A reduction in long-term debt is a use of cash.
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⊚ true
⊚ false
,7) The accrual principle requires that revenue not be recognized until payment from a sale is rec
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eived.
⊚ true
⊚ false
8) An increase in cash and cash equivalents should appear as a use of cash on the sources and
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uses statement.
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⊚ true
⊚ false
9) A cash flow statement places each source or use of cash into one of three broad cat
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egories: operating activities, investing activities, or financing activities.
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⊚ true
⊚ false
10) The cost of equity is usually reported on the income statement right below interest ex
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pense.
⊚ true
⊚ false
11) The United States was one of the first countries to adopt International Financial Re
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porting Standards.
st
⊚ true
⊚ false
MULTIPLE CHOICE - st st
Choose the one alternative that best completes the statement or answers the question.
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12) Which of the following statements concerning a firm’s cash flows and profits is false?
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, A) Managers must be at least as concerned with cash flows as with profits. st st st st st st st st st st st st
B) A company that sells merchandise at a profit can be assured of generating cash soon en
st st st st st st st st st st st st st st st
ough to replenish cash flows required for continued production.
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C) The cash flows generated in a given time period can differ from the profits reported.
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D) Profits are no assurance that cash flow will be sufficient to maintain solvency.
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E) Due to required cash investments in current assets, fast-
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growing and profitable companies can literally “grow broke”.
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13) Which of the following is NOT a typical reason for differences between profits and cash flo
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w?
A) Goodwill
B) Depreciation expense st
C) Changes in accounts receivable st st st
D) Accrual accounting practices st st
14) Which one of the following is the financial statement that shows a financial snapshot, tak
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en at a point in time, of all the assets the company owns and all the claims against those assets?
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A) Income statement st
B) Creditor’s statement st
C) Balance sheet st
D) Cash flow statement st st
E) Sources and uses statement st st st
15) A balance sheet reports the value of a firm’s assets, liabilities, and equity
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A) over an annual period. st st st
B) over any period of time. st st st st
C) at any point in time.
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D) at the end of the year only.
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st st s t st st st st st st st
Jennifer Koski, Todd Mitton
st st st st
Student name: st
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
st st st st st st st st st st st st st st st
1) Current liabilities are defined as liabilities with a maturity of less than one year.
st st st st st st st st st st st st st
⊚ true
⊚ false
2) A decline in the Net Property, Plant, and Equipment account between year-
st st st st st st st st st st st
end 2020 and year-end 2021 is a clear indication that fixed assets were sold during 2021.
st st st st st st st st st st st st st st st
⊚ true
⊚ false
3) When reporting financial performance for tax purposes, U.S. companies prefer to use ac
st st st st st st st st st st st st
celerated depreciation methods over the straight-line method.
st st st st st st
⊚ true
⊚ false
4) Accounting rules require U.S. companies to depreciate research and development (R&D) ex
st st st st st st st st st st st
penditures using the straight-line method.
st st st st
⊚ true
⊚ false
5) You can construct a sources and uses statement for 2021 if you have a company’s year-
st st st st st st st st st st st st st st st
end balance sheets for 2021 and 2022.
st st st st st st st
⊚ true
⊚ false
6) A reduction in long-term debt is a use of cash.
st st st st st st st st st
⊚ true
⊚ false
,7) The accrual principle requires that revenue not be recognized until payment from a sale is rec
st st st st st st st st st st st st st st st
eived.
⊚ true
⊚ false
8) An increase in cash and cash equivalents should appear as a use of cash on the sources and
st st st st st st st st st st st st st st st st st
uses statement.
st st
⊚ true
⊚ false
9) A cash flow statement places each source or use of cash into one of three broad cat
st st st st st st st st st st st st st st st st
egories: operating activities, investing activities, or financing activities.
st st st st st st st
⊚ true
⊚ false
10) The cost of equity is usually reported on the income statement right below interest ex
st st st st st st st st st st st st st st
pense.
⊚ true
⊚ false
11) The United States was one of the first countries to adopt International Financial Re
st st st st st st st st st st st st st
porting Standards.
st
⊚ true
⊚ false
MULTIPLE CHOICE - st st
Choose the one alternative that best completes the statement or answers the question.
st st st st st st st st st st st st st
12) Which of the following statements concerning a firm’s cash flows and profits is false?
st st st st st st st st st st st st st
, A) Managers must be at least as concerned with cash flows as with profits. st st st st st st st st st st st st
B) A company that sells merchandise at a profit can be assured of generating cash soon en
st st st st st st st st st st st st st st st
ough to replenish cash flows required for continued production.
st st st st st st st st
C) The cash flows generated in a given time period can differ from the profits reported.
st st st st st st st st st st st st st st
D) Profits are no assurance that cash flow will be sufficient to maintain solvency.
st st st st st st st st st st st st
E) Due to required cash investments in current assets, fast-
st st st st st st st st
growing and profitable companies can literally “grow broke”.
st st st st st st st
13) Which of the following is NOT a typical reason for differences between profits and cash flo
st st st st st st st st st st st st st st st
w?
A) Goodwill
B) Depreciation expense st
C) Changes in accounts receivable st st st
D) Accrual accounting practices st st
14) Which one of the following is the financial statement that shows a financial snapshot, tak
st st st st st st st st st st st st st st
en at a point in time, of all the assets the company owns and all the claims against those assets?
st st st st st st st st st st st st st st st st st st st
A) Income statement st
B) Creditor’s statement st
C) Balance sheet st
D) Cash flow statement st st
E) Sources and uses statement st st st
15) A balance sheet reports the value of a firm’s assets, liabilities, and equity
st st st st st st st st st st st st
A) over an annual period. st st st
B) over any period of time. st st st st
C) at any point in time.
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D) at the end of the year only.
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