MBA 621 Exam 1 QUESTIONS WITH 100% RATED ANSWERS | GUARANTEED TO PASS
A public company has a book value of $128 million. They have 20 million shares outstanding,
with a market price of $4 per share. Which of the following statements is true regarding this
company?
A. Investors may consider this firm to be a growth company
B. Investors believe the company's assets are not likely to be profitable since its market value is
worth less than its book value
C. The firm's market value is more than its book value
D. The value of the firm's assets is greater than their liquidation value B. Investors believe
the company's assets are not likely to be profitable since its market value is worth less than its
book value
BV=$128 million
MV= 20 x 4 = $80 million
Allen Company bought a new copy machine to be depreciated straight line for three years for
use by sales personnel. Where would this purchase be reflected on the Statement of Cash
Flows?
A. It would be an expense on the income statement so it would be reflected in operating cash
flows
B. It would be an addition to property, plant, and equipment so it would be an investing activity
,C. It would be an addition to cash so it would be reflected in the change of cash
D. None of the above B. It would be an addition to property, plant, and equipment so it
would be an investing activity
A printing company prints a brochure for a client and then bills them for this service. At the
time the printing company's financial disclosure statements are prepared, the client has not yet
paid the bill for this service. How will this transaction be recorded?
A. The sale will be added to Net Income on the incoming statement and retained in Net Income
of the statement of cash flows
B. The sale will be added to Net Income on the income statement but deducted from Net
Income on the statement of cash flows
C. The sale will not be added to Net Income on the income statement but added to Net Income
on the statement of cash flows
D. The sale will neither be added to Net Income on the income statement nor used to adjust
Net Income on the statement of cash flows B. The sale will be added to Net Income on the
income statement but deducted from Net Income on the statement of cash flows
A software company acquires a smaller company in order to acquire the patents that it holds.
Where will the cost of this acquisition be recorded on the statement of cash flows?
A. As an outflow under operating activities
B. As an outflow under investment activities
C. As an outflow under financial activities
, D. Not recorded on the statement of cash flows B. As an outflow under investment activities
AOS Industries Statement of Cash Flows for 2008
Operating activities
Net Income 3.2
Depreciation and amortization 1.4
Cash effect of changes in
Accounts receivable -2.1
Accounts payable 1.1
Inventory -0.8
Cash from operating activities 2.8
Investment activities
Capital expenditures -2.2
Acquisitions and other investing activity -0.4
Cash from investing activities -2.6
Financing activities
Dividends paid -1.5
Sale or purchase of stock 2.1
Increase in short-term borrowing 1.4
A public company has a book value of $128 million. They have 20 million shares outstanding,
with a market price of $4 per share. Which of the following statements is true regarding this
company?
A. Investors may consider this firm to be a growth company
B. Investors believe the company's assets are not likely to be profitable since its market value is
worth less than its book value
C. The firm's market value is more than its book value
D. The value of the firm's assets is greater than their liquidation value B. Investors believe
the company's assets are not likely to be profitable since its market value is worth less than its
book value
BV=$128 million
MV= 20 x 4 = $80 million
Allen Company bought a new copy machine to be depreciated straight line for three years for
use by sales personnel. Where would this purchase be reflected on the Statement of Cash
Flows?
A. It would be an expense on the income statement so it would be reflected in operating cash
flows
B. It would be an addition to property, plant, and equipment so it would be an investing activity
,C. It would be an addition to cash so it would be reflected in the change of cash
D. None of the above B. It would be an addition to property, plant, and equipment so it
would be an investing activity
A printing company prints a brochure for a client and then bills them for this service. At the
time the printing company's financial disclosure statements are prepared, the client has not yet
paid the bill for this service. How will this transaction be recorded?
A. The sale will be added to Net Income on the incoming statement and retained in Net Income
of the statement of cash flows
B. The sale will be added to Net Income on the income statement but deducted from Net
Income on the statement of cash flows
C. The sale will not be added to Net Income on the income statement but added to Net Income
on the statement of cash flows
D. The sale will neither be added to Net Income on the income statement nor used to adjust
Net Income on the statement of cash flows B. The sale will be added to Net Income on the
income statement but deducted from Net Income on the statement of cash flows
A software company acquires a smaller company in order to acquire the patents that it holds.
Where will the cost of this acquisition be recorded on the statement of cash flows?
A. As an outflow under operating activities
B. As an outflow under investment activities
C. As an outflow under financial activities
, D. Not recorded on the statement of cash flows B. As an outflow under investment activities
AOS Industries Statement of Cash Flows for 2008
Operating activities
Net Income 3.2
Depreciation and amortization 1.4
Cash effect of changes in
Accounts receivable -2.1
Accounts payable 1.1
Inventory -0.8
Cash from operating activities 2.8
Investment activities
Capital expenditures -2.2
Acquisitions and other investing activity -0.4
Cash from investing activities -2.6
Financing activities
Dividends paid -1.5
Sale or purchase of stock 2.1
Increase in short-term borrowing 1.4
