Test Bank for Analysis For Financial Management 13th Edition Robert
Higgins, Jennifer Koski, Todd Mitton
Student name:
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
1) Current liabilities are defined as liabilities with a maturity of less than one year.
⊚ true
⊚ false
2) A decline in the Net Property, Plant, and Equipment account between year-end 2020 and
year-end 2021 is a clear indication that fixed assets were sold during 2021.
⊚ true
⊚ false
3) When reporting financial performance for tax purposes, U.S. companies prefer to use
accelerated depreciation methods over the straight-line method.
⊚ true
⊚ false
4) Accounting rules require U.S. companies to depreciate research and development (R&D)
expenditures using the straight-line method.
⊚ true
⊚ false
5) You can construct a sources and uses statement for 2021 if you have a company’s year-
end balance sheets for 2021 and 2022.
⊚ true
⊚ false
6) A reduction in long-term debt is a use of cash.
⊚ true
⊚ false
,7) The accrual principle requires that revenue not be recognized until payment from a sale is
received.
⊚ true
⊚ false
8) An increase in cash and cash equivalents should appear as a use of cash on the sources
and uses statement.
⊚ true
⊚ false
9) A cash flow statement places each source or use of cash into one of three broad
categories: operating activities, investing activities, or financing activities.
⊚ true
⊚ false
10) The cost of equity is usually reported on the income statement right below interest
expense.
⊚ true
⊚ false
11) The United States was one of the first countries to adopt International Financial
Reporting Standards.
⊚ true
⊚ false
MULTIPLE CHOICE - Choose the one alternative that best completes the statement or
answers the question.
12) Which of the following statements concerning a firm’s cash flows and profits is false?
, A) Managers must be at leastasa2concerneda2witha2casha2flowsa2asa2witha2profits.
B) Aa2companya2thata2sellsa2merchandisea2ata2aa2profita2cana2bea2assureda2ofa2generatin
ga2casha2soona2enougha2toa2replenisha2casha2flowsa2requireda2fora2continueda2production.
C) Thea2casha2flowsa2generateda2ina2aa2givena2timea2perioda2cana2differa2froma2thea2profitsa2re
ported.
D) Profitsa2area2noa2assurancea2thata2casha2flowa2willa2bea2sufficienta2toa2maintaina2solvency.
E) Duea2toa2requireda2casha2investmentsa2ina2currenta2assets,a2fast-
growinga2anda2profitablea2companiesa2cana2literallya2“growa2broke”.
13) Whicha2ofa2thea2followinga2isa2NOTa2aa2typicala2reasona2fora2differencesa2betweena2profi
tsa2anda2casha2flow?
A) Goodwill
B) Depreciationa2expense
C) Changesa2ina2accountsa2receivable
D) Accruala2accountinga2practices
14) Whicha2onea2ofa2thea2followinga2isa2thea2financiala2statementa2thata2showsa2aa2financia
la2snapshot,a2takena2ata2aa2pointa2ina2time,a2ofa2alla2thea2assetsa2thea2companya2ownsa2anda2all
a2thea2claimsa2againsta2thosea2assets?
A) Incomea2statement
B) Creditor’sa2statement
C) Balancea2sheet
D) Casha2flowa2statement
E) Sourcesa2anda2usesa2statement
15) Aa2balancea2sheeta2reportsa2thea2valuea2ofa2aa2firm’sa2assets,a2liabilities,a2anda2equity
A) overa2ana2annuala2period.
B) overa2anya2perioda2ofa2time.
C) ata2anya2pointa2ina2time.
D) ata2thea2enda2ofa2thea2yeara2only.
, 16) Aa2companya2sellsa2useda2equipmenta2witha2aa2booka2valuea2ofa2$100,000a2fora2$250,000a
2cash.a2Howa2woulda2thisa2transactiona2affecta2thea2company’sa2balancea2sheet?
A) Equitya2risesa2$250,000;a2neta2planta2anda2equipmenta2fallsa2$250,000.
B) Casha2risesa2$250,000;a2neta2planta2anda2equipmenta2fallsa2$100,000;a2equitya2risesa2$150,
000.
C) Casha2risesa2$250,000;a2accountsa2receivablea2fallsa2$100,000;a2goodwilla2risesa2$150,000.
D) Casha2risesa2$250,000;a2neta2planta2anda2equipmenta2fallsa2$250,000.
17) Aa2companya2purchasesa2aa2newa2$10a2milliona2buildinga2financeda2halfa2witha2casha2anda
2halfa2witha2aa2banka2loan.a2Howa2woulda2thisa2transactiona2affecta2thea2company’sa2balancea2she
et?
A) Neta2planta2anda2equipmenta2risesa2$10a2million;a2casha2fallsa2$10a2million;a2banka2d
ebta2risesa2$5a2million.
B) Neta2planta2anda2equipmenta2risesa2$5a2million;a2casha2fallsa2$10a2million;a2banka2d
ebta2risesa2$5a2million.
C) Neta2planta2anda2equipmenta2risesa2$5a2million;a2casha2fallsa2$5a2million;a2banka2d
ebta2risesa2$5a2million.
D) Neta2planta2anda2equipmenta2risesa2$10a2million;a2casha2fallsa2$5a2million;a2banka2d
ebta2risesa2$5a2million.
18) Whicha2onea2ofa2thea2followinga2isa2thea2financiala2statementa2thata2summarizesa2aa2fir
m’sa2revenuea2anda2expensesa2overa2aa2perioda2ofa2time?
A) Incomea2statement
B) Balancea2sheet
C) Casha2flowa2statement
D) Sourcesa2anda2usesa2statement
E) Marketa2valuea2statement
19) Thea2sourcesa2anda2usesa2ofa2casha2overa2aa2stateda2perioda2ofa2timea2area2reflecteda2ina2the
Higgins, Jennifer Koski, Todd Mitton
Student name:
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
1) Current liabilities are defined as liabilities with a maturity of less than one year.
⊚ true
⊚ false
2) A decline in the Net Property, Plant, and Equipment account between year-end 2020 and
year-end 2021 is a clear indication that fixed assets were sold during 2021.
⊚ true
⊚ false
3) When reporting financial performance for tax purposes, U.S. companies prefer to use
accelerated depreciation methods over the straight-line method.
⊚ true
⊚ false
4) Accounting rules require U.S. companies to depreciate research and development (R&D)
expenditures using the straight-line method.
⊚ true
⊚ false
5) You can construct a sources and uses statement for 2021 if you have a company’s year-
end balance sheets for 2021 and 2022.
⊚ true
⊚ false
6) A reduction in long-term debt is a use of cash.
⊚ true
⊚ false
,7) The accrual principle requires that revenue not be recognized until payment from a sale is
received.
⊚ true
⊚ false
8) An increase in cash and cash equivalents should appear as a use of cash on the sources
and uses statement.
⊚ true
⊚ false
9) A cash flow statement places each source or use of cash into one of three broad
categories: operating activities, investing activities, or financing activities.
⊚ true
⊚ false
10) The cost of equity is usually reported on the income statement right below interest
expense.
⊚ true
⊚ false
11) The United States was one of the first countries to adopt International Financial
Reporting Standards.
⊚ true
⊚ false
MULTIPLE CHOICE - Choose the one alternative that best completes the statement or
answers the question.
12) Which of the following statements concerning a firm’s cash flows and profits is false?
, A) Managers must be at leastasa2concerneda2witha2casha2flowsa2asa2witha2profits.
B) Aa2companya2thata2sellsa2merchandisea2ata2aa2profita2cana2bea2assureda2ofa2generatin
ga2casha2soona2enougha2toa2replenisha2casha2flowsa2requireda2fora2continueda2production.
C) Thea2casha2flowsa2generateda2ina2aa2givena2timea2perioda2cana2differa2froma2thea2profitsa2re
ported.
D) Profitsa2area2noa2assurancea2thata2casha2flowa2willa2bea2sufficienta2toa2maintaina2solvency.
E) Duea2toa2requireda2casha2investmentsa2ina2currenta2assets,a2fast-
growinga2anda2profitablea2companiesa2cana2literallya2“growa2broke”.
13) Whicha2ofa2thea2followinga2isa2NOTa2aa2typicala2reasona2fora2differencesa2betweena2profi
tsa2anda2casha2flow?
A) Goodwill
B) Depreciationa2expense
C) Changesa2ina2accountsa2receivable
D) Accruala2accountinga2practices
14) Whicha2onea2ofa2thea2followinga2isa2thea2financiala2statementa2thata2showsa2aa2financia
la2snapshot,a2takena2ata2aa2pointa2ina2time,a2ofa2alla2thea2assetsa2thea2companya2ownsa2anda2all
a2thea2claimsa2againsta2thosea2assets?
A) Incomea2statement
B) Creditor’sa2statement
C) Balancea2sheet
D) Casha2flowa2statement
E) Sourcesa2anda2usesa2statement
15) Aa2balancea2sheeta2reportsa2thea2valuea2ofa2aa2firm’sa2assets,a2liabilities,a2anda2equity
A) overa2ana2annuala2period.
B) overa2anya2perioda2ofa2time.
C) ata2anya2pointa2ina2time.
D) ata2thea2enda2ofa2thea2yeara2only.
, 16) Aa2companya2sellsa2useda2equipmenta2witha2aa2booka2valuea2ofa2$100,000a2fora2$250,000a
2cash.a2Howa2woulda2thisa2transactiona2affecta2thea2company’sa2balancea2sheet?
A) Equitya2risesa2$250,000;a2neta2planta2anda2equipmenta2fallsa2$250,000.
B) Casha2risesa2$250,000;a2neta2planta2anda2equipmenta2fallsa2$100,000;a2equitya2risesa2$150,
000.
C) Casha2risesa2$250,000;a2accountsa2receivablea2fallsa2$100,000;a2goodwilla2risesa2$150,000.
D) Casha2risesa2$250,000;a2neta2planta2anda2equipmenta2fallsa2$250,000.
17) Aa2companya2purchasesa2aa2newa2$10a2milliona2buildinga2financeda2halfa2witha2casha2anda
2halfa2witha2aa2banka2loan.a2Howa2woulda2thisa2transactiona2affecta2thea2company’sa2balancea2she
et?
A) Neta2planta2anda2equipmenta2risesa2$10a2million;a2casha2fallsa2$10a2million;a2banka2d
ebta2risesa2$5a2million.
B) Neta2planta2anda2equipmenta2risesa2$5a2million;a2casha2fallsa2$10a2million;a2banka2d
ebta2risesa2$5a2million.
C) Neta2planta2anda2equipmenta2risesa2$5a2million;a2casha2fallsa2$5a2million;a2banka2d
ebta2risesa2$5a2million.
D) Neta2planta2anda2equipmenta2risesa2$10a2million;a2casha2fallsa2$5a2million;a2banka2d
ebta2risesa2$5a2million.
18) Whicha2onea2ofa2thea2followinga2isa2thea2financiala2statementa2thata2summarizesa2aa2fir
m’sa2revenuea2anda2expensesa2overa2aa2perioda2ofa2time?
A) Incomea2statement
B) Balancea2sheet
C) Casha2flowa2statement
D) Sourcesa2anda2usesa2statement
E) Marketa2valuea2statement
19) Thea2sourcesa2anda2usesa2ofa2casha2overa2aa2stateda2perioda2ofa2timea2area2reflecteda2ina2the
