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 leastasa3concerneda3witha3casha3flowsa3asa3witha3profits.
B) Aa3companya3thata3sellsa3merchandisea3ata3aa3profita3cana3bea3assureda3ofa3generatin
ga3casha3soona3enougha3toa3replenisha3casha3flowsa3requireda3fora3continueda3production.
C) Thea3casha3flowsa3generateda3ina3aa3givena3timea3perioda3cana3differa3froma3thea3profitsa3re
ported.
D) Profitsa3area3noa3assurancea3thata3casha3flowa3willa3bea3sufficienta3toa3maintaina3solvency.
E) Duea3toa3requireda3casha3investmentsa3ina3currenta3assets,a3fast-
growinga3anda3profitablea3companiesa3cana3literallya3“growa3broke”.
13) Whicha3ofa3thea3followinga3isa3NOTa3aa3typicala3reasona3fora3differencesa3betweena3profi
tsa3anda3casha3flow?
A) Goodwill
B) Depreciationa3expense
C) Changesa3ina3accountsa3receivable
D) Accruala3accountinga3practices
14) Whicha3onea3ofa3thea3followinga3isa3thea3financiala3statementa3thata3showsa3aa3financia
la3snapshot,a3takena3ata3aa3pointa3ina3time,a3ofa3alla3thea3assetsa3thea3companya3ownsa3anda3all
a3thea3claimsa3againsta3thosea3assets?
A) Incomea3statement
B) Creditor’sa3statement
C) Balancea3sheet
D) Casha3flowa3statement
E) Sourcesa3anda3usesa3statement
15) Aa3balancea3sheeta3reportsa3thea3valuea3ofa3aa3firm’sa3assets,a3liabilities,a3anda3equity
A) overa3ana3annuala3period.
B) overa3anya3perioda3ofa3time.
C) ata3anya3pointa3ina3time.
D) ata3thea3enda3ofa3thea3yeara3only.
, 16) Aa3companya3sellsa3useda3equipmenta3witha3aa3booka3valuea3ofa3$100,000a3fora3$250,000a
3cash.a3Howa3woulda3thisa3transactiona3affecta3thea3company’sa3balancea3sheet?
A) Equitya3risesa3$250,000;a3neta3planta3anda3equipmenta3fallsa3$250,000.
B) Casha3risesa3$250,000;a3neta3planta3anda3equipmenta3fallsa3$100,000;a3equitya3risesa3$150,
000.
C) Casha3risesa3$250,000;a3accountsa3receivablea3fallsa3$100,000;a3goodwilla3risesa3$150,000.
D) Casha3risesa3$250,000;a3neta3planta3anda3equipmenta3fallsa3$250,000.
17) Aa3companya3purchasesa3aa3newa3$10a3milliona3buildinga3financeda3halfa3witha3casha3anda
3halfa3witha3aa3banka3loan.a3Howa3woulda3thisa3transactiona3affecta3thea3company’sa3balancea3she
et?
A) Neta3planta3anda3equipmenta3risesa3$10a3million;a3casha3fallsa3$10a3million;a3banka3d
ebta3risesa3$5a3million.
B) Neta3planta3anda3equipmenta3risesa3$5a3million;a3casha3fallsa3$10a3million;a3banka3d
ebta3risesa3$5a3million.
C) Neta3planta3anda3equipmenta3risesa3$5a3million;a3casha3fallsa3$5a3million;a3banka3d
ebta3risesa3$5a3million.
D) Neta3planta3anda3equipmenta3risesa3$10a3million;a3casha3fallsa3$5a3million;a3banka3d
ebta3risesa3$5a3million.
18) Whicha3onea3ofa3thea3followinga3isa3thea3financiala3statementa3thata3summarizesa3aa3fir
m’sa3revenuea3anda3expensesa3overa3aa3perioda3ofa3time?
A) Incomea3statement
B) Balancea3sheet
C) Casha3flowa3statement
D) Sourcesa3anda3usesa3statement
E) Marketa3valuea3statement
19) Thea3sourcesa3anda3usesa3ofa3casha3overa3aa3stateda3perioda3ofa3timea3area3reflecteda3ina3the
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 leastasa3concerneda3witha3casha3flowsa3asa3witha3profits.
B) Aa3companya3thata3sellsa3merchandisea3ata3aa3profita3cana3bea3assureda3ofa3generatin
ga3casha3soona3enougha3toa3replenisha3casha3flowsa3requireda3fora3continueda3production.
C) Thea3casha3flowsa3generateda3ina3aa3givena3timea3perioda3cana3differa3froma3thea3profitsa3re
ported.
D) Profitsa3area3noa3assurancea3thata3casha3flowa3willa3bea3sufficienta3toa3maintaina3solvency.
E) Duea3toa3requireda3casha3investmentsa3ina3currenta3assets,a3fast-
growinga3anda3profitablea3companiesa3cana3literallya3“growa3broke”.
13) Whicha3ofa3thea3followinga3isa3NOTa3aa3typicala3reasona3fora3differencesa3betweena3profi
tsa3anda3casha3flow?
A) Goodwill
B) Depreciationa3expense
C) Changesa3ina3accountsa3receivable
D) Accruala3accountinga3practices
14) Whicha3onea3ofa3thea3followinga3isa3thea3financiala3statementa3thata3showsa3aa3financia
la3snapshot,a3takena3ata3aa3pointa3ina3time,a3ofa3alla3thea3assetsa3thea3companya3ownsa3anda3all
a3thea3claimsa3againsta3thosea3assets?
A) Incomea3statement
B) Creditor’sa3statement
C) Balancea3sheet
D) Casha3flowa3statement
E) Sourcesa3anda3usesa3statement
15) Aa3balancea3sheeta3reportsa3thea3valuea3ofa3aa3firm’sa3assets,a3liabilities,a3anda3equity
A) overa3ana3annuala3period.
B) overa3anya3perioda3ofa3time.
C) ata3anya3pointa3ina3time.
D) ata3thea3enda3ofa3thea3yeara3only.
, 16) Aa3companya3sellsa3useda3equipmenta3witha3aa3booka3valuea3ofa3$100,000a3fora3$250,000a
3cash.a3Howa3woulda3thisa3transactiona3affecta3thea3company’sa3balancea3sheet?
A) Equitya3risesa3$250,000;a3neta3planta3anda3equipmenta3fallsa3$250,000.
B) Casha3risesa3$250,000;a3neta3planta3anda3equipmenta3fallsa3$100,000;a3equitya3risesa3$150,
000.
C) Casha3risesa3$250,000;a3accountsa3receivablea3fallsa3$100,000;a3goodwilla3risesa3$150,000.
D) Casha3risesa3$250,000;a3neta3planta3anda3equipmenta3fallsa3$250,000.
17) Aa3companya3purchasesa3aa3newa3$10a3milliona3buildinga3financeda3halfa3witha3casha3anda
3halfa3witha3aa3banka3loan.a3Howa3woulda3thisa3transactiona3affecta3thea3company’sa3balancea3she
et?
A) Neta3planta3anda3equipmenta3risesa3$10a3million;a3casha3fallsa3$10a3million;a3banka3d
ebta3risesa3$5a3million.
B) Neta3planta3anda3equipmenta3risesa3$5a3million;a3casha3fallsa3$10a3million;a3banka3d
ebta3risesa3$5a3million.
C) Neta3planta3anda3equipmenta3risesa3$5a3million;a3casha3fallsa3$5a3million;a3banka3d
ebta3risesa3$5a3million.
D) Neta3planta3anda3equipmenta3risesa3$10a3million;a3casha3fallsa3$5a3million;a3banka3d
ebta3risesa3$5a3million.
18) Whicha3onea3ofa3thea3followinga3isa3thea3financiala3statementa3thata3summarizesa3aa3fir
m’sa3revenuea3anda3expensesa3overa3aa3perioda3ofa3time?
A) Incomea3statement
B) Balancea3sheet
C) Casha3flowa3statement
D) Sourcesa3anda3usesa3statement
E) Marketa3valuea3statement
19) Thea3sourcesa3anda3usesa3ofa3casha3overa3aa3stateda3perioda3ofa3timea3area3reflecteda3ina3the
