Corporate Finance Exam #1 UPDATED
Exam Questions and CORRECT Answers
Financial Management Decisions - CORRECT ANSWER - -Investment Decisions
-Financing Decisions
-Payout Policy
Cash Method of Accounting - CORRECT ANSWER - Income is counted when cash is
actually received, and expenses are counted when actually paid
Accrual Method of Accounting - CORRECT ANSWER - Income is recorded when the sale
occurs, and expenses are recorded when the good/service is received
Multi-Step Income Statement - CORRECT ANSWER - Net Sales
-COGS
=Gross Profit
-Depreciation Expense
-Operating Expense
=Operating Profit (EBIT)
-Interest Expense
=Income Before Taxes (EBT)
-Tax Expenses
=Net Income
Operating Expenses - CORRECT ANSWER - -SG&A
-R&D
Depreciation Methods - CORRECT ANSWER - -Straight Line (same rate each year)
, -Accelerated Cost Recovery Method (good for tax purposes)
Non-Operating Expenses (Income) - CORRECT ANSWER - -Dividend Income
-Rental Income
-Interest Expense (Cost of Borrowing)
EPS - CORRECT ANSWER - Net Income / # Shares Outstanding
Balance Sheet - CORRECT ANSWER - Assets
Current Assets
Cash
A/R
Allowance for Doubtful Accounts
Inventories
Fixed Assets/PPE
Accumulated Depreciation
Liabilities
Current Liabilities
A/P
Accrued Expenses
Notes Payable
Current Portion of LTD
Long-Term Debt
Equity
Common Stock (@ Par)
APIC
Exam Questions and CORRECT Answers
Financial Management Decisions - CORRECT ANSWER - -Investment Decisions
-Financing Decisions
-Payout Policy
Cash Method of Accounting - CORRECT ANSWER - Income is counted when cash is
actually received, and expenses are counted when actually paid
Accrual Method of Accounting - CORRECT ANSWER - Income is recorded when the sale
occurs, and expenses are recorded when the good/service is received
Multi-Step Income Statement - CORRECT ANSWER - Net Sales
-COGS
=Gross Profit
-Depreciation Expense
-Operating Expense
=Operating Profit (EBIT)
-Interest Expense
=Income Before Taxes (EBT)
-Tax Expenses
=Net Income
Operating Expenses - CORRECT ANSWER - -SG&A
-R&D
Depreciation Methods - CORRECT ANSWER - -Straight Line (same rate each year)
, -Accelerated Cost Recovery Method (good for tax purposes)
Non-Operating Expenses (Income) - CORRECT ANSWER - -Dividend Income
-Rental Income
-Interest Expense (Cost of Borrowing)
EPS - CORRECT ANSWER - Net Income / # Shares Outstanding
Balance Sheet - CORRECT ANSWER - Assets
Current Assets
Cash
A/R
Allowance for Doubtful Accounts
Inventories
Fixed Assets/PPE
Accumulated Depreciation
Liabilities
Current Liabilities
A/P
Accrued Expenses
Notes Payable
Current Portion of LTD
Long-Term Debt
Equity
Common Stock (@ Par)
APIC
