Test Bank for Analysis For Financial Management 13th Edition Robert Higgins, J
S S S S S S S S S S S
ennifer Koski, Todd Mitton
S S S
Student name: S
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
S S S S S S S S S S S S S S S
1) Current liabilities are defined as liabilities with a maturity of less than one year.
S S S S S S S S S S S S S
⊚ true
⊚ false
2) A decline in the Net Property, Plant, and Equipment account between year-end 2020 and year-
S S S S S S S S S S S S S S
end 2021 is a clear indication that fixed assets were sold during 2021.
S S S S S S S S S S S S
⊚ true
⊚ false
3) When reporting financial performance for tax purposes, U.S. companies prefer to use acce
S S S S S S S S S S S S
lerated depreciation methods over the straight-line method.
S S S S S S
⊚ true
⊚ false
4) Accounting rules require U.S. companies to depreciate research and development (R&D) exp
S S S S S S S S S S S
enditures using the straight-line method.
S S S S
⊚ true
⊚ false
5) You can construct a sources and uses statement for 2021 if you have a company’s year-
S S S S S S S S S S S S S S S
end balance sheets for 2021 and 2022.
S S S S S S S
⊚ true
⊚ false
6) A reduction in long-term debt is a use of cash.
S S S S S S S S S
⊚ true
⊚ false
,7) The accrual principle requires that revenue not be recognized until payment from a sale is recei
S S S S S S S S S S S S S S S
ved.
⊚ true
⊚ false
8) An increase in cash and cash equivalents should appear as a use of cash on the sources and us
S S S S S S S S S S S S S S S S S S
es statement.
S
⊚ true
⊚ false
9) A cash flow statement places each source or use of cash into one of three broad categ
S S S S S S S S S S S S S S S S
ories: operating activities, investing activities, or financing activities.
S S S S S S S
⊚ true
⊚ false
10) The cost of equity is usually reported on the income statement right below interest expe
S S S S S S S S S S S S S S
nse.
⊚ true
⊚ false
11) The United States was one of the first countries to adopt International Financial Rep
S S S S S S S S S S S S S
orting Standards.
S
⊚ true
⊚ false
MULTIPLE CHOICE - S S
Choose the one alternative that best completes the statement or answers the question.
S S S S S S S S S S S S S
12) Which of the following statements concerning a firm’s cash flows and profits is false?
S S S S S S S S S S S S S
, A) Managers must be at least as concerned with cash flows as with profits. S S S S S S S S S S S S
B) A company that sells merchandise at a profit can be assured of generating cash soon enou
S S S S S S S S S S S S S S S
gh to replenish cash flows required for continued production.
S S S S S S S S
C) The cash flows generated in a given time period can differ from the profits reported.
S S S S S S S S S S S S S S
D) Profits are no assurance that cash flow will be sufficient to maintain solvency.
S S S S S S S S S S S S
E) Due to required cash investments in current assets, fast-
S S S S S S S S
growing and profitable companies can literally “grow broke”.
S S S S S S S
13) Which of the following is NOT a typical reason for differences between profits and cash flow?
S S S S S S S S S S S S S S S
A) Goodwill
B) Depreciation expense S
C) Changes in accounts receivable S S S
D) Accrual accounting practices S S
14) Which one of the following is the financial statement that shows a financial snapshot, take
S S S S S S S S S S S S S S
n at a point in time, of all the assets the company owns and all the claims against those assets?
S S S S S S S S S S S S S S S S S S S
A) Income statement S
B) Creditor’s statement S
C) Balance sheet S
D) Cash flow statement S S
E) Sources and uses statement S S S
15) A balance sheet reports the value of a firm’s assets, liabilities, and equity
S S S S S S S S S S S S
A) over an annual period. S S S
B) over any period of time. S S S S
C) at any point in time.
S S S S
D) at the end of the year only.
S S S S S S
, 16) A company sells used equipment with a book value of $100,000 for $250,000 cash. How woul
S S S S S S S S S S S S S S S
d this transaction affect the company’s balance sheet?
S S S S S S S
A) Equity rises $250,000; net plant and equipment falls $250,000.
S S S S S S S S
B) Cash rises $250,000; net plant and equipment falls $100,000; equity rises $150,000.
S S S S S S S S S S S
C) Cash rises $250,000; accounts receivable falls $100,000; goodwill rises $150,000.
S S S S S S S S S
D) Cash rises $250,000; net plant and equipment falls $250,000.
S S S S S S S S
17) A company purchases a new $10 million building financed half with cash and half with a bank l
S S S S S S S S S S S S S S S S S
oan. How would this transaction affect the company’s balance sheet?
S S S S S S S S S
A) Net plant and equipment rises $10 million; cash falls $10 million; bank debt rises $5 milli
S S S S S S S S S S S S S S S
on.
B) Net plant and equipment rises $5 million; cash falls $10 million; bank debt rises $5 milli
S S S S S S S S S S S S S S S
on.
C) Net plant and equipment rises $5 million; cash falls $5 million; bank debt rises $5 milli
S S S S S S S S S S S S S S S
on.
D) Net plant and equipment rises $10 million; cash falls $5 million; bank debt rises $5 milli
S S S S S S S S S S S S S S S
on.
18) Which one of the following is the financial statement that summarizes a firm’s revenue and e
S S S S S S S S S S S S S S S
xpenses over a period of time?
S S S S S
A) Income statement S
B) Balance sheet S
C) Cash flow statement S S
D) Sources and uses statement S S S
E) Market value statement S S
19) The sources and uses of cash over a stated period of time are reflected in the
S S S S S S S S S S S S S S S
S S S S S S S S S S S
ennifer Koski, Todd Mitton
S S S
Student name: S
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
S S S S S S S S S S S S S S S
1) Current liabilities are defined as liabilities with a maturity of less than one year.
S S S S S S S S S S S S S
⊚ true
⊚ false
2) A decline in the Net Property, Plant, and Equipment account between year-end 2020 and year-
S S S S S S S S S S S S S S
end 2021 is a clear indication that fixed assets were sold during 2021.
S S S S S S S S S S S S
⊚ true
⊚ false
3) When reporting financial performance for tax purposes, U.S. companies prefer to use acce
S S S S S S S S S S S S
lerated depreciation methods over the straight-line method.
S S S S S S
⊚ true
⊚ false
4) Accounting rules require U.S. companies to depreciate research and development (R&D) exp
S S S S S S S S S S S
enditures using the straight-line method.
S S S S
⊚ true
⊚ false
5) You can construct a sources and uses statement for 2021 if you have a company’s year-
S S S S S S S S S S S S S S S
end balance sheets for 2021 and 2022.
S S S S S S S
⊚ true
⊚ false
6) A reduction in long-term debt is a use of cash.
S S S S S S S S S
⊚ true
⊚ false
,7) The accrual principle requires that revenue not be recognized until payment from a sale is recei
S S S S S S S S S S S S S S S
ved.
⊚ true
⊚ false
8) An increase in cash and cash equivalents should appear as a use of cash on the sources and us
S S S S S S S S S S S S S S S S S S
es statement.
S
⊚ true
⊚ false
9) A cash flow statement places each source or use of cash into one of three broad categ
S S S S S S S S S S S S S S S S
ories: operating activities, investing activities, or financing activities.
S S S S S S S
⊚ true
⊚ false
10) The cost of equity is usually reported on the income statement right below interest expe
S S S S S S S S S S S S S S
nse.
⊚ true
⊚ false
11) The United States was one of the first countries to adopt International Financial Rep
S S S S S S S S S S S S S
orting Standards.
S
⊚ true
⊚ false
MULTIPLE CHOICE - S S
Choose the one alternative that best completes the statement or answers the question.
S S S S S S S S S S S S S
12) Which of the following statements concerning a firm’s cash flows and profits is false?
S S S S S S S S S S S S S
, A) Managers must be at least as concerned with cash flows as with profits. S S S S S S S S S S S S
B) A company that sells merchandise at a profit can be assured of generating cash soon enou
S S S S S S S S S S S S S S S
gh to replenish cash flows required for continued production.
S S S S S S S S
C) The cash flows generated in a given time period can differ from the profits reported.
S S S S S S S S S S S S S S
D) Profits are no assurance that cash flow will be sufficient to maintain solvency.
S S S S S S S S S S S S
E) Due to required cash investments in current assets, fast-
S S S S S S S S
growing and profitable companies can literally “grow broke”.
S S S S S S S
13) Which of the following is NOT a typical reason for differences between profits and cash flow?
S S S S S S S S S S S S S S S
A) Goodwill
B) Depreciation expense S
C) Changes in accounts receivable S S S
D) Accrual accounting practices S S
14) Which one of the following is the financial statement that shows a financial snapshot, take
S S S S S S S S S S S S S S
n at a point in time, of all the assets the company owns and all the claims against those assets?
S S S S S S S S S S S S S S S S S S S
A) Income statement S
B) Creditor’s statement S
C) Balance sheet S
D) Cash flow statement S S
E) Sources and uses statement S S S
15) A balance sheet reports the value of a firm’s assets, liabilities, and equity
S S S S S S S S S S S S
A) over an annual period. S S S
B) over any period of time. S S S S
C) at any point in time.
S S S S
D) at the end of the year only.
S S S S S S
, 16) A company sells used equipment with a book value of $100,000 for $250,000 cash. How woul
S S S S S S S S S S S S S S S
d this transaction affect the company’s balance sheet?
S S S S S S S
A) Equity rises $250,000; net plant and equipment falls $250,000.
S S S S S S S S
B) Cash rises $250,000; net plant and equipment falls $100,000; equity rises $150,000.
S S S S S S S S S S S
C) Cash rises $250,000; accounts receivable falls $100,000; goodwill rises $150,000.
S S S S S S S S S
D) Cash rises $250,000; net plant and equipment falls $250,000.
S S S S S S S S
17) A company purchases a new $10 million building financed half with cash and half with a bank l
S S S S S S S S S S S S S S S S S
oan. How would this transaction affect the company’s balance sheet?
S S S S S S S S S
A) Net plant and equipment rises $10 million; cash falls $10 million; bank debt rises $5 milli
S S S S S S S S S S S S S S S
on.
B) Net plant and equipment rises $5 million; cash falls $10 million; bank debt rises $5 milli
S S S S S S S S S S S S S S S
on.
C) Net plant and equipment rises $5 million; cash falls $5 million; bank debt rises $5 milli
S S S S S S S S S S S S S S S
on.
D) Net plant and equipment rises $10 million; cash falls $5 million; bank debt rises $5 milli
S S S S S S S S S S S S S S S
on.
18) Which one of the following is the financial statement that summarizes a firm’s revenue and e
S S S S S S S S S S S S S S S
xpenses over a period of time?
S S S S S
A) Income statement S
B) Balance sheet S
C) Cash flow statement S S
D) Sources and uses statement S S S
E) Market value statement S S
19) The sources and uses of cash over a stated period of time are reflected in the
S S S S S S S S S S S S S S S
