Question 1

This is the amount of additional taxes a firm must pay out for every additional dollar of taxable income it earns.

Accepted Answer

The term used to describe the additional taxes a firm must pay for every additional dollar of taxable income it earns is known as the marginal tax rate. It is different from the average tax rate in that the latter is the total amount of taxes paid divided by the total taxable income earned by the firm. The marginal tax rate is important for firms to know as it helps them make decisions about whether to take on additional projects or investments that may push them into a higher tax bracket.

Question 2

Which financial statement reconciles net income earned during a given period and any cash dividends paid within that period using the change in retained earnings between the beginning and end of the period?

Accepted Answer

The statement of retained earnings reconciles net income earned during a given period and any cash dividends paid within that period using the change in retained earnings between the beginning and end of the period.

Question 3

For which of the following would one expect the book value of the asset to differ widely from its market value?

Accepted Answer

Fixed assets such as property, plant, and equipment can have a significant difference between the book value (historical cost less accumulated depreciation) and their current market value due to factors such as changes in market conditions, improvements, or depreciation.

Question 4

Which financial statement reports a firm's assets, liabilities, and equity at a particular point in time?

Accepted Answer

The Balance Sheet reports a firm's assets, liabilities, and equity at a specific point in time. The Income Statement reports a firm's revenue, expenses, and net income over a period of time. The Statement of Retained Earnings reports changes in a company's retained earnings over a period of time. The Statement of Cash Flows reports a firm's inflows and outflows of cash over a period of time.

Question 5

The Sarbanes-Oxley Act requires public companies to ensure that these individuals have considerable experience applying generally accepted accounting principles (GAAP) for financial statements.

Accepted Answer

The Sarbanes-Oxley Act mandates that at least one member of the corporate board's audit committee must be a financial expert with experience in applying GAAP for financial statements.

Question 6

This is cash flow available for payments to stockholders and debt holders of a firm after the firm has made investments in assets necessary to sustain the ongoing operations of the firm.

Accepted Answer

Free cash flow is the cash flow available for payments to stockholders and debt holders of a firm after making necessary investments in assets to sustain ongoing operations. It is calculated as operating cash flow minus capital expenditures.

Question 7

If a company reports a large amount of net income on its income statement during a year, the firm will have

Accepted Answer

The answer of If a company reports a large amount...

Question 8

Balance Sheet Jack and Jill Corporation's year-end 2009 balance sheet lists current assets of $250,000, fixed assets of $800,000, current liabilities of $195,000, and long-term debt of $300,000. What is Jack and Jill's total stockholders' equity?

Accepted Answer

Total assets can be calculated as the sum of current assets and fixed assets: 
$250,000 + $800,000 = $1,050,000. 
Total liabilities can be calculated as the sum of current liabilities and long-term debt: 
$195,000 + $300,000 = $495,000. 
Total stockholders' equity can then be calculated as the difference between total assets and total liabilities: 
$1,050,000 - $495,000 = $555,000.

Question 9

On which of the four major financial statements would you find net plant and equipment?

Accepted Answer

Net plant and equipment is a long-term asset that is reported on the balance sheet.

Question 10

Which financial statement shows the total revenues that a firm earns and the total expenses the firm incurs to generate those revenues over a specific period of time-generally one year?

Accepted Answer

The income statement, also known as the profit and loss statement, shows the revenues earned by a firm and the related expenses incurred over a specific period of time, usually one year. It helps to determine the profitability of the business during that period.

Question 11

Free cash flow is defined as

Accepted Answer

Free cash flow is the amount of cash generated by a business that is available for distribution to its investors after necessary investments have been made to maintain or expand operations. It is the cash flow that is available to both debt and equity holders of a firm after accounting for capital expenditures required to maintain current asset base. Therefore, option C is the correct definition of free cash flow. Options A and B are incorrect as they do not take into account necessary investments in the form of capital expenditures. Option D is incorrect as tax implications are not a determining factor in the calculation of free cash flow.

Question 12

Balance Sheet You are evaluating the balance sheet for Campus Corporation. From the balance sheet you find the following balances: Cash and marketable securities = $400,000, Accounts receivable = $200,000, Inventory = $100,000, Accrued wages and taxes = $10,000, Accounts payable = $300,000, and Notes payable = $600,000. What is Campus's net working capital?

Accepted Answer

Net working capital is calculated as current assets minus current liabilities. Current assets are $400,000 (cash and marketable securities) + $200,000 (accounts receivable) + $100,000 (inventory) = $700,000. Current liabilities are $10,000 (accrued wages and taxes) + $300,000 (accounts payable) + $600,000 (notes payable) = $910,000. Therefore, net working capital is $700,000 - $910,000 = -$210,000.

Question 13

These are cash inflows and outflows associated with buying and selling of fixed or other long-term assets.

Accepted Answer

Cash inflows and outflows associated with buying and selling of fixed or other long-term assets are typically recorded in the cash flows from investing activities section of the statement of cash flows.

Question 14

Which of the following activities result in an increase in a firm's cash?

Accepted Answer

The answer of Which of the following activities result in...

Question 15

An equity-financed firm will

Accepted Answer

An equity-financed firm will pay more in income taxes than a debt-financed firm because the interest expense on debt is tax-deductible, which reduces the firm's taxable income. On the other hand, dividends paid to equity shareholders are not tax-deductible, and therefore, the equity-financed firm will have a higher taxable income and pay more in income taxes.

Question 16

Income Statement Bullseye, Inc.'s 2010 income statement lists the following income and expenses: EBIT = $900,000, Interest expense = $85,000, and Net income = $570,000. What is the 2010 Taxes reported on the income statement?

Accepted Answer

To find the taxes, calculate the taxable income by subtracting interest from EBIT: $900,000 - $85,000 = $815,000. Then, subtract net income from taxable income to find taxes: $815,000 - $570,000 = $245,000.

Question 17

On which of the four major financial statements would you find the common stock and paid-in surplus?

Accepted Answer

Common stock and paid-in surplus are reported on the Balance Sheet as part of the stockholders' equity section. The Balance Sheet reports a company's assets, liabilities, and equity as of a specific point in time.

Question 18

Which financial statement reports the amounts of cash that the firm generated and distributed during a particular time period?

Accepted Answer

The Statement of Cash Flows reports the amounts of cash that a firm generated and distributed during a particular time period. It helps investors and analysts to assess the liquidity and financial health of the company. The other financial statements (Balance Sheet, Income Statement, and Statement of Retained Earnings) do not provide information on cash flows.

Question 19

Common stockholders' equity divided by number of shares of common stock outstanding is the formula for calculating

Accepted Answer

The formula given calculates the book value per share (BVPS), which represents the amount of equity available to common stockholders per share. It is calculated by dividing the total common stockholders' equity by the number of shares of common stock outstanding. BVPS represents the amount that shareholders would receive if a company were to liquidate its assets and pay off its liabilities.

Question 20

On which of the four major financial statements would you find the increase in inventory?

Accepted Answer

The answer of On which of the four major financial...

Quiz 2: Reviewing Financial Statements