Question 1

Which one of the following will increase cash flow from assets but not affect the operating cash flow?

Accepted Answer

Selling a fixed asset will result in an inflow of cash from the sale, which will increase cash flow from assets but will not affect operating cash flow. The other choices will either directly affect operating cash flow (B, D, E) or indirectly affect it through changes in net income (A).

Question 2

Plato's Foods has ending net fixed assets of $84,400 and beginning net fixed assets of $79,900.During the year,the firm sold assets with a total book value of $13,600 and also recorded $14,800 in depreciation expense.How much did the company spend to buy new fixed assets?

Accepted Answer

New fixed asset purchases = $84,400 - $79,900 + $13,600 + $14,800 = $32,900

Question 3

Pete's Warehouse has net working capital of $2,400,total assets of $19,300,and net fixed assets of $10,200.What is the value of the current liabilities?

Accepted Answer

Current liabilities = $19,300 - $10,200 - $2,400 = $6,700

Question 4

Which one of the following relates to a negative change in net working capital?

Accepted Answer

An increase in current liabilities with no change in current assets for the period leads to a decrease in net working capital, as the company has less available cash to cover its current liabilities.

Question 5

Red Roofs,Inc.has current liabilities of $24,300 and accounts receivable of $7,800.The firm has total assets of $43,100 and net fixed assets of $23,700.The owners' equity has a book value of $21,400.What is the amount of the net working capital?

Accepted Answer

Net working capital = $43,100 - $23,700 - $24,300 = -$4,900

Question 6

Early Works had $87,600 in net fixed assets at the beginning of the year.During the year,the company purchased $6,400 in new equipment.It also sold,at a price of $2,300,some old equipment with a book value of $1,100.The depreciation expense for the year was $3,700.What is the net fixed asset balance at the end of the year?

Accepted Answer

Ending net fixed assets = $87,600 + $6,400 - $1,100 - $3,700 = $87,200

Question 7

Which one of the following indicates that a firm has generated sufficient internal cash flow to finance its entire operations for the period?

Accepted Answer

Positive cash flow from assets indicates that the firm has generated enough cash internally to finance its operations and to pay dividends to shareholders, make debt payments to creditors, and make investments in new capital assets. This measure takes into account both the cash generated from operations and the cash used in investing activities.

Question 8

Net capital spending is equal to:

Accepted Answer

Net capital spending refers to the change in net fixed assets from one period to another. It is calculated by subtracting the beginning net fixed assets from the ending net fixed assets and then adding back any depreciation expense incurred during the period. Therefore, the correct formula for net capital spending is ending net fixed assets minus beginning net fixed assets plus depreciation.

Question 9

Kroeger Exporters has total assets of $74,300,net working capital of $22,900,owners' equity of $38,600,and long-term debt of $23,900.What is the value of the current assets?

Accepted Answer

Current liabilities = $74,300 - $38,600 - $23,900 = $11,800; Current assets = $11,800 + $22,900 = $34,700

Question 10

Baugh and Essary reports the following account balances: inventory of $17,600,equipment of $128,300,accounts payable of $24,700,cash of $11,900,and accounts receivable of $31,900.What is the amount of the current assets?

Accepted Answer

Current assets = $17,600 + $11,900 + $31,900 = $61,400

Question 11

Donut Delite has total assets of $31,300,long-term debt of $8,600,net fixed assets of $19,300,and owners' equity of $21,100.What is the value of the net working capital?

Accepted Answer

Net working capital = $21,100 + $8,600 - $19,300 = $10,400

Question 12

The Braxton Co.has beginning long-term debt of $64,500,which is the principal balance of a loan payable to Centre Bank.During the year,the company paid a total of $16,300 to the bank,including $4,100 of interest.The company also borrowed $11,000.What is the value of the ending long-term debt?

Accepted Answer

Ending long-term debt = $64,500 - $16,300 + $4,100 + $11,000 = $63,300

Question 13

Tressler Industries opted to repurchase 5,000 shares of stock last year in lieu of paying a dividend.The cash flow statement for last year must have which one of the following assuming that no new shares were issued?

Accepted Answer

Repurchasing shares reduces cash flow to stockholders.

Question 14

Donner United has total owners' equity of $18,800.The firm has current assets of $23,100,current liabilities of $12,200,and total assets of $36,400.What is the value of the long-term debt?

Accepted Answer

Long-term debt = $36,400 - $18,800 - $12,200 = $5,400

Question 15

The Draiman,Inc.currently has $3,600 in cash.The company owes $41,800 to suppliers for merchandise and $21,500 to the bank for a long-term loan.Customers owe The Draiman $18,000 for their purchases.The inventory has a book value of $53,300 and an estimated market value of $61,200.If the store compiled a balance sheet as of today,what would be the book value of the current assets?

Accepted Answer

Current assets = $3,600 + $18,000 + $53,300 = $74,900

Question 16

An increase in which one of the following will increase operating cash flow for a profitable,tax-paying firm?

Accepted Answer

Depreciation is a non-cash expense that reduces the reported net income of a firm for tax purposes. However, it does not affect the firm's cash flows. Therefore, an increase in depreciation will result in a higher operating cash flow for the firm.

Question 17

If a firm has a negative cash flow from assets every year for several years,the firm:

Accepted Answer

The answer of If a firm has a negative cash...

Question 18

Cash flow to creditors is equal to:

Accepted Answer

Cash flow to creditors is calculated as the beginning long-term debt minus the ending long-term debt plus interest paid, reflecting the net cash outflow to creditors.

Question 19

A negative cash flow to stockholders indicates a firm:

Accepted Answer

A negative cash flow to stockholders means the firm received more cash from issuing new stock than it paid out in dividends and share repurchases.

Question 20

Morgantown Movers has net working capital of $11,300,current assets of $31,200,equity of $53,400,and long-term debt of $11,600.What is the amount of the net fixed assets?

Accepted Answer

Net fixed assets = $11,600 + $53,400 - $11,300 = $53,700

Quiz 2: Financial Statements, Taxes, and Cash Flow