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QUIZ FOR CHAPTER 3 & 4

Uploaded: 4 years ago
Contributor: Ryan Shaw
Category: Accounting
Type: Lecture Notes
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Filename:   QUIZ FOR CHAPTER 3 & 4.docx (27.25 kB)
Page Count: 4
Credit Cost: 1
Views: 69
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Transcript
QUIZ FOR CHAPTER 3 Question 1 1 out of 1 points GAAP is the accounting profession's rule-setting body. Selected Answer:  False Correct Answer:  False Question 2 1 out of 1 points The income statement is a financial summary of a firm's operating results during a specified period while the balance sheet is a summary statement of a firm's financial position at a given point in time. Selected Answer:  True Correct Answer:  True Question 3 1 out of 1 points Creditors are primarily interested in short-term liquidity of the company and its ability to make interest and principal payments. Selected Answer:  True Correct Answer:  True Question 4 1 out of 1 points In ratio analysis, the financial statements being used for comparison should be dated at the same point in time during the year. If not, the effect of seasonality may produce erroneous conclusions and decisions. Selected Answer:  True Correct Answer:  True Question 5 1 out of 1 points Total asset turnover commonly measures the liquidity of a firm's total assets. Selected Answer:  False Correct Answer:  False Question 6 1 out of 1 points Higher the debt ratio, more the financial leverage a firm has and thus, the greater will be its risk and return. Selected Answer:  True Correct Answer:  True Question 7 1 out of 1 points Gross profit margin measures the percentage of each sales dollar left after a firm has paid for its goods and operating expenses. Selected Answer:  False Correct Answer:  False Question 8 1 out of 1 points Return on total assets (ROA) measures the overall effectiveness of management in generating profits with its available assets. Selected Answer:  True Correct Answer:  True Question 9 1 out of 1 points The financial leverage multiplier is the ratio of the firm's total assets to stockholders' equity. Selected Answer:  True Correct Answer:  True Question 10 1 out of 1 points The DuPont formula allows a firm to break down its return into the net profit margin, which measures the firm's profitability on sales, and its total asset turnover, which indicates how efficiently the firm has used its assets to generate sales. Selected Answer:  True Correct Answer:  True QUIZ CHAPTER 4 Question 1 1 out of 1 points Depreciation deductions, like any other business expenses, reduce the income that a firm reports on its income statement. Selected Answer:  True Correct Answer:  True Question 2 1 out of 1 points Given a financial manager's preference for faster receipt of cash flows, a longer depreciable life is preferred to a shorter one. Selected Answer:  False Correct Answer:  False Question 3 1 out of 1 points In the statement of cash flows, the cash flows from financing activities result from debt and equity financing transactions; including incurrence and repayment of debt, cash inflow from the sale of stock, and cash outflows to repurchase stock or pay cash dividends. Selected Answer:  True Correct Answer:  True Question 4 1 out of 1 points The statement of cash flows allows the financial manager and other interested parties to analyze a firm's past and possibly future profitability. Selected Answer:  False Correct Answer:  False Question 5 1 out of 1 points Strategic financial plans are planned long-term financial actions and the anticipated financial impact of those actions. Selected Answer:  True Correct Answer:  True Question 6 1 out of 1 points The sales forecast and various forms of operating and financial data are the key outputs of the short-run (operating) financial planning. Selected Answer:  False Correct Answer:  False Question 7 1 out of 1 points In cash budgeting, the impact of depreciation is reflected in a reduction in tax payments. Selected Answer:  True Correct Answer:  True Question 8 1 out of 1 points Since the percentage-of-sales method assumes that all the form's costs and expenses are variable, it tends to understate profits when sales are increasing and overstate profits when sales are decreasing. Selected Answer:  True Correct Answer:  True Question 9 1 out of 1 points In the development of pro forma statements, a firm that requires external funds means that its projected level of cash is in excess of its needs and that funds would therefore be available for repaying debt, repurchasing stock, or increasing the dividend to stockholders. Selected Answer:  False Correct Answer:  False Question 10 1 out of 1 points A weakness of the percent-of-sales method of preparing a pro forma income statement is the assumption that the firm's past financial condition is an accurate predictor of its future Selected Answer:  True Correct Answer:  True

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