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QUIZ FOR CHAPTER 3 & 4
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Uploaded: 4 years ago
Category: Accounting
Type: Lecture Notes
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Filename: QUIZ FOR CHAPTER 3 & 4.docx
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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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