Question 1

Which of the following could lead to cash flow problems?

Tightening of credit by suppliers

Easing of credit by suppliers

Reduction of inventory

Improved quality of accounts receivable

Selling of bonds

Question 2

Which of the following represents an internal source of cash?

Cash inflows from financing activities

Cash inflows from investing activities

Cash inflows from selling land

Cash inflows from operating activities

Cash inflows from issuing stock

Question 3

Which of the following is not a typical cash flow under operating activities?

cash inflows from sale of goods or services

cash inflows from interest

cash outflows to employees

cash outflows to suppliers

cash inflows from sale of property, plant, and equipment

Question 4

Working capital is defined as

total assets less intangible assets

current assets divided by current liabilities

current assets less current liabilities

total assets less current assets

current assets less liabilities

Question 5

Management should use the statement of cash flows for which of the following purposes?

To determine dividend policy

To determine cash flow from operations

To determine cash flow from investing activities

To determine cash flow from financing activities

To determine the balance in accounts receivable

Question 6

Notes to financial statements are beneficial in meeting the disclosure requirements of financial reporting. The notes should not be used to

Describe depreciation methods employed by the company.

Describe principles and methods peculiar to the industry in which the company operates when these principles and methods are predominately followed in that industry.

Disclose the basis of consolidation for consolidated statements.

Correct an improper presentation in the financial statements.

Question 7

The concept of conservatism is often considered important in accounting. The application of this concept means that in the event some doubt occurs as to how a transaction should be recorded, it should be recorded so as to

Understate income and overstate assets

Overstate income and overstate assets

Understate income and understate assets

Overstate income and understate assets

Question 8

Which of the following ratios would best disclose effective management of working capital by a given firm relative to other firms in the same industry?

A high rate of financial leverage relative to the industry average

A high number of days' sales uncollected relative to the industry average

A high turnover of net working capital relative to the industry average

A high number of days' sales in inventory relative to the industry average

Question 9

Which of the following would not be an example of the use of a multiple when valuing common equity?

Multiperiod discounted earnings models

Price-to-earnings (PE)

Price-to-book

Price-to-operating cash flow

Question 10

Which of the following was not given as a reason for acquirers paying too much in an acquisition?

Overbidding

Overuse of conventional financial statements

Overoptimistic appraisal of market potential

Overestimation of synergies