Test Bank For Analysis for Financial Management 12Th Edition BY Robert Higgins
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Course
Financial Management - Test Bank
Institution
Financial Management - Test Bank
Chapter 04 Test Bank
1. The sustainable growth rate is defined as the maximum rate at which company sales can increase.
FALSE
Accessibility: Keyboard Navigation Difficulty: 1 Easy Gradable: automatic
2. The sustainable growth rate is the only growth rate in sales that is consistent with stable ...
,8. An increase in cash and cash equivalents should appear as a source of cash on the sources and uses statement.
FALSE
Accessibility: Keyboard Navigation
Difficulty: 2 Medium
Gradable: automatic
9. A cash flow statement places each source or use of cash into one of three broad categories: operating activities, investing
activities, or financing activities.
11. Which of the following statements concerning the cash flow production cycle is true?
A. The profits reported in a given time period equal the cash flows generated.
B. A company’s operations and finances are independent of each other.
C. Financial statements have nothing to do with reality.
D. The movement of cash to inventory, to accounts receivable, and back to cash is known as the firm’s working capital cycle.
E. A profitable company will always have sufficient cash to meet its obligations.
Accessibility: Keyboard Navigation
Difficulty: 2 Medium
Gradable: automatic
12. Which of the following statements concerning a firm’s cash flows and profits is false?
A. Managers must be at least as concerned with cash flows as with profits.
B. A company that sells merchandise at a profit will generate cash soon enough to replenish cash flows required for continued
production.
C. The cash flows generated in a given time period can differ from the profits reported.
D. Profits are no assurance that cash flow will be sufficient to maintain solvency.
E. Due to required cash investments in current assets, fast-growing and profitable companies can literally "grow broke".
Accessibility: Keyboard Navigation
Difficulty: 2 Medium
Gradable: automatic
13. Which of the following is NOT a typical reason for differences between profits and cash flow?
A. Goodwill
B. Depreciation expense
C. Changes in accounts receivable
D. Accrual accounting practices
Accessibility: Keyboard Navigation
Difficulty: 2 Medium
Gradable: automatic
, 14. Which one of the following is the financial statement that shows a financial snapshot, taken at a point in time, of all the assets
the company owns and all the claims against those assets?
A. income statement
B. creditor’s statement
C. balance sheet
D. cash flow statement
E. sources and uses statement
Accessibility: Keyboard Navigation
Difficulty: 1 Easy
Gradable: automatic
15. A balance sheet reports the value of a firm’s assets, liabilities, and equity
A. over an annual period.
B. over any period of time.
C. at any point in time.
D. at the end of the year.
16. A company sells used equipment with a book value of $100,000 for $250,000 cash. How would this transaction affect the
company’s balance sheet?
A. Equity rises $250,000; net plant and equipment falls $250,000.
B. Cash rises $250,000; net plant and equipment falls $100,000; equity rises $150,000.
C. Cash rises $250,000; accounts receivable falls $100,000; goodwill rises $150,000.
D. Cash rises $250,000; net plant and equipment falls $250,000.
Accessibility: Keyboard Navigation
Difficulty: 2 Medium
Gradable: automatic
17. A company purchases a new $10 million building financed half with cash and half with a bank loan. How would this
transaction affect the company’s balance sheet?
A. Net plant and equipment rises $10 million; cash falls $10 million; bank debt rises $5 million.
B. Net plant and equipment rises $5 million; cash falls $10 million; bank debt rises $5 million.
C. Net plant and equipment rises $5 million; cash falls $5 million; bank debt rises $5 million.
D. Net plant and equipment rises $10 million; cash falls $5 million; bank debt rises $5 million.
Accessibility: Keyboard Navigation
Difficulty: 2 Medium
Gradable: automatic
18. Which one of the following is the financial statement that summarizes a firm’s revenue and expenses over a period of time?
A. income statement
B. balance sheet
C. cash flow statement
D. sources and uses statement
E. market value statement
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