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57) Use the following cash flow data of Haven Hardware for the year ended December 31, 2017.
Cash Dividend
$
70,000
Purchase of Land
$
28,000
Cash Payment on Interest
$
20,000
Cash Payment on Salaries
$
90,000
Sales of Equipment
$
76,000
Retirement of Common Stock
$
50,000
Purchase of Equipment
$
60,000
Cash Payments to Suppliers
$
170,000
Cash Collections from Customers
$
500,000
Cash at the Beginning of the Year
$
100,000
What is the net cash provided by operating activities of Haven Hardware?
A) −$30,000
B) $220,000
C) $320,000
D) $780,000
58) Use the following cash flow data of Haven Hardware for the year ended December 31, 2017.
Cash Dividend
$
70,000
Purchase of Land
$
28,000
Cash Payment on Interest
$
20,000
Cash Payment on Salaries
$
90,000
Sales of Equipment
$
76,000
Retirement of Common Stock
$
50,000
Purchase of Equipment
$
60,000
Cash Payments to Suppliers
$
170,000
Cash Collections from Customers
$
500,000
Cash at the Beginning of the Year
$
100,000
What is the net cash provided by or used in investing activities of Haven Hardware?
A) −$12,000
B) −$62,000
C) $12,000
D) $164,000
59) Use the following cash flow data of Haven Hardware for the year ended December 31, 2017.
Cash Dividend
$
70,000
Purchase of Land
$
28,000
Cash Payment on Interest
$
20,000
Cash Payment on Salaries
$
90,000
Sales of Equipment
$
76,000
Retirement of Common Stock
$
50,000
Purchase of Equipment
$
60,000
Cash Payments to Suppliers
$
170,000
Cash Collections from Customers
$
500,000
Cash at the Beginning of the Year
$
100,000
What is the net cash provided by or used in financing activities of Haven Hardware?
A) −$10,000
B) −$120,000
C) $10,000
D) $120,000
60) Use the following cash flow data of Haven Hardware for the year ended December 31, 2017.
Cash Dividend
$
70,000
Purchase of Land
$
28,000
Cash Payment on Interest
$
20,000
Cash Payment on Salaries
$
90,000
Sales of Equipment
$
76,000
Retirement of Common Stock
$
50,000
Purchase of Equipment
$
60,000
Cash Payments to Suppliers
$
170,000
Cash Collections from Customers
$
500,000
Cash at the Beginning of the Year
$
100,000
What is the net increase or decrease in cash for Haven Hardware for 2017?
A) −$94,000
B) −$88,000
C) $88,000
D) $188,000
61) Use the following cash flow data of Haven Hardware for the year ended December 31, 2017.
Cash Dividend
$
70,000
Purchase of Land
$
28,000
Cash Payment on Interest
$
20,000
Cash Payment on Salaries
$
90,000
Sales of Equipment
$
76,000
Retirement of Common Stock
$
50,000
Purchase of Equipment
$
60,000
Cash Payments to Suppliers
$
170,000
Cash Collections from Customers
$
500,000
Cash at the Beginning of the Year
$
100,000
What is the cash at the end of 2017 for Haven Hardware?
A) $6,000
B) $94,000
C) $736,000
D) $188,000
62) All of the following ratios are related to efficiency except ________.
A) total asset turnover
B) fixed-asset turnover
C) average collection period
D) cash ratio
63) Which of the following would result in a cash inflow under the heading "Cash flow from
investing" in the statement of cash flows?
A) purchase of capital equipment
B) payments to suppliers for inventory
C) collections on receivables
D) sale of production machinery
64) When assessing the sustainability of a firm's cash flows, analysts will prefer to see cash
growth generated from which of the following sources?
A) cash flow from investment activities
B) cash flow from operating activities
C) cash flow from financing
D) cash flow from extraordinary events
65) The ABS company has a capital base of $100 million, an opportunity cost of capital (k) of
15%, a return on assets (ROA) of 9%, and a return on equity (ROE) of 18%. What is the
economic value added (EVA) for ABS?
A) $8 million
B) –$6 million
C) $3 million
D) –$4 million
66) Another term for EVA is ________.
A) net income
B) operating income
C) residual income
D) market-based income
67) Which of the following transactions will result in a decrease in cash flow from operations?
A) increase in accounts receivable
B) decrease in inventories
C) increase in taxes payable.
D) decrease in bonds outstanding
68) Which of the following transactions will result in a decrease in cash flow from investments?
A) acquisition of another business
B) capital gain from sale of a subsidiary
C) decrease in net investments
D) sale of equipment
69) Which of the following will result in an increase in cash to the firm?
A) dividends paid
B) a delay in collecting on accounts receivable
C) net new investments
D) an increase in accounts payable
70) The table below shows some data for Key Biscuit Company:
Year
Tax Burden
Interest
Burden
ROS
ATO
Leverage
ROE
2010
0.60
0.70
0.40
0.45
1.20
9.07%
2011
0.60
0.55
0.40
0.45
1.45
8.61%
2012
0.60
0.45
0.40
0.45
1.65
8.02%
What must have caused the firm's ROE to drop?
A) The firm began using more debt as a percentage of financing.
B) The firm began using less debt as a percentage of financing.
C) The compound leverage ratio was less than 1.
D) The operating ROA was declining.
71) A firm purchases goods on credit worth $150. The same firm pays off $100 in old credit
purchases. An investment is made via the purchase of a new facility, and equity is issued in the
amount of $300 to pay for the purchase. What is the change in net cash provided by operations?
A) $50 increase
B) $100 increase
C) $150 increase
D) $250 increase
72) A firm purchases goods on credit worth $100. The same firm pays off $80 in old credit
purchases. An investment is made via the purchase of a new facility, and equity is issued in the
amount of $200 to pay for the purchase. What is the change in net cash provided by financing?
A) $20 increase
B) $80 increase
C) $100 increase
D) $200 increase
73) A firm purchases goods on credit worth $90. The same firm pays off $100 in old credit
purchases. An investment is made via the purchase of a new facility, and equity is issued in the
amount of $180 to pay for the purchase. What is the change in net cash provided by investments?
A) $10 decrease
B) $90 decrease
C) $180 decrease
D) $190 decrease
74) The net income of the company is $120. Accounts payable increase by $20, depreciation is
$15, and equipment is purchased for $40. If the firm issued $110 in new bonds, what is the total
change in cash for the firm for all activities?
A) increase of $225
B) increase of $130
C) decrease of $195
D) decrease of $110
75) The term quality of earnings refers to ________.
A) how well reported earnings conform to GAAP
B) the realism and sustainability of reported earnings
C) whether actual earnings matched expected earnings
D) how well reported earnings fit a trend line of earnings growth
76) The practice of "selling" large quantities of goods to customers in order to get quarterly sales
up while allowing these customers to return the goods next quarter is termed ________.
A) channel stuffing
B) clogging the network
C) spamming the johns
D) artificial sales
77) What ratio will definitely increase when a firm increases its annual sales with no
corresponding increase in assets?
A) asset turnover
B) current ratio
C) liquidity ratio
D) quick ratio
78) A firm's leverage ratio is 1.2, interest-burden ratio is 0.81, and profit margin is 0.25, and its
asset turnover is 1.1. What is the firm's compound leverage factor?
A) 0.243
B) 0.267
C) 0.826
D) 0.972
79) The tax burden of the firm is 0.4, the interest burden is 0.65, the return on sales is 0.05, the
asset turnover is 0.90, and the leverage ratio is 1.35. What is the ROE of the firm?
A) 1.58%
B) 5.68%
C) 12.2%
D) 13.33%
80) The tax burden of the firm is 0.5, the interest burden is 0.55, the profit margin is 0.25, the
asset turnover is 1.5, and the leverage ratio is 1.65. What is the ROE of the firm?
A) 1.88%
B) 6.68%
C) 12.15%
D) 17.02%
81) The major difference between IFRS and GAAP is that U.S. standards are ________ and
IFRS standards are ________.
A) strictly enforced; weakly enforced
B) rules-based; principles-based
C) evolutionary; devolutionary
D) based on government standards; based on corporate practice
82) The quick ratio is a measure of a firm's ________.
A) asset turnover
B) market valuation
C) liquidity
D) interest burden
83) The firm's leverage ratio is 1.2, interest-burden ratio is 0.81, and profit margin is 0.24, and its
asset turnover is 1.25. What is the firm's ROA?
A) 0.25
B) 0.3
C) 0.335
D) 0.372
84) A firm has a compound leverage factor greater than 1; this indicates that ________.
A) the firm has no interest payments
B) the firm uses less debt as a percentage of financing
C) the firm's interest payments are equal to the firm's pretax profits
D) the firm's debt has a positive contribution to the firm's ROA
85) If a firm's borrowing rate exceeds its ROA, then ROE will ________.
A) increase by an amount that depends on the equity/debt ratio.
B) increase by an amount that depends on the debt/equity ratio.
C) decline by an amount that depends on the equity/debt ratio.
D) decline by an amount that depends on the debt/equity ratio.
86) The impact of using LIFO over FIFO is to ________.
A) bias ROE downward since investments are undervalued
B) bias ROE downward since investments are overvalued
C) bias ROE upward since investments are undervalued
D) bias ROE upward since investments are overvalued
87) According the Financial Accounting Standards Board's Statement No. 157 on fair value
accounting, Level 3 assets ________.
A) must be reduced to book value
B) must be compared to market valuations
C) are hardest to value
D) are easiest to value
88) When choosing a benchmark, it is best to use ________.
A) numerous firms in the same industry
B) your number one competitor
C) the aspirational firm you wish to emulate
D) standards established by the FASB
