Chap 3 Risk and Insurance

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Chapter 03
Working with Financial Statements
 

Multiple Choice Questions
 

1. Activities of a firm which require the spending of cash are known as:  A. sources of cash.
B. uses of cash.
C. cash collections.
D. cash receipts.
E. cash on hand.

 

2. The sources and uses of cash over a stated period of time are reflected on the:  A. income statement.
B. balance sheet.
C. tax reconciliation statement.
D. statement of cash flows.
E. statement of operating position.

 

3. A common-size income statement is an accounting statement that expresses all of a firm's expenses as percentage of:  A. total assets.
B. total equity.
C. net income.
D. taxable income.
E. sales.

 

4. Which one of the following standardizes items on the income statement and balance sheet relative to their values as of a common point in time?  A. statement of standardization
B. statement of cash flows
C. common-base year statement
D. common-size statement
E. base reconciliation statement

 

5. Relationships determined from a firm's financial information and used for comparison purposes are known as:  A. financial ratios.
B. identities.
C. dimensional analysis.
D. scenario analysis.
E. solvency analysis.

 

6. The formula which breaks down the return on equity into three component parts is referred to as which one of the following?  A. equity equation
B. profitability determinant
C. SIC formula
D. Du Pont identity
E. equity performance formula

 

7. The U.S. government coding system that classifies a firm by the nature of its business operations is known as the:  A. NASDAQ 100.
B. Standard & Poor's 500.
C. Standard Industrial Classification code.
D. Governmental ID code.
E. Government Engineered Coding System.

 

8. Which one of the following is a source of cash? 
A. increase in accounts receivable
B. decrease in notes payable
C. decrease in common stock
D. increase in accounts payable
E. increase in inventory

 

9. Which one of the following is a use of cash? 
A. increase in notes payable
B. decrease in inventory
C. increase in long-term debt
D. decrease in accounts receivables
E. decrease in common stock

 

10. Which one of the following is a source of cash? 
A. repurchase of common stock
B. acquisition of debt
C. purchase of inventory
D. payment to a supplier
E. granting credit to a customer

 

11. Which one of the following is a source of cash? 
A. increase in accounts receivable
B. decrease in common stock
C. decrease in long-term debt
D. decrease in accounts payable
E. decrease in inventory

 

12. On the Statement of Cash Flows, which of the following are considered financing activities? I. increase in long-term debt
II. decrease in accounts payable
III. interest paid
IV. dividends paid 
A. I and IV only
B. III and IV only
C. II and III only
D. I, III, and IV only
E. I, II, III, and IV

 

13. On the Statement of Cash Flows, which of the following are considered operating activities? I. costs of goods sold
II. decrease in accounts payable
III. interest paid
IV. dividends paid 
A. I and III only
B. III and IV only
C. I, II, and III only
D. I, III, and IV only
E. I, II, III, and IV

 

14. According to the Statement of Cash Flows, a decrease in accounts receivable will _____ the cash flow from _____ activities.  A. decrease; operating
B. decrease; financing
C. increase; operating
D. increase; financing
E. increase; investment

 

15. According to the Statement of Cash Flows, an increase in interest expense will _____ the cash flow from _____ activities.  A. decrease; operating
B. decrease; financing
C. increase; operating
D. increase; financing
E. increase; investment

 

16. On a common-size balance sheet all accounts are expressed as a percentage of:  A. sales for the period.
B. the base year sales.
C. total equity for the base year.
D. total assets for the current year.
E. total assets for the base...
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