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1.

__________ is concerned with the acquisition,


financing, and management of assets with some overall
goal in mind.
Financial management
Profit maximization
Agency theory
Social responsibility
2. Jensen and Meckling showed that __________ can
assure themselves that the __________ will make
optimal decisions only if appropriate incentives are
given and only if the __________ are monitored.
principals; agents; agents
agents; principals; principals
principals; agents; principals
agents; principals; agents
3. __________ is concerned with the maximization of a
firm's earnings after taxes.
Shareholder wealth maximization
Profit maximization
Stakeholder maximization
EPS maximization
4. What is the most appropriate goal of the firm?
Shareholder wealth maximization.
Profit maximization.
Stakeholder maximization.
EPS maximization
5. Which of the following statements is correct
regarding profit maximization as the primary goal of the
firm?
A. Profit maximization considers the firm's risk level.
B. Profit maximization will not lead to increasing shortterm profits at the expense of lowering expected future
profits.
C. Profit maximization does consider the impact on
individual shareholder's EPS.
D. Profit maximization is concerned more with
maximizing net income than the stock price.
6. __________ is concerned with the branch of
economics relating the behavior of principals and their
agents.
Financial management
Profit maximization

Agency theory
Corporate social responsibility
7. A concept that implies that the firm should consider
issues such as protecting the consumer, paying fair
wages, maintaining fair hiring practices, supporting
education, and considering environmental issues.
Financial management
Profit maximization
Agency theory
Corporate social responsibility
8. Which of the following is not normally a responsibility
of the treasurer of the modern corporation but rather
the controller?
Budgets and forecasts
Asset management
Investment management
Financing management
9. The __________ decision involves determining the
appropriate make-up of the right-hand side of the
balance sheet.
asset management
financing
investment
capital budgeting
10. To whom does the Treasurer most likely report?
Chief Financial Officer.
Vice President of Operations.
Chief Executive Officer.
Board of Directors.
11. The authors of your textbook suggest that you need
to understand financial management even if you have
no intention of becoming a financial manager. One
reason is that the successful manager of the not-toodistant future will need to be much more of a
__________ who has the knowledge and ability to move
not just vertically within an organization but horizontally
as well. Developing __________ will be the rule, not the
exception.
specialist; specialties
generalist; general business skills
technician; quantitative skills
team player; cross-functional capabilities

12. The __________ decision involves a determination


of the total amount of assets needed, the composition
of the assets, and whether any assets need to be
reduced, eliminated, or replaced.
asset management
financing
investment
accounting
13. How are earnings per share calculated?
A. Use the income statement to determine earnings
after taxes (net income) and divide by the previous
period's earnings after taxes. Then subtract 1 from the
previously calculated value.
B. Use the income statement to determine earnings
after taxes (net income) and divide by the number of
common shares outstanding.
C. Use the income statement to determine earnings
after taxes (net income) and divide by the number of
common and preferred shares outstanding.
D. Use the income statement to determine earnings
after taxes (net income) and divide by the forecasted
period's earnings after taxes. Then subtract 1 from the
previously calculated value.
14. According to the text's authors, what is the most
important of the three financial management decisions?
Asset management decision.
Financing decision.
Investment decision.
Accounting decision.
15. The __________ decision involves efficiently
managing the assets on the balance sheet on a day-today basis, especially current assets.
asset management
financing
investment
accounting
16. Which of the following is not a perquisite (perk)?
Company-provided automobile.
Expensive office.
Salary.
Country club membership.

17. Which of the following is not normally a


responsibility of the controller of the modern
corporation?
Budgets and forecasts.
Asset management.
Financial reporting to the IRS.
Cost accounting.
18. All constituencies with a stake in the fortunes of the
company are known as __________.
shareholders
stakeholders
creditors
customers
19. Which of the following statements is not correct
regarding earnings per share (EPS) maximization as the
primary goal of the firm?
A. EPS maximization ignores the firm's risk level.
B. EPS maximization does not specify the timing or
duration of expected EPS.
C. EPS maximization naturally requires all earnings to be
retained.
D. EPS maximization is concerned with maximizing net
income.
20. __________ is concerned with the maximization of a
firm's stock price.
Shareholder wealth maximization
Profit maximization
Stakeholder welfare maximization
EPS maximization
21. Corporate governance success includes three key
groups. Which of the following represents these three
groups?
A. Suppliers, managers, and customers.
B. Board of Directors, executive officers, and common
shareholders.
C. Suppliers, employees, and customers.
D. Common shareholders, managers, and employees.

1. In finance we refer to the market for short-term


government and corporate debt securities as the
__________ market.

7. In finance we refer to the market where existing


securities are bought and sold as the __________
market.

money
capital
primary
secondary

money
capital
primary
secondary

2. Which of the following would generally have


unlimited liability?

8. Which of the following is not an example of a financial


intermediary?

A limited partner in a partnership.


A shareholder in a corporation.
The owner of a sole proprietorship.
A member in a limited liability company (LLC).

Wisconsin S&L, a savings and loan association.


Strong Capital Appreciation, a mutual fund.
Microsoft Corporation, a software firm.
College Credit, a credit union.

3. The Chance Dice Corporation had taxable income


(excluding capital gains) of $16 million. The firm's
$10,000 of realized capital gains will be taxed at
__________.

9. How are funds allocated efficiently in a market


economy?

39 percent
35 percent
34 percent
the average tax rate of the firm
4. A corporation in the U.S. estimates and pays it taxes
__________.
monthly
quarterly
semi-annually
annually

The economic unit that considers itself most in need of


funds receives funds first followed by those who are less
in need.
Receipt of funds is rotated over time so that each
economic unit can receive them in turn.
The largest economic units receive the funds first
followed by smaller firms if sufficient funds are
available.
The economic unit that is willing to pay the highest
expected return for a given risk level receives the
funds.
10. What mechanism ensures that large firms who
benefit from tax laws pay some minimum amount of
tax?

5. The average tax rate is equal to the __________.


total tax liability divided by taxable income
rate that will be paid on the next dollar of taxable
income
median marginal tax rate
percentage increase in taxable income from the
previous period
6. Accounting.com has purchased 3-year class
equipment for $100,000. It uses the MACRS method of
depreciation. What is tax depreciation for the fourth
year?
$0
$7,410
$25,000
$33,333

Annual minimum tax.


Alternative minimum tax.
Minimum tax law.
Corpulent minimum tax.
11. A profitable firm would prefer to use which of the
following methods of depreciation -- for tax purpose -for a given depreciable asset, all else equal?
Straight-line.
Double-declining-balance.
Modified accelerated cost recovery system.
All of the above techniques are equally useful for a
profitable firm because they provide the same tax
deductions over the life of the asset.

12. A major disadvantage of the corporate form of


organization is the __________.
double taxation of dividends
inability of the firm to raise large sums of additional
capital
limited liability of shareholders
limited life of the corporate form
13. Which of the following examples would be
deductible as an expense on the corporation's income
statement?
Interest paid on outstanding bonds.
Cash dividends paid on outstanding common stock.
Cash dividends paid on outstanding preferred stock.
All of the above.
14. A corporation that receives $1,000 in dividends from
another corporation, of which they have owned 10% for
one full year, will be taxed on how much of those
dividends?
All $1,000 of the dividends.
None of the dividends since it is from another
corporation.
$100 (10% of $1,000) since they owned a 10% position
for at least 6 months.
$300 (30% of $1,000) since 70% of dividends is tax
exempt.
15. In finance we refer to the market where new
securities are bought and sold for the first time as the
__________ market.
A money B capital C primary D secondary
16. Limited liability companies (LLCs) generally possess
no more than two of the following four (desirable)
characteristics: (1) limited liability, (2) centralized
management, (3) unlimited life, and (4) the ability to
transfer ownership interest without prior consent of the
other owners. The two characteristics most likely to be
absent in LLCs are __________.
limited liability and centralized management
centralized management and unlimited life
centralized management and the ability to transfer
ownership interest without prior consent of the other
owners
unlimited life and the ability to transfer ownership
interest without prior consent of the other owners

17. Which of the following is an advantage of a


corporation that is not an advantage as a limited partner
in a partnership?
Limited liability.
Easy transfer of ownership position.
Double taxation.
All of the above are advantages that the corporation
has over the limited partner.
18. Which of the following statements is correct for a
sole proprietorship?
The sole proprietor has limited liability.
The sole proprietor can easily dispose of their
ownership position relative to a shareholder in a
corporation.
The sole proprietorship can be created more quickly
than a corporation.
The owner of a sole proprietorship faces double
taxation unlike the partners in a partnership.
19. What is potentially the biggest advantage of a small
partnership over a sole proprietorship?
Unlimited liability.
Single tax filing.
Difficult ownership resale.
Raising capital.
20. In finance we refer to the market for relatively longterm financial instruments as the __________ market.
money
capital
primary
secondary
21. Limited liability companies (LLCs) generally possess
no more than two of the following four (desirable)
characteristics: (1) limited liability, (2) centralized
management, (3) unlimited life, and (4) the ability to
transfer ownership interest without prior consent of the
other owners. Which of the following forms of business
organization in the U.S. generally possesses all four of
these characteristics?
General partnership.
Limited partnership.
Corporation.
None of the above.

1. Determine a firm's total asset turnover (TAT) if its net


profit margin is 5 percent, assets are $8 million, and ROI
is 8 percent.

7. Sales for 1991 (base year) were $800,000 and the


year-end total asset turnover ratio was 1.6. With which
of the following statements would you agree?

1.60
2.05
2.50
4.00

The total assets index analysis value, assuming $1.05


million of assets at the end of 2000, would be 210.
The gross profit margin and the net profit margin are
examples of balance sheet ratios.
If total debt in 2000 was $420,000, the debt-to-equity
ratio in 2000 would be 84%.
Index analysis supplements the common-size analysis
by comparing key industry ratios.

2. Felton Farm Supplies, Inc., has an 8 percent return on


total assets of $300,000 and a net profit margin of 5
percent. What are its sales?
$3,750,000
$480,000
$300,000
$1,500,000
3. Which of the following would not improve the current
ratio?
Borrow short term to finance additional fixed assets.
Issue long-term debt to buy inventory.
Sell common stock to reduce current liabilities.
Sell fixed assets to reduce accounts payable.
4. The gross profit margin is unchanged, but the net
profit margin declined over the same period. This could
have happened if __________.
cost of goods sold increased relative to sales
sales increased relative to expenses
the U.S. Congress increased the tax rate
dividends were decreased
5. A company can improve (lower) its debt-to-total asset
ratio by doing which of the following?
Borrow more.
Shift short-term to long-term debt.
Shift long-term to short-term debt.
Sell common stock.
6. Which of the following statements (in general) is
correct?
A low receivables turnover is desirable.
The lower the total debt-to-equity ratio, the lower the
financial risk for a firm.
An increase in net profit margin with no change in sales
or assets means a weaker ROI.
The higher the tax rate for a firm, the lower the interest
coverage ratio.

8. Krisle and Kringle's debt-to-total assets ratio is.4.


What is its debt-to-equity ratio?
.2
.77
.667
.333
9. Which of the following statements is the least likely to
be correct?
A firm that has a high degree of business risk is less
likely to want to incur financial risk.
There exists little or no negotiation with suppliers of
capital regarding the financing needs of the firm.
Financial ratios are relevant for making internal
comparisons.
It is important to make external comparisons or
financial ratios.
10. Which of the following statements is most accurate?
Coverage ratios also shed light on the "liquidity" of
these current ratios.
Receivable- and inventory-based activity ratios also
shed light on the "liquidity" of these current assets.
Receivable- and inventory-based activity ratios also
shed light on the firm's use of financial leverage.
Liquidity ratios also shed light on the firm's use of
financial leverage.

11. The authors place financial ratios into __________.


two broad categories: (1) balance sheet ratios; and (2)
income statement ratios
three broad categories: (1) balance sheet ratios; (2)
income statement ratios; and (3) income
statement/balance sheet ratios
two broad categories: (1) balance sheet and income
statement/balance sheet ratios; and (2) income
statement ratios
two broad categories: (1) balance sheet ratios; (2)
income statement and income statement/balance
sheet ratios
12. Benchmarking can be applied to ratio analysis. How
is this different from comparing a firm's ratios to
industry averages over time?

Net profit margin Total asset turnover Equity


multiplier
Total asset turnover Gross profit margin Debt ratio
Total asset turnover Net profit margin
Total asset turnover Gross profit margin Equity
multiplier
15. In conducting a common-size analysis every balance
sheet item is divided by __________ and every income
statement is divided by __________.
its corresponding base year balance sheet item; its
corresponding base year income statement item
its corresponding base year income statement item; its
corresponding base year balance sheet item
net sales or revenues; total assets.
total assets; net sales or revenues

In benchmarking you compare your firm's performance


to a previous "benchmarked" period and not industry
averages.
It creates a benchmark of numerous industries for
comparison purposes rather than a single industry due
to wild fluctuations within specific industries.
It creates a benchmark that compares your firm to the
best world-class competitors rather than an entire
industry.
It creates a benchmark by taking an average of a
portfolio of industries over a specific time period,
usually 5 years, rather than a single industry in a single
year due to wild fluctuations within specific industries
over short periods of time.

16. In conducting an index analysis every balance sheet


item is divided by __________ and every income
statement is divided by __________.

13. Which of the following statements is most correct


regarding the current ratio for a firm that uses industry
averages and a peer benchmark as their comparison?

Liquidity ratios.
Debt ratios.
Coverage ratios.
Profitability ratios.
Activity ratios.

Firms should attempt to maintain a current ratio that is


below 0.5.
Firms should always exceed both the industry average
and the peer benchmark current ratio.
Firms should strive to maintain a current ratio that
seems reasonable when compared to an industry
average and a peer benchmark.
Firms should strive to maintain a current ratio of at
least 2.0.
14. The DuPont Approach breaks down the earning
power on shareholders' book value (ROE) as follows:
ROE = __________.

its corresponding base year balance sheet item; its


corresponding base year income statement item
its corresponding base year income statement item; its
corresponding base year balance sheet item
net sales or revenues; total assets.
total assets; net sales or revenues
17.
Which group of ratios measure a firm's ability to meet
short-term obligations?

18.
Which group of ratios relate the financial charges of a
firm to its ability to service them?

Liquidity ratios.
Debt ratios.
Coverage ratios.
Profitability ratios.
Activity ratios.

19. Which group of ratios measure how effectively the


firm is using its assets?
Liquidity ratios.
Debt ratios.
Coverage ratios.
Profitability ratios.
Activity ratios.
20. Which group of ratios relate profits to sales and
investment?
Liquidity ratios.
Debt ratios.
Coverage ratios.
Profitability ratios.
Activity ratios.
21. Which group of ratios shows the extent to which the
firm is financed with debt?
Liquidity ratios.
Debt ratios.
Coverage ratios.
Profitability ratios.
Activity ratios.
22. Determine a firm's total asset turnover (TAT) if its
net profit margin (NPM) is 5 percent, total assets are $8
million, and ROI is 8 percent.
1.60
2.05
2.50
4.00
23. Felton Farm Supplies, Inc., has an 8 percent return
on total assets of $300,000 and a net profit margin of 5
percent. What are its sales?
$3,750,000
$480,000
$300,000
$1,500,000
24. Which of the following would NOT improve the
current ratio?
Borrow short term to finance additional fixed assets.
Issue long-term debt to buy inventory.
Sell common stock to reduce current liabilities.
Sell fixed assets to reduce accounts payable.

25. The gross profit margin is unchanged, but the net


profit margin declined over the same period. This could
have happened if
cost of goods sold increased relative to sales.
sales increased relative to expenses.
the U.S. Congress increased the tax rate.
dividends were decreased
26. Palo Alto Industries has a debt-to-equity ratio of 1.6
compared with the industry average of 1.4. This means
that the company
will not experience any difficulty with its creditors.
has less liquidity than other firms in the industry.
will be viewed as having high creditworthiness.
has greater than average financial risk when compared
to other firms in its industry.
27. Kanji Company had sales last year of $265 million,
including cash sales of $25 million. If its average
collection period was 36 days, its ending accounts
receivable balance is closest to
. (Assume a 365-day
year.)
$26.1 million
$23.7 million
$7.4 million
$18.7 million
28. A company can improve (lower) its debt-to-total
assets ratio by doing which of the following?
Borrow more.
Shift short-term to long-term debt.
Shift long-term to short-term debt.
Sell common stock.
29. Which of the following statements (in general) is
correct?
A low receivables turnover is desirable.
The lower the total debt-to-equity ratio, the lower the
financial risk for a firm.
An increase in net profit margin with no change in sales
or assets means a poor ROI.
The higher the tax rate for a firm, the lower the interest
coverage ratio.

30. Retained earnings for the "base year" equals 100.0


percent. You must be looking at
a common-size balance sheet.
a common-size income statement.
an indexed balance sheet.
an indexed income statement.
31. Krisle and Kringle's debt-to-total assets (D/TA) ratio
is .4. What is its debt-to-equity (D/E) ratio?
.2
.6
.667
.333
32. A firm's operating cycle is equal to its inventory
turnover in days (ITD)
plus its receivable turnover in days (RTD).
minus its RTD.
plus its RTD minus its payable turnover in days (PTD).
minus its RTD minus its PTD.

1. According to the accounting profession, which of the


following would be considered a cash-flow item from a
"financing" activity?
A cash outflow to the government for taxes.
A cash outflow to repurchase the firm's own common
stock.
A cash outflow to lenders as interest.
A cash outflow to purchase bonds issued by another
company.
2. If the following are the balance sheet changes:
$ 5,005 decrease in accounts receivable
$12,012 decrease in notes payable
$10,001 increase in accounts payable
$ 8,950 decrease in net fixed assets
a "use" of funds would be:
$8,950 decrease in net fixed assets.
$5,005 decrease in accounts receivable.
$10,001 increase in accounts payable.
$12,012 decrease in notes payable.
3. Cash budgets are prepared from past:

33. When doing an "index analysis," we should expect


that changes in a number of the firm's current asset and
liabilities accounts (e.g., cash, accounts receivable, and
accounts payable) would move roughly together with
for a normal, well-run company.
net sales
cost of goods sold
earnings before interest and taxes (EBIT)
earnings before taxes (EBT)
34. The process of convergence of accounting standards
around the world aims to
.
narrow or remove national accounting differences
move non-US accounting standards towards US
Generally Accepted Accounting Principles (US GAAP)
create one set of rules-based accounting standards for
all countries

balance sheets.
income statements.
income tax and depreciation data.
None of the above answers are
4. An examination of the sources and uses of funds is
part of:
a forecasting technique.
a funds flow analysis.
a ratio analysis.
calculations for preparing the balance sheet.
5. Which of the following is not a cash outflow for the
firm?
Depreciation.
Dividends.
Interest payments.
Taxes.

6. If the following are balance sheet changes:


$ 5,005 decrease in accounts receivable
$ 7,000 increase in cash
$12,012 decrease in notes payable
$ 9,850 increase in inventories
a "source" of funds would be:

being positively related to the firm's target return on


equity and negatively related to its target retention rate.
the maximum annual percentage increase in sales that
can be achieved based on target operating, debt, and
dividend-payout ratios.
being negatively related to the firm's target return on
equity and positively related to its retention rate.

$9,850 increase in inventories.


$5,005 decrease in accounts receivable.
$7,000 increase in cash.
$12,012 decrease in notes payable.
7. According to the accounting profession, which of the
following would be considered a cash-flow item from an
"investing" activity?

11. A firm receives cash for 30% of its sales with the
remaining 70% being credit sales. Of the credit sales,
20% are collected in the month of sale, 60% in the
month following the sale, and 20% in the second month
following the sale. Forecasted sales for January through
April are $400,000, $500,000, $600,000, and $400,000
respectively. What are total cash receipts in the month
of April?

Cash outflow to the government for taxes.


Cash outflow to shareholders as dividends.
Cash outflow to lenders as interest.
Cash outflow to purchase bonds issued by another
company.

$120,000
$400,000
$498,000
$530,000

8. If the following are balance sheet changes:


$ 7,000 decrease in cash
$12,012 increase in notes payable
$ 9,850 increase in inventories
$10,001 increase in accounts payable
a "use" of funds would be:
$9,850 increase in inventories.
$7,000 decrease in cash.
$10,001 increase in accounts payable.
$12,012 increase in notes payable.
9. According to the accounting profession, which of the
following would be considered a cash-flow item from an
"operating" activity?
Cash outflow to the government for taxes.
Cash outflow to shareholders as dividends.
Cash inflow to the firm from selling new common equity
shares.
Cash outflow to purchase bonds issued by another
company.
10. The sustainable growth rate (SGR) can be expressed
as:

the percentage change in retained earnings assuming a


steady state model where the retention rate is held
constant.

12. A firm makes all purchases on credit. Cash payment


on this trade credit is required in the month following
purchase on 70% of all purchases. The firm takes a 2%
cash discount and makes payment for the remaining
30% of all purchases in the month of purchase.
Forecasted purchases for January through April are
$300,000, $375,000, $450,000, and $300,000
respectively. In the month of March, what is the total
cash disbursement for purchases?
$132,300
$394,800
$403,200
$450,000
13. Assume that total cash receipts for January through
June are $100, $120, $80, $60, $120, and $190
respectively. Also assume that total cash disbursements
for January through June are $80, $100, $80, $150,
$150, and $70 respectively. Your firm has a beginning
cash balance at the beginning of January of $55. At the
end of what month is the firm forecasting a negative
cash balance?
June.
May.
April.
March.

14. Assume that total cash receipts for January through


June are $100, $120, $80, $60, $120, and $190
respectively. Also assume that total cash disbursements
for January through June are $80, $100, $80, $150,
$150, and $70 respectively. Your firm has a beginning
cash balance at the beginning of January of $20 and
requires a minimum cash balance of $30. At the end of
what month is the firm forecasting a cash balance below
the minimum?

18. The accounting statement of cash flows reports a


firm's cash flows segregated into what categorical
order?

January.
February.
March.
April.

19. The firm paid $800,000 in dividends over the last


period. The beginning and ending retained earnings
account balances were $10,100,000 and $12,500,000
respectively. Assuming a 40% average tax rate, what was
the firm's net income (net profit after taxes)?

Operating, investing, and financing.


Investing, operating, and financing.
Financing, operating and investing.
Financing, investing, and operating.

15. Which of the following statements regarding


forecasted ending cash balances?
The cash balance is simply a forecast and the ending
cash balance can be more correctly viewed via a
probability distribution of possible ending cash
balances.
The forecasted ending cash balance reveals the firm's
actual profits.
From an internal management standpoint, a range of
possible cash balances is much less useful to managers
than a single most-likely ending cash balance.
If the forecasted ending cash balance is below a
minimum required level, then the firm will have to
borrow funds.
16. Information that goes into __________ can be used
to help prepare __________.
a forecast balance sheet; a forecast income statement
forecast financial statements; a cash budget
a cash budget; forecast financial statements
a forecast income statement; a cash budget
17. In preparing a forecast balance sheet, it is likely that
either cash or __________ will serve as a "plug figure"
or balancing factor to ensure that assets equal liabilities
plus shareholders' equity.
retained earnings
accounts receivable
shareholders' equity
Notes payable (short-term borrowings)

$1,600,000
$2,400,000
$3,200,000
$5,333,333
20. The firm had a net increase of $800,000 in net fixed
assets over the last period. The beginning and ending
net fixed asset account balances were $9,100,000 and
$9,900,000 respectively. If the firm purchased
$2,000,000 in additional fixed assets and sold $100,000
of fixed assets at book value, what was the firm's
depreciation expense over the period?

$800,000
$1,100,000
$1,900,000
$2,700,000
21. According to the accounting profession, which of the
following would be considered a cash-flow item from an
"investing" activity?
cash inflow from interest income.
cash inflow from dividend income.
cash outflow to acquire fixed assets.
all of the above.

22. According to the Financial Accounting Standards


Board (FASB), which of the following is a cash flow from
a "financing" activity?
cash outflow to the government for taxes.
cash outflow to shareholders as dividends.
cash outflow to lenders as interest.
cash outflow to purchase bonds issued by another
company.
23. If the following are balance sheet changes:
$5,005 decrease in accounts receivable
$7,000 decrease in cash
$12,012 decrease in notes payable
$10,001 increase in accounts payable
a "use" of funds would be the:
$7,000 decrease in cash.
$5,005 decrease in accounts receivable.
$10,001 increase in accounts payable.
$12,012 decrease in notes payable
24. On an accounting statement of cash flows an
"increase(decrease) in cash and cash equivalents"
appears as
a cash flow from operating activities.
a cash flow from investing activities.
a cash flow from financing activities.
none of the above..
25. Uses of funds include a (an):
decrease in cash.
increase in any liability.
increase in fixed assets.
tax refund.
26. Which of the following would be included in a cash
budget?
depreciation charges.
dividends.
goodwill.
patent amortization.
27. An examination of the sources and uses of funds
statement is part of:
a forecasting technique.
a funds flow analysis.
a ratio analysis.
calculations for preparing the balance sheet.

28. Which of the following is NOT a cash outflow for the


firm?
depreciation.
dividends.
interest payments.
taxes.
29. Which of the following would be considered a use of
funds?
a decrease in accounts receivable.
a decrease in cash.
an increase in account payable.
an increase in cash.
30. The cash flow statement in the United States is most
likely to appear using
a "supplementary method."
a "direct method."
an "indirect method."
a "flow of funds method."
31. For a profitable firm, total sources of funds will
always .. total uses of funds.
be equal to
be greater than
be less than
have no consistent relationship to

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