1. Which of the following is the effect on a company's liquidity and profitability metrics when it purchases a piece of equipment?

a.Its free cash flow increases.

b.Its asset turnover increases.

c.Its asset turnover remains unaffected.

d.Its free cash flow decreases.

2. Depreciable cost is computed as:

a.book value less residual value.

b.cost less accumulated depreciation.

c.market value less residual value.

d.cost less residual value.

3. The Modified Accelerated Cost Recovery System is used to:

a.ascertain break-even point.

b.report liabilities.

c.compute income for audit reporting.

d.compute depreciation for tax purposes.

4. Recording depreciation:

a.decreases capital and operating expense.

b.decreases liability and cash flow.

c.decreases net income but has no effect on cash flows.

d.decreases retained earning but has no effect on fixed assets.

Answer rating: 100% (QA)

1 d Its free cash flow decreases 2 Depreciable cost is computed a... View the full answer