1. Accounting asset values often differ from economic asset values because economic values are based on historical costs.

a. True

b. False

2. If a company is running short on cash, it can spend some of its shareholders equity.

a. True

b. False

3. Low or negative cash flow provided by operating activities does not necessarily indicate poor performance.

a. True

b. False

4. Financial statements are largely transaction-based and reflect historical rather than future values.

a. True

b. False

5. Management compensation may be structured in such a way that it tempts management to conceal the financial problems of a company.

a. True

b. False

6. The Sarbanes-Oxley Act emphasized that the regulations for corporate boards and audit committees was most effectively done by state corporate law.

a. True

b. False

7. The term "customer churn" refers to when customers withdraw from a particular market; this leads to negative market growth.

a. True

b. False

8. Even though EBITDA excludes the non-cash expenses of depreciation and amortization, it should not be considered a measure of cash flow.

a. True

b. False

9. A companys current ratio must always be larger than its acid-test ratio.

a. True

b. False

10. If you learn the warning signs of manipulating revenues or earnings, and you are willing to take the time to thoroughly review the financial statements and the corresponding notes, you will be able to always successfully identify whether a companys earnings are fairly presented.

a. True

b. False