Chapter 4 Multiple Choice Questions 1 Financial statement that provides a snapshot of a business' financial position as of a specific date is called the a income statement b balance sheet c statement of retained earnings d statement of cash flows 2 Financial statement that reports the revenues generated and expenses incurred over an accounting period is called the a income statement b balance sheet c statement of retained earnings d statement of cash flows 3 Financial statement that shows how cash, as reflected in accrual accounting, flows into and out of a company during a specific period of operation is called the a income statement b balance sheet c statement of retained earnings d statement of cash flows 4 The balance sheet equation states that total assets total liabilities depreciation total liabilities owners' equity owners' equity net income owners' equity current liabilities total liabilities net income 5 Which one of the following is not considered to be a current asset a cash b receivables c inventories d fixed assets 6 Retained earnings is a a corporate asset b part of owners' equity c neither a or b d both a and b 7 Cash includes all of the following except a coins b currency c checking accounts d certificates of deposit 8 Which of the following is not a characteristic of marketable securities a short term b illiquid c high quality d interest bearing 9 Which of the following is not a characteristic of inventories a raw materials b finished products c goods sold but not yet shipped d work in process 10 Which of the following is not depreciated a inventory b machinery c land d both a and b e both a and c 11 Which of the following is a use of cash a a decrease in inventory b an increase in accrued liabilities c the sale of an asset for a gain d a drop in the amount owed on a bond e an increase in stock issued 12 Which of the following is a source of cash a an increase in accounts receivable b a decrease in wages payable c the acquisition of land d an increase in the amount owed on a note payable e the repurchase of outstanding shares of stock 13 Which of the following is not a category on the statement of cash flows a cash flow from operating activities b cash flow from equity activities c cash flow from investing activities d cash flow from financing activities Note Use the following data for the next three problems (14, 15, 16) Acme Pest Control has sales of $13,500, cost of goods sold of $4,000, selling expenses of $3,500, depreciation of $2,000, interest expense of $2,000, and a tax rate of 34 14 What is Acme's operating income a $4,000 b $2,000 c $9,500 d $6,000 e $1,320 15 What is Acme's taxable income and tax expense a $6,000 $2,040 b $2,000 $1,320 c $4,000 $1,360 d $2,000 $680 e $9,500 $3,230 16 What is Acme's net income a $2,720 b $897 60 c $6,460 d $2,040 e $1,320 17 Your venture has total assets of $690, net fixed assets of $500, long term debt of $80, and stockholders' equity of $400 What is the amount of your venture's current liabilities a $100 b $100 c $210 d $290 e $1,090 18 In breakeven analysis, solving for when EBITDA is equal to zero gives breakeven in terms of economic revenues variable costs survival revenues fixed costs income statement 19 A lease that provides maintenance in addition to financing and is also usually cancelable is called a capital lease b liability lease c operating lease d asset lease e equity lease 20 Which one of the following is not considered to be an internal operating schedule cost of production schedule cost of goods sold schedule inventories schedule 21 Net cash burn occurs when the sum of which of the following items is negative a cash flows from operations and financing b cash flows from investing and financing c cash flows from operations and investing d cash flows from net income and depreciation e cash flows from operations and net income 22 Expenses or costs that vary directly with revenues are said to be fixed expenses semi fixed expenses semi variable expenses variable expenses 23 EBDAT is equal to a revenues variable costs cash fixed costs b revenues variable costs cash fixed costs c revenues variables costs total fixed costs d revenues variable costs cash fixed costs 24 Gross earnings is equal to a Revenue After Tax cost of financial capital used b net income sales c (net sales the cost of production) tax rate d net sales the cost of production 25 According to Appendix A of Chapter 4, NOPAT is defined as a revenues times (1 tax rate) b revenues times (1 tax rate) c EBITDA times (1 tax rate) d EBIT times (1 tax rate) e net income times (1 tax rate) 26 Last year a firm had sales of $200,000 Its cost of goods sold was $75,000, and administrative and marketing expenses were $25,000 each Depreciation expense was $10,000, while interest expense was $15,000 If the tax rate is 30 , what was the firm's NOPAT last year a $19,500 b $35,000 c $45,500 d $52,500 e $80,500 27 What is the survival revenues breakeven based on cash fixed costs $400,000 and a variable cost revenue ratio 65 a $460,500 b $615,385 c $1,142,857 d $2,000,334 e $4,000,667 28 Use the following information to determine the cash fixed costs Administrative expenses $200,000 Marketing expenses $180,000 Depreciation expenses $100,000 and Interest expenses $20,000 $380,000 $400,000 $480,000 $500,000 $620,000 29 Find the contribution profit margin based on the following information cash fixed costs $60,000 variable costs $70,000 and sales $100,000 a 70 b 60 c 30 d 40 e 100 30 Find the survival revenues (SR), also known as the EBDAT breakeven) based on the following information cash fixed costs $60,000 variable costs $70,000 and sales $100,000 a $85,714 b $100,000 c $116,667 d $200,000 e $300,000 31 What is the survival revenues breakeven based on the following Administrative expenses $200,000 Marketing expenses $180,000 Depreciation expenses $100,000 and Interest expenses $20,000 and a variable cost revenue ratio 50 a $400,000 b $600,000 c $800,000 d $1,000,000 e $1,200,000 32 A firm with constant variable costs has a survival revenue breakeven of $375,000 This year it had $250,000 in sales, $100,000 of which was a fixed cost What are the firm's cash fixed costs a $150,000 b $225,000 c $625,000 d $937,500 33 Last year, Beth's Baked Goods exactly broke even with cash fixed costs of $63,000 If its breakeven survival revenue level was $94,000, what was its variable cost revenue ratio (VCRR) a 27 b 30 c 33 d 67 34 In its first year, Joe's Start Up Company had revenues of $125,000 and cost of goods sold of $81,250, which was the only variable cost Depreciation was $20,000, and cash costs were $5,000 in financing costs, admin expenses of $50,000, and $45,000 in marketing expenses all of which were fixed What is the survival breakeven revenue a $342,857 b $285,714 c $271,429 d $184,615 e $153,846 35 The practice of recording economic activity when it is recognized rather than waiting until it is realized is called a GAAP accounting b accrual accounting c forward looking accounting d management accounting

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Question: Chapter 4 Multiple-Choice Questions 1. Financial statement that provides a snapshot of a business' financial position as of a specific date is called the: a.

Chapter 4 Multiple-Choice Questions

1. Financial statement that provides a snapshot of a business' financial position as of a specific date is called the:

a. income statement

b. balance sheet

c. statement of retained earnings

d. statement of cash flows

2. Financial statement that reports the revenues generated and expenses incurred over an accounting period is called the

a. income statement

b. balance sheet

c. statement of retained earnings

d. statement of cash flows

3. Financial statement that shows how cash, as reflected in accrual accounting, flows into and out of a company during a specific period of operation is called the:

a. income statement

b. balance sheet

c. statement of retained earnings

d. statement of cash flows

4. The balance sheet equation states that total assets =

total liabilities + depreciation
total liabilities + owners' equity
owners' equity + net income
owners' equity + current liabilities
total liabilities + net income

5. Which one of the following is not considered to be a current asset?

a. cash

b. receivables

c. inventories

d. fixed assets

6. "Retained earnings" is:

a. a corporate asset

b. part of owners' equity

c. neither a or b

d. both a and b

7. Cash includes all of the following except:

a. coins

b. currency

c. checking accounts

d. certificates of deposit

8. Which of the following is not a characteristic of marketable securities?

a. short-term

b. illiquid

c. high-quality

d. interest-bearing

9. Which of the following is not a characteristic of inventories?

a. raw materials

b. finished products

c. goods sold but not yet shipped

d. work-in-process

10. Which of the following is not depreciated?

a. inventory

b. machinery

c. land

d. both aand b

e. both a and c

11. Which of the following is a use of cash?

a. a decrease in inventory

b. an increase in accrued liabilities

c. the sale of an asset for a gain

d. a drop in the amount owed on a bond

e. an increase in stock issued

12. Which of the following is a source of cash?

a. an increase in accounts receivable

b. a decrease in wages payable

c. the acquisition of land

d. an increase in the amount owed on a note payable

e. the repurchase of outstanding shares of stock

13. Which of the following is not a category on the statement of cash flows?

a. cash flow from operating activities

b. cash flow from equity activities

c. cash flow from investing activities

d. cash flow from financing activities

Note: Use the following data for the next three problems (14, 15, & 16).

Acme Pest Control has sales of $13,500, cost of goods sold of $4,000, selling expenses of $3,500, depreciation of $2,000, interest expense of $2,000, and a tax rate of 34%.

14. What is Acme's operating income?

a. $4,000

b. $2,000

c. $9,500

d. $6,000

e. $1,320

15. What is Acme's taxable income and tax expense?

a. $6,000;$2,040

b. $2,000;$1,320

c. $4,000;$1,360

d. $2,000;$680

e. $9,500;$3,230

16. What is Acme's net income?

a. $2,720

b. $897.60

c. $6,460

d. $2,040

e. $1,320

17. Your venture has total assets of $690, net fixed assets of $500, long term debt of $80, and stockholders' equity of $400. What is the amount of your venture's current liabilities?

a. -$100

b. $100

c. $210

d. $290

e. $1,090

18. In breakeven analysis, solving for when EBITDA is equal to zero gives breakeven in terms of:

economic revenues
variable costs
survival revenues
fixed costs
1. income statement

19. A lease that provides maintenance in addition to financing and is also usually cancelable is called:

a. capital lease

b. liability lease

c. operating lease

d. asset lease

e. equity lease

20. Which one of the following is not considered to be an internal operating schedule?

cost of production schedule
cost of goods sold schedule
inventories schedule

21. "Net cash burn" occurs when the sum of which of the following items is negative?

a. cash flows from operations and financing

b. cash flows from investing and financing

c. cash flows from operations and investing

d. cash flows from net income and depreciation

e. cash flows from operations and net income

22. Expenses or costs that vary directly with revenues are said to be:

fixed expenses
semi-fixed expenses
semi-variable expenses
variable expenses

23. EBDAT is equal to:

a. revenues - variable costs - cash fixed costs

b. revenues + variable costs + cash fixed costs

c. revenues - variables costs - total fixed costs

d. revenues + variable costs - cash fixed costs

24. "Gross earnings" is equal to:

a. Revenue - After-Tax cost of financial capital used

b. net income sales

c. (net sales - the cost of production) tax rate

d. net sales - the cost of production

25. According to Appendix A of Chapter 4, NOPAT is defined as:

a. revenues times (1 + tax rate)

b. revenues times (1 - tax rate)

c. EBITDA times (1 - tax rate)

d. EBIT times (1 - tax rate)

e. net income times (1 + tax rate)

26. Last year a firm had sales of $200,000. Its cost of goods sold was $75,000, and administrative and marketing expenses were $25,000 each. Depreciation expense was $10,000, while interest expense was $15,000. If the tax rate is 30%, what was the firm's NOPAT last year?

a. $19,500

b. $35,000

c. $45,500

d. $52,500

e. $80,500

27. What is the survival revenues breakeven based on: cash fixed costs = $400,000 and a variable cost revenue ratio = .65?

a. $460,500

b. $615,385

c. $1,142,857

d. $2,000,334

e. $4,000,667

28. Use the following information to determine the cash fixed costs: Administrative expenses = $200,000; Marketing expenses = $180,000; Depreciation expenses = $100,000; and Interest expenses = $20,000.

$380,000
$400,000
$480,000
$500,000
$620,000

29. Find the "contribution profit margin" based on the following information: cash fixed costs = $60,000; variable costs = $70,000; and sales = $100,000.

a. 70%

b. 60%

c. 30%

d. 40%

e. 100%

30. Find the "survival revenues" (SR), also known as the EBDAT breakeven) based on the following information: cash fixed costs = $60,000; variable costs = $70,000; and sales = $100,000.

a. $85,714

b. $100,000

c. $116,667

d. $200,000

e. $300,000

31. What is the survival revenues breakeven based on the following: Administrative expenses = $200,000; Marketing expenses = $180,000; Depreciation expenses = $100,000; and Interest expenses = $20,000; and a variable cost revenue ratio = .50?

a. $400,000

b. $600,000

c. $800,000

d. $1,000,000

e. $1,200,000

32. A firm with constant variable costs has a survival revenue breakeven of $375,000. This year it had $250,000 in sales, $100,000 of which was a fixed cost. What are the firm's cash fixed costs?

a. $150,000

b. $225,000

c. $625,000

d. $937,500

33. Last year, Beth's Baked Goods exactly broke even with cash fixed costs of $63,000. If its breakeven survival revenue level was $94,000, what was its variable cost revenue ratio (VCRR)?

a. .27

b. .30

c. .33

d. .67

34. In its first year, Joe's Start-Up Company had revenues of $125,000 and cost of goods sold of $81,250, which was the only variable cost. Depreciation was $20,000, and cash costs were $5,000 in financing costs, admin expenses of $50,000, and $45,000 in marketing expenses - all of which were fixed. What is the survival breakeven revenue?

a. $342,857

b. $285,714

c. $271,429

d. $184,615

e. $153,846

35. The practice of recording economic activity when it is recognized rather than waiting until it is realized is called:

a. GAAP accounting

b. accrual accounting

c. forward-looking accounting

d. management accounting

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