Chapter 3 Self-Test Multiple Choice

1. Small firm common stocks, Common stocks, Long-term corporate bonds, Treasury bills

2. What information does a firm's balance sheet provide to the viewing public?

3. Net working capital is equal to

4. Gross profit is equal to

5. Jones Finance Company had a cash balance of $3 million at the beginning of 2010. During 2010, Sales were $8 million and expenses were $7 million. Therefore,

6. Examples of uses of cash include

7. Wheeler Corporation had retained earnings as of 12/31/10 of $15 million. During 2011, Wheeler's net income was $7 million. The retained earnings balance at the end of 2011 was equal to $20 million. Therefore,

8. Which of the following accounts belongs in the equity section of a balance sheet?

9. All of the following statements about balance sheets are true except:

10. What information does a firm's statement of cash flows provide to the viewing public?

11. PDQ Corp. has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000. The firm's interest expense is $250,000, and the corporate tax rate is 40%. The firm paid dividends to preferred stockholders of $40,000, and the firm distributed $60,000 in dividend payments to common stockholders. What is PDQ's "Addition to Retained Earnings"?

12. Based on the information in Table 3-1, assuming that no common stock was repurchased during the year, the firm issued how much new common stock during 2010?

13. Based on the information in Table 3-1, calculate the after tax cash flow from operations for 2008 (no assets were disposed of during the year, and there was no change in interest payable or taxes payable).

14. A firm has after-tax cash flow from operations equal to $100,000. Operating working capital increased by $20,000, and the firm purchased $30,000 of fixed assets. The firm's free cash flow was:

15. PDQ Corp. has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000. The firm's interest expense is $250,000, and the corporate tax rate is 40%. What is PDQ's tax liability?

16. What information does a firm's income statement provide to the viewing public?

17. Which of the following represents an attempt to measure the net results of the firm's operations (revenues versus expenses) over a given time period?

18. What financial statement explains the changes that took place in the firm's cash balance over a period?

19. Which of the following accounts belongs on the asset side of a balance sheet?

20. All of the following are income statement items except:

21. All of the following are equity accounts on a balance sheet except:

22. The income statement for Brit, Inc. indicates that tax expense was $20,000. The balance sheet indicates that taxes payable for the same year increased by $5,000. What amount did Brit, Inc. actually pay in taxes during this year?