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Ch 2 Financial Statement and Cash Flow Analysis

In: Business and Management

Submitted By tsimonetti
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Chapter 2—Financial Statement and Cash Flow Analysis
MULTIPLE CHOICE 1. Which of the following items can be found on an income statement? a. Accounts receivable b. Long-term debt c. Sales d. Inventory ANS: C DIF: E REF: 2.1 Financial Statements

2. If you only knew a company’s total assets and total debt, which item could you easily calculate? a. Sales b. Depreciation c. Total equity d. Inventory ANS: C DIF: E REF: 2.1 Financial Statements

3. How do we calculate a company’s operating cash flow? a. EBIT - taxes + depreciation b. EBIT - taxes - depreciation c. EBIT + taxes + depreciation d. EBIT - Sales ANS: A DIF: E REF: 2.2 Cash Flow Analysis

4. Holding all other things constant, which of the following represents a cash outflow? a. The company sells a machine. b. The company acquires inventory. c. The company receives a bank loan. d. The company increases accounts payable. ANS: B DIF: E REF: 2.2 Cash Flow Analysis

5. Which of the following is a liquidity ratio? a. Quick ratio b. P/E- ratio c. Inventory turnover d. Equity multiplier ANS: A DIF: E REF: 2.3 Analyzing Financial Performance Using Ratio Analysis NARRBEGIN: Bavarian Sausage, Inc. Bavarian Sausage, Inc. Bavarian Sausage, Inc. posted the following balance sheet and income statement. Balance Sheet Cash Accounts Receivable Inventories Net Plant and $ 50,000 125,000 225,000 Accounts Payable Notes Payable Long-term debt $185,000 125,000 115,000

Equipment

525,000

Total Assets

$925,000

Common Stock Retained earnings Total liabilities and Stockholders’ Equity

350,000 150,000 $925,000

Income Statement Sales Cost of goods sold Depreciation Earnings before interest and taxes Interest expense Net profit before taxes Taxes (@ 40%) Net income NARREND

$525,000 215,000 65,000

245,000 35,000

210,000 84,000 $126,000

6. What is Bavarian Sausage, Inc.’s operating cash flow? a....

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