Question 31) Debts to be paid more than one year from now are considered short-term liabilities

31) Debts to be paid more than one year from now are considered short-term liabilities.

32) EBIT (earnings before interest and taxes) is obtained by adding together revenue and operating expenses.

33) Net income is not cash flow.

34) Explain the three main areas of the balance sheet.

35) From the finance perspective, there are five principal line accounts of particular interest on the balance sheet: the cash account, the working capital accounts, long-term capital assets accounts, long-term debt accounts, and ownership accounts. Briefly explain each.

36) Why is an understanding of cash flow so important in the study of finance?

2.2 Cash Flow Identity and the Statement of Cash Flows

1) Which of the statements below is FALSE?

A) The cash that the firm generates from its operating decisions (use of its assets) is used to either pay creditors or the owners of the company.

B) Cash flow from assets shows the success or failure of the operating decisions.

C) Cash flow to owners shows cash paid to owners plus any new borrowing from owners.

D) Cash flow to creditors shows a portion of how the firm is financing the operations.

2) Which one of the answers below is NOT one of the three components of the “Cash Flow from Assets”?

A) Operating Cash Flow

B) Net Capital Spending

C) Noncash expenses

D) Change in Net Working Capital

3) Which of the following identities is TRUE?

A) Operating Cash Flow = EBIT + Depreciation – Taxes

B) Net Capital Spending = Ending Net Fixed Assets – Depreciation

C) Change in Net Working Capital (NWC) = Current Assets – Current Liabilities

D) Cash Flow from Assets = Operating Cash Flow + Net Capital Spending

4) Which of the following identities is TRUE?

A) Operating Cash Flow = EBIT – Depreciation + Taxes

B) Net Capital Spending = Ending Net Fixed Assets – Depreciation

C) Net Working Capital (NWC) = Current Assets – Current Liabilities

D) Cash Flow from Assets = Operating Cash Flow – Net Capital Spending

5) Which of the following identities is FALSE?

A) Cash Flow to Creditors = Interest Expense – Net New Borrowing from Creditors

B) Net New Borrowing = Ending Long-term Liabilities – Beginning Long-Term Liabilities

C) Cash Flow to Owners = Dividends + Net New Borrowing from Owners

D) Net New Borrowing from Owners = Change in Equity

6) Which of the following identities is FALSE?

A) Change in Equity = Paid-in-Surplus – Net New Borrowing from Creditors

B) Net New Borrowing = Ending Long-term Liabilities – Beginning Long-Term Liabilities

C) Cash Flow to Owners = Dividends – Net New Borrowing from Owners

D) Net New Borrowing from Owners = Change in Equity

7) Cash and Equivalents are $1,561, Short-Term Investments are $1,052, Accounts Receivables are $3,616, Accounts Payable is $5,173, Short-Term Debt is $288, Inventories are $1,816, Other Current Liabilities are $1,401, and Other Current Assets are $707. What are the Total Current Assets?

A) $8,752

Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.