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Exam 4: Preparing and Using Financial Statements

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Question 41

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Amounts owed to another for purchases made on credit which come due in less than one year are known as receivables.

A) True
B) False

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Question 42

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Net cash build occurs when the sum of cash flows from operations and investing is positive.

A) True
B) False

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Question 43

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The acquisition of production assets (e.g., inventories and equipment to produce products and give credit to customers)usually occurs during the development stage in a new venture's life cycle.

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

Long-term, noncancelable leases whereby the owner receives payments that cover the cost of the equipment plus a return on investment in the equipment are known as capital leases.

Making sales usually begins during the development stage in a venture's life cycle.

Contribution profit margin is the portion of the sale of a product that contributes to covering the cash variable costs.

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.

Gross earnings are net sales minus net income.

During the startup stage in a new venture's life cycle, the income statement typically shows no sales and shows expenses for the production and marketing of products or services.

Which of the following is the equation for EBDAT?

Operating income, or earnings before interest and taxes, reflects the firm's profit after all operating expenses, excluding financing costs, have been deducted from net sales.

Net income, or profit, is the bottom-line measure of what's left from the firm's net sales after operating expenses, financing costs, and taxes have been deducted.

Assets are financial and physical items controlled or owned by the business.

Which of the following is a use of cash?

The statement of cash flows is a financial statement that shows how cash, as reflected in accrual accounting, flowed into and out of a company during a specific period of operation.

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

Variable expenses are costs or expenses that vary directly with revenues.

GAAP stands for "generally accepted accounting principles."

The practice of recording economic activity when realized is known as accrual accounting.