QuestionQuestion

Profit and Cash Flow
1. A company’s net cash flow will equal its net income …
A) Almost always
B) Rarely
C) Occasionally
D) Only when the company has no investing cash flow for the period
E) Only when the company has no investing or financing cash flow for the period

2. Intel Corporation reported the following on its 2013 income statement (in millions)
Sales revenue $52,708
Gross profit $31,521
Total expenses $19,230
What did Intel report for cost of goods sold during 2013?
A) $ 21,187 million
B) $ 5,502 million
C) $ 33,478 million
D) $ 12,291 million
E) None of the above

3. The Goodyear Tire & Rubber Company’s December 31, 2013, financial statements reported the following (in millions).
Cash December 31, 2013 2,996
Cash from operating activities $938
Cash from investing activities $(1,136)
Cash from financing activities $913

What did Goodyear report for cash on its December 31, 2012 balance sheet?
A) $ 2,281 million
B) $ 32,281 million
C) $ 3,711 million
D) $ 715 million
E) None of the above

Review of Business Activities and Financial Statements
4. Assets are recorded in the balance sheet in order of:
A) Market Value
B) Historic Value
C) Liquidity
D) Maturity
E) None of the above

5. In 2013, Delphi Automotive PLC had current assets of $5,752 million and current liabilities of $3,894 million. The firm’s net working capital is:
A) $ 1,858 million
B) $ 5,752 million
C) $ (1,858) million
D) $ 9,646 million
E) None of the above

6. How would cash collected on accounts receivable affect the balance sheet?
A) Increase liabilities and decrease equity
B) Decrease liabilities and increase equity
C) Increase assets and decrease assets
D) Increase assets and increase equity

Profitability Analysis and Interpretation
7. The 2013 financial statements of The New York Times Company reveal average shareholders’ equity attributable to controlling interest of $752,618 thousand, net operating profit after tax of $97,898 thousand, net income attributable to The New York Times Company of $65,105 thousand, and average net operating assets of $ 402,427 thousand.

The company’s return on equity (ROE) for the year is:
A) 8.7%
B) 13.0%
C) 16.2%
D) 24.3%
E) There is not enough information to calculate the ratio.

8. Ratios provide one way to compare companies in the same industry regardless of their size.   
True or False

9. ROE is computed as:
A) Net income attributable to controlling interest / Average equity attributable to controlling interest
B) Net income attributable to controlling interest / Net sales
C) [RNOA + (FLEV x Spread)] x NCI ratio
D) A and B
E) A and C

Credit Risk Analysis and Interpretation
10. Many companies have cyclical operating cash needs due to:
A) Mergers and acquisitions
B) The seasonality of sales
C) Delays in customer payments
D) Refinancing of debt

11. A letter of credit:
A) Ensures a company that funds will be available when needed
B) Is analogous to a credit card that companies can draw on as needed
C) Is a representation that a company has a high credit rating
D) Provides a guarantee of payment from the buyer, reducing the credit risk to the seller

12. Which of the following is not one of Porter’s five forces that determine a company’s competitive intensity?
A) Supplier power
B) Threat of substitution
C) Ability to obtain financing
D) Threat of entry

Revenue Recognition and Operating Income
13. According to GAAP revenue recognition criteria, in order for revenue to be recognized on the income statement, it must be earned and realized (realizable). True or False

14. Companies that engage in long-term sales contracts such as construction projects often use the percentage of completion method to recognize revenue. This means that revenue is recognized in proportion to the project’s completion. True or False

15. R&D expense is treated as an operating expense, not a capital expenditure, unless the R&D assets acquired have an alternative future use. True or False

16. Which of the following items create risk related to revenue recognition?
A) Bonuses tied to sales goals
B) Long-term construction contracts
C) Multiple element sales contracts
D) Consignment goods
E) All of the above

17. Oracle Corporation reported the following earnings per share information in its 2013 annual report. The company has only one class of stock outstanding. ($ in millions)

Net income $10,925
Dividends to common shareholders $1,433

Weighted average common shares outstanding 4,769
Weighted average dilutive shares from employee stock plans 75

Basic and diluted earnings per share were, respectively:
A) $0.30 and $0.30
B) $0.77 and $0.74
C) $1.08 and $1.06
D) $2.29 and $2.26
E) None of the above

18. All of the following ways can diminish accounting quality, except:
A) Unintentional errors
B) Deliberate management intervention
C) Reliable numbers that are predictive
D) Pro forma disclosures
E) All of the above can diminish accounting quality

19. Revenues from discontinued operations of a company are reported separately from revenues from continuing operations in the income statement.
True or False

20. The two factors that enhance the quality of accounting information are reliability and relevance.
True or False

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Question 1: The answer is option B.
Question 2: The answer is option A.
Question 3: The answer is option A....
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