1. The following item would be classified as an financing activity on the statement of cash flows: *

A) Payments for inventory.

B) Acquisitions of equipment.

C) Proceeds from borrowing.

D) Purchasing inventory.

E) None of the above.

2. Common-size income statement prepared when: *

A) Each income statement item is expressed as a percentage of total assets.

B) Each income statement item is expressed as a percentage of net sales.

C) Each income statement item is expressed as a percentage of net income.

D) Each income statement item is expressed as a percentage of cash flow.

E) None of the above.

3. Why is it important to assess operating profit? *

A) Operating profit represents the firms profits after consideration of all revenues, expenses and comprehensive income.

B) The figure for operating profit provides a basis for assessing the success of the firm apart from its financing and investing activities and separate from tax considerations.

C) Operating profit represents the firms profits after consideration of all revenues and expenses.

D) Operating profit represents the firms profits after consideration of all revenues and expenses, except for taxes.

E) None of the above.

4. Which of the items below would be included under Other income and expense? *

A) Salaries, interest expense, equity losses.

B) Equity earnings, gains from sale of assets, interest income.

C) Research and development, dividend income, interest expense.

D) Advertising, cost of goods sold, selling and administrative expenses.

E) None of the above.

5. The statement of cash flows includes: *

A) Financing Activities

B) Operating Activities

C) Investing Activities

D) All of the Above

E) None of the above.

6. If a company repurchased its own stocks, the result on cash flow will be: *

A) Increased Equity

B) Increased Liabilities

C) Decreased Cash

D) Increased Cash

E) None of the above.

7. Cash from operating activities will increase due to : *

A) Decrease in Current Assets.

B) Increase in Current Liabilities.

C) Both (A) and (B)

D) None of the above.

8. In which part of the cash flow statement will you show the repayment of long-term loans? *

A) Cash Flow from Operating Activities.

B) Cash Flow from Investing Activities.

C) Cash Flow from Financing Activities.

D) None of the above.

9. Which of the following factors would explain a increase in retained earnings? *

A) Net Income.

B) Net Loss.

C) Investment on Stocks.

D) None of the above.

10. How does the equity method distort earnings *

A) Income is recognized even though cash may never be received.

B) Equity earnings are recorded even if the investor cannot exercise influence over the investees policies.

C) Equity earnings are only recorded on a cash basis of accounting.

D) Equity earnings are recorded when investment ownership is 100%.

E) None of the above.