1) Which of the following statement is correct?

A) Investing activities such as sells a building reduces cash at the time of the sale.

B) A progressive tax means the higher ones income, the smaller the percentage paid in taxes.

C) Investing activities such as sells a building increases cash at the time of the sale.

D) Average tax rate is defined as the tax rate on the last unit of income.

E) All the answers are incorrect.

2) Which of the following statement is incorrect?

A) Most of the answers are correct.

B) The LIFO (last-in, first-out) method assumes that the items most recently placed in inventory are the first ones used in production.

C) The income statement reports the results of operations over a period of time, and it shows earnings per share as its bottom line.

D) A capital gain occurs when an asset is sold for less than its book value.

E) On a typical balance sheet, cash, short-term investments, accounts receivable, and inventories are listed as current assets because those items are expected to converted into cash within a year.

3)Which of the following statement is incorrect?

A) Decreases in current liabilities increase cash.

B) Typically, marketable securities mature very soon and they can be converted quickly into cash at prices close to their book values.

C) Total net operating capital or operating capital is the sum of net operating working capital and operating long-term assets and therefore it is the total amount of capital needed to run the business.

D) Most of the answers are correct.

E) If the return on invested capital (ROIC) is greater than the weighted average cost of capital (WACC), then the investment adds value to the firm.

4)Which of the following statement is incorrect?

A) An S corporation is a small corporation which, under Subchapter S of the Internal Revenue Code, elects to be taxed as a proprietorship or a partnership yet retains limited liability and other benefits of the corporate form of organization.

B) Most of the answers are correct.

C) Accounts receivable arises when a firm sells its products to customers but does not demand immediate payment, and the customers then have obligations to make the payment at a later time, usually less than a year.

D) Cost of goods sold (COGS) are the revenues less any discounts or returns.

E)Total net operating capital = NOWC + Operating long-term assets.

5) Which of the following statement is correct?

A) All the answers are incorrect.

B) Cost of goods sold (COGS) reflects the estimated costs of the assets that wear out in producing goods and services.

C) The income statement begins with assets, which are the things the company owns.

D) The fundamental value of a company to its investors depends on the present value of its expected future FCFs which are discounted at the companys weighted average cost of capital (WACC).

E) Gross income is defined as taxable income less a set of exemptions and deductions which are spelled out in the instructions to the tax forms individuals must file.

6) Which of the following statement is incorrect?

A) Retained earnings is the portion of the firms earnings that have been saved rather than paid out as dividends.

B) Most of the answers are correct.

C) S corporations are businesses that have the limited-liability benefits of the corporate form of organization yet are taxed as partnerships or proprietorships.

D) Operating long-term liabilities are the liabilities that are a natural consequence of the firms operations, such as accounts payable and accruals and include notes payable or any other short-term debt that charges interest.

E) A firms balance sheet is a statement of the firms financial position at a specific point in time.