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18. When calculating a firm's free cash flow from earnings before interest and taxes we must add back depreciation, amortization and depletion expense and allowances
18. When calculating a firm's free cash flow from earnings before interest and taxes we must add back depreciation, amortization and depletion expense and allowances because A. they are non-cash expenditures. B. the accounting method for reporting such expenses may be different from that reported to the taxing authority. C. they approximate the value of fixed asset purchases during the year. D. they are unrelated to the amount of taxes paid during the year. 19. The effect of an increase in a firm's accounts payable during the year, assuming that the current asset portion of the balance sheet remains the same, is A. an outflow of cash. B. an inflow of cash. C. neither an inflow nor an outflow of cash. D. a decrease in the equity of the firm. 20. Edison Bagels had operating cash flow equal to $850 for 2012. If its earnings before interest and taxes were $1,000 while its tax bill was $300, what was Edison's depreciation expense for the year? A. $150 B. $550 C. $1,550 D. not enough information to calculate 21. Which statement is true? A. The less liquid assets a firm holds, the less likely it is that the firm will experience financial distress. B. The lower the liquidity ratios, the less liquidity risk a firm has. C. Liquid assets generate profits for the firm. D. Extremely high levels of liquidity guard against liquidity crises, but at the cost of lower returns on assets. 22. These ratios measure the relationship between a firm's liquid (or current) assets and its current liabilities. A. Cross-section B. internal growth C. liquidity D. market value 23. You are evaluating the balance sheet for Blue Jays Corporation. From the balance sheet you find the following balances: Cash and marketable securities = $200,000, Accounts receivable = $800,000, Inventory = $1,000,000, Accrued wages and taxes = $250,000, Accounts payable = $400,000 and Notes payable = $300,000. What is Blue Jays' Quick ratio? A. 1.05236 times B. 1.05263 times C. 1.05263% D. 1.02563 times
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