CHAPTER12 MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 11) Which of the following statements must be true for a company that uses the accrual basis of accounting? A) A net loss will result in net cash outflows from operating activities. B) Increasing net sales will result in net cash inflows from operating activities. C) If net income increasing from one period to the next, cash inflows will also increase. D) Net income and cash flows will not always agree because revenues and expenses can be recorded in different time periods than their related cash flows. 12) Which of the following is not provided by the Statement of Cash Flows? A) Company management of current assets and liabilities. B) Expenditures on long-term assets. C) Current profitability as measured by specific revenues and expenses. D) Reliance on external financing. 13) Cash and cash equivalents include: A) assets that have stable long-term value. B) assets that are short-term and highly liquid and have an original maturity of less than three months. C) assets that consistently grow in value over the long run. D) amounts that customers have promised to pay, but have not yet been collected. 14) Which of the following should be included in calculating net cash flows from operating activities? A) Cash proceeds from sales. B) Cash received from an issuance of bonds. C) Dividends paid to shareholders. D) Cash used for purchases of equipment. 15) Which of the following should be included in calculating net cash flows from investing activities? A) Cash proceeds from sales. B) Cash received from an issuance of bonds. C) Dividends paid to shareholders. D) Cash used for purchases of equipment. 16) Which of the following should be included in calculating net cash flows from financing activities? A) Cash proceeds from sales. B) Cash received from an issuance of bonds. C) Dividends received from investments. D) Cash used for purchases of equipment. 17) If the calculation of net cash flows from operating activities starts with net income, the company: A) is using the net income method. B) should then remove all non-cash items included in the calculation of net income. C) is using the direct method. D) should then add all additional non-cash items not included in the calculation of net income. 18) Cash flows from investing activities include cash: A) inflows and outflows reflecting revenues and expenses. B) outflows from the sale of long-term investments. C) inflows from the sale of long-term investments. D) inflows from the sale of a company's own shares to its shareholders. 19) Cash flows from financing activities: A) are always negative because the company pays dividends as well as interest and principal on debt. B) includes all cash inflows and outflows between a company and its shareholders. C) includes all cash inflows and outflows associated with a company's lending activities. D) are always positive unless the company is experiencing serious financial trouble. 20) Which of the following is not needed to prepare a Statement of Cash Flows? A) Statement of Retained Earnings. B) Comparative Balance Sheet. C) Additional information on financing and investing activities. D) Income Statement. CHAPTER 13 MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 21) Which of the following analysis techniques does not examine significant sustained changes over time? A) Trend analyses B) Horizontal analyses C) Time-series analyses D) Vertical analyses 22) If you wish to examine the relationships among various items reported in one or more of the financial statements, you are most likely to use: A) time-series analysis. B) ratio analysis. C) horizontal analysis. D) cross-sectional analysis. 23) Net income was $364,000 in 2019 and $418,600 in 2020. The year- to-year change in net income is: A) 15% B) 85% C) 87%. D) 13% 24) Which of the following are the constraints on how broadly accounting rules can be applied? A) Industry practices constraint and cost-benefit constraint. B) Disclosure principle constraint and cost-benefit constraint; C) Industry practices constraint and disclosure principle constraint. D) Cost-benefit constraint and disclosure principle constraint. 25) Net income was $418,600 in 2019 and $364,000 in 2020. The year-to-year change in net income is: A) $54,600 decrease. B) $364,000. C) $54,600 increase. D) $418,600. 26) Data from ratio analysis can be: A) compared to particular competitors in the industry. B) compared to the company ratio data in previous years. C) compared to industry averages. D) all of the answers are acceptable. 27) When using ratio data for comparison to other companies, analysts should: A) not assume that all companies in the industry are in direct competition. B) not interpret the data as a way of determining which companies will survive and outperform others. C) only use data from one time period. D) use industry averages, rather than individual companies, for the comparison. 28) Solvency ratio data are primarily concerned with the ability of a company to: A) produce profits. B) handle its debt. C) manage its cash flow. D) provide income for shareholders. 29) If an analyst wants to examine a company's current ability to generate income, which of the following would best be considered? A) Liquidity B) Market share C) Profitability D) Solvency 30) If an analyst wants to examine a company's short-run ability to survive, which of the following would best be considered? A) Liquidity B) Market share C) Profitability D) Solvency