1. Three fundamental issues separate net income and cash flow. Which of the answers below is NOT one of these three fundamental issues:

1. Accrual accounting.
2. Non-cash accounting
3. Non-cash expense items
4. Interest expense

2. Notes to the financial statements help explain many of the details necessary to gain a more complete picture of the firms:

1. Capital budget.
2. Choice of management.
3. Dividend policy.
4. Performance.

3. The annual report of a company is:

1. Printed and mailed to owners and the SEC.
2. Not available online.
3. Not mailed to owners but only to the SEC.
4. Always available online in more details.

4. The income statement provides:

1. A summary of the cash flows over the period of concern.
2. A financial summary of a companys operating results during a specified period.
3. A financial summary of a companys operating results for the future period.
4. A summary of a firms financial position at a given point in time.

5. The Balance sheet presents:

1. The expenses and revenues generated by a corporate over a past period
2. The distribution and reinvestment of net income for the past period.
3. The assets owned by the company and the claims against those assets.
4. None of the above.

6. Statements of cash flows explain:

1. Where did the cash come from?
2. How was cash used during the period?
3. What was the change in the cash balance during the period?
4. All the above.

7. Statement of retain investment shows:

1. The distribution and reinvestment of net income for the last period.
2. The success or failure of how the company uses the assets to generate.
3. How the firm uses debt to finance the operations and its repayment to the debt.
4. The overview of financing and shows any additional contribution by owners and return of capital to the owners.

8. One advantage of partnership business is :

1. Assets of general partners are commingled with assets of the business.
2. Agreements between partners may be easily formed.
3. Profits treated as personal income for tax purposes.
4. Difficult to transfer ownership.

9. One disadvantage of corporation business is :

1. Owner makes decisions and keeps all profits.
2. Owners do not have personal liabilities incase of default.
3. Most regulated.
4. Profits treated as personal income for tax purposes.

10. Activity ratios measure :

1. The firms ability to meet its short term obligations.
2. The proportion of total assets financed by the firms creditors.
3. The profitability.
4. The speed with which various accounts are converted into sales or cash.

11. The most advantage of capital structure is :

1. Maximize the value of the firm.
2. Maximize the overall cost of capital.
3. Maximize the dividends.
4. None of the above.

12. Right of control management is considered the most advantage of :

1. Equity shareholders.
2. Debentures holders
3. Bonds holders.
4. Financial managers.

13. The capital requirements of the business concern may be classified into two categories:

1. Fixed and working capital.
2. External and internal creditors.
3. Short and long loans.
4. All of the above.

14. Over capitalization arise due to the following important causes:

1. Over issue of capital by the company.
2. Borrowing large amount of capital at a higher rate of interest.
3. High rate of taxation.
4. All of the above.

15. Under capitalization arises due to the following important causes:

1. Acquiring the assets of the company at high price.
2. Maintaining high standards of efficiency.
3. Adopting ineffective depreciation policy.
4. All of the above