Q: A company has fixed assets of $$450,000 and long-term liabilities of 250$$,000. What is the equity if total assets are $$750,000 and current liabilities are 50$$,000?

$$Equity = Total\ Assets - (Current\ Liabilities + Long\text{-}term\ Liabilities) = 750,000 - (50,000 + 250,000) = 450,000$$

Question 1

Which of the following best describes the formula for Earnings Before Interest and Taxes (EBIT)?

Accepted Answer

$$EBIT = Revenues - Operating Expenses$$

Question 2

A company has current assets of $$300,000 and current liabilities of 200$$,000. What is its net working capital?

Accepted Answer

$$Net\ Working\ Capital = Current\ Assets - Current\ Liabilities = 300,000 - 200,000 = 100,000$$

Question 3

Which section of the cash flow statement would include the purchase of new equipment?

Accepted Answer

Investing activities

Question 4

If a company reports $$750,000 in cash flow from operating activities, 125$$,000 from investing activities, and $315,000 from financing activities, what is the total net cash flow for the year?

Accepted Answer

$$Total\ Net\ Cash\ Flow = 750,000 + 125,000 + 315,000 = 1,190,000$$

Question 5

Which of the following is NOT considered a current asset?

Accepted Answer

Land

Question 6

A company has fixed assets of $$450,000 and long-term liabilities of 250$$,000. What is the equity if total assets are $$750,000 and current liabilities are 50$$,000?

Accepted Answer

$$Equity = Total\ Assets - (Current\ Liabilities + Long	ext{-}term\ Liabilities) = 750,000 - (50,000 + 250,000) = 450,000$$

Question 7

Which of the following best describes the purpose of financial statements?

Accepted Answer

To provide information about a company's financial position, performance, and cash flows

Question 8

If a company’s earnings per share (EPS) is calculated as $$EPS = \frac{Earnings}{Shares\ Outstanding}$$, what is the EPS if earnings are $120,000 and shares outstanding are 40,000?

Accepted Answer

$$EPS = \frac{120,000}{40,000} = 3$$

Question 9

Which of the following transactions would be classified under financing activities in the cash flow statement?

Accepted Answer

Issuing new shares of stock

Question 10

A company’s balance sheet shows total assets of $$1,000,000, total liabilities of 600$$,000, and equity of $400,000. Which accounting equation does this illustrate?

Accepted Answer

$$Assets = Liabilities + Equity$$

Question 11

Which of the following is a key component of the cash flow identity?

Accepted Answer

Cash flow from assets equals cash flow to creditors plus cash flow to owners

Question 12

If a company’s operating cash flow is $$500,000, its capital spending is 200$$,000, and its change in net working capital is $50,000, what is its cash flow from assets?

Accepted Answer

$$Cash\ Flow\ from\ Assets = Operating\ Cash\ Flow - Capital\ Spending - Change\ in\ NWC = 500,000 - 200,000 - 50,000 = 250,000$$

Question 13

Which of the following would increase a company’s net working capital?

Accepted Answer

Collecting accounts receivable

Question 14

Which financial statement reports a company’s financial position at a specific point in time?

Accepted Answer

Balance Sheet

Question 15

A company’s income statement shows revenues of $$900,000 and operating expenses of 600$$,000. What is the EBIT?

Accepted Answer

$$EBIT = Revenues - Operating\ Expenses = 900,000 - 600,000 = 300,000$$

Question 16

Which of the following is a long-term liability?

Accepted Answer

Mortgage payable

Question 17

If a company’s cash flow from operating activities is negative, which of the following is most likely true?

Accepted Answer

The company may have trouble meeting its short-term obligations

Question 18

Which of the following best describes the relationship between assets, liabilities, and equity?

Accepted Answer

Assets are financed by a combination of liabilities and equity

Question 19

Which of the following would be considered a fixed asset?

Accepted Answer

Machinery

Core Concepts in Financial Accounting: Statements, Cash Flow, and Performance Reporting

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