BMCH03TB.docVIP

Chapter Three Managing Financial Health and Performance This chapter contains 62 multiple choice questions, 19 short problems and 9 longer problems. Multiple Choice For a corporation, net worth is called ________. (a) net income (b) assets (c) stockholder’s equity (d) retained earnings Answer: (c) On a company’s published balance sheet, the value of assets, liabilities and net worth, are measured at ________. expected market value current book value current market value historical acquisition costs Answer: (d) Any U.S. or non-U.S. company that wishes to list its shares on a U.S. exchange must regularly report its activities by filing financial statements with the ________. SEC NYSE GAAP AMEX Answer: (a) Noncurrent assets typically consist of ________. accounts payable receivables and inventories cash and marketable securities property, plant, and equipment Answer: (d) The difference between a firm’s current assets and its current liabilities is called ________. net worth net working capital net income stockholder’s equity Answer: (b) ________ is the difference between revenues and cost of goods sold. Operating income Gross margin Taxable income Change in retained earnings Answer: (b) ________ is the difference between gross margin and GSA expenses. Operating income Gross margin Taxable income Net income Answer: (a) Although it differs from the income statement, the statement of cash flows is a useful supplement to the income statement because: it focuses attention on what is happening to the firm’s cash position over time it avoids the judgments about revenue and expense recognition that go into the income statement it is influenced by accrual accounting decisions (a) and (b) Answer: (d) On the statement of cash flows, the purchase of new plant and equipment represents a ________. cash flow from operating activity cash flow from investing activity cash flow from financing activity total cash flow from (a) + (b) +(c ) Answer: (b) On the balance sheet, the value of