In terms of revenues and costs for a project, which of the statements below is FALSE? A) Projected revenues and costs are estimates of future activity. B) Estimates of revenues and costs begin with operating cash flow of the project. C) Projected revenues and costs form the basis of the potential for a project’s acceptance […]
The projected revenues and costs that form the basis of the potential for a project’s acceptance or rejection are estimates of ________. A) future activity B) past activity C) known activity D) current activity ANSWER Answer: A
Managers typically look at the initial outlay for the project as its capital expenditure and determine ________ from this capital expenditure. A) interest expenses B) dividends C) depreciation D) CEO expenses ANSWER Answer: C
In general, non-U.S. companies have much higher debt ratios than their U.S. counterparts because financial markets are much more developed in the United States than elsewhere. Indicate whether the statement is true or false ANSWER TRUE
The EBIT is $20,000, depreciation is $5,000, and taxes are $3,000. What is the operating cash flow (OCF)? A) $25,000 B) $22,000 C) $14,000 D) $28,000 ANSWER Answer: B Explanation: B) OCF = EBIT + Depreciation – Taxes = $20,000 + $5,000 – $3,000 = $22,000.
Asymmetric information results when managers of a firm have more information about the firm’s operations and future prospects than investors have. Indicate whether the statement is true or false ANSWER TRUE
Most businesses fail because their ________ dries up. A) net working capital B) cash flow C) liabilities D) tax shield ANSWER Answer: B
A floating inventory lien is most attractive when the firm has a stable level of inventory that consists of a diversified group of relatively inexpensive merchandise. Indicate whether the statement is true or false ANSWER TRUE
________ are an accounting measure of performance during a specific period of time, while ________ is the actual inflow or outflow of money. A) Profits; cash flow B) Cash flows; profit C) Dividends; cash flow D) Profits; a dividend ANSWER Answer: A
Operating Cash Flow (OCF) = EBIT + Depreciation + Taxes. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: Operating Cash Flow (OCF) = EBIT + Depreciation – Taxes
