The revenue is $25,000, the cost of goods sold is $11,000, other expenses (from selling and administration) are $7,000, and depreciation is $1,000. What is the EBIT? A) $13,000 B) $7,000 C) $6,000 D) Cannot tell because we do not know the interest paid. ANSWER Answer: C Explanation: C) EBIT = Revenue – […]
Date: September 19th, 2020
The two most fundamental aspects of a corporation (as a form of business organization) that lead to not only tremendous economies of scale and scope (as a positive) but also are linked to the financing problems that we address in the course (as a negative) are: a. the separation of ownership and control AND private […]
Date: September 19th, 2020
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.
Date: September 19th, 2020
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
Date: September 19th, 2020
Most businesses fail because their ________ dries up. A) net working capital B) cash flow C) liabilities D) tax shield ANSWER Answer: B
Date: September 19th, 2020
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
Date: September 19th, 2020
________ 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
Date: September 19th, 2020
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
Date: September 19th, 2020
Business risk is the risk to the firm of being unable to cover required financial obligations. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
A firm can spend its reported profits. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: A firm can only spend cash. Profits are an accounting measure of performance during a specific period of time.
Date: September 19th, 2020
