68. Which one of the following statements is correct?
a. Book values should always be given precedence over market values.
B. Financial statements are frequently the basis used for performance evaluations.
c. Historical information has no value when predicting the future.
d.Potential lenders place little value on financial statement information.
e. Reviewing financial information over time has very limited value.
69. It is easier to evaluate a firm using financial statements when the firm:
a. is a conglomerate.
b. is global in nature.
C. uses the same accounting procedures as other firms in their industry.
d.has a different fiscal year than other firms in their industry.
e. tends to have many one-time events such as asset sales and property acquisitions.
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Chapter 003 Working with Financial Statements
70. The most acceptable method of evaluating the financial statements of a firm is to compare the firm’s current:
A. financial ratios to the firm’s historical ratios.
b. financial statements to the financial statements of similar firms operating in other countries.
c. financial ratios to the average ratios of all firms located within the same geographic area.
d.financial statements to those of larger firms in unrelated industries.
e. financial statements to the projections that were created based on Tobin’s Q.
71. Which of the following represent problems encountered when comparing the financial statements of one firm with those of another firm?
I. Either one, or both, of the firms may be conglomerates and thus have unrelated lines of business.
II. The operations of the two firms may vary geographically.
III. The firms may use differing accounting methods for inventory purposes. IV. The two firms may be seasonal in nature and have different fiscal year ends.
a. I and II only
b. II and III only
c. I, III, and IV only
d.I, II, and III onlyE. I, II, III, and IV
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Chapter 003 Working with Financial Statements
72. Margo’s Dress Shoppe had the following values as of the end of last year and the end of this year. Which of the following are sources of cash for the year?
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a. cash and accounts receivable
b. cash and accounts payable
c. accounts receivable and inventory
d.cash, accounts payable, and inventory
E. accounts payable, accounts receivable, and inventory
73. During the year, The Train Stop decreased its accounts receivable by $60, increased its inventory by $130, and decreased its accounts payable by $20. For these three accounts, the firm has a net:
A. $90 use of cash.
b. $50 use of cash.
c. $170 use of cash.
d.$90 source of cash.
e. $50 source of cash.
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Chapter 003 Working with Financial Statements
74. A firm generated net income of $624. The depreciation expense was $58 and dividends were paid in the amount of $72. Accounts payables decreased by $28, accounts receivables increased by $16, inventory increased by $41, and net fixed assets increased by $28. What was the net cash flow from operating activity?
a. $497
b. $553C. $597
d.$608
e. $641
75. A firm has sales of $ 1,640, net income of $135, net fixed assets of $1,200, and current assets of $530. The firm has $280 in inventory. What is the common-size statement value of inventory?
a. 15.01 percent
b. 15.68 percentC. 16.18 percent
d.30.42 percent
e. 52.83 percent
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Chapter 003 Working with Financial Statements
76. A firm has sales of $1,800, net income of $210, total assets of $1,400, and total equity of $950. Interest expense is $35. What is the common-size statement value of the interest expense?
A. 1.94 percent
b. 2.50 percent
c. 3.69 percent
d.12.58 percent
e. 16.67 percent
77. Last year, which is used as the base year, a firm had cash of $46, accounts receivable of $132, inventory of $319, and net fixed assets of $640. This year, the firm has cash of $52, accounts receivable of $147, inventory of $312, and net fixed assets of $576. What is the common-base year value of accounts receivable?
a. .88 b. .90C. 1.11
d.1.13
e. 1.18
