Test Bank For Practical Financial Management 8th Edition by William R. Lasher
Chapter 3 – Cash Flows and Financial Analysis
1. The principal function of financial statements is to:a. convey information to managers, investors, and creditors.b. provide benchmark information for projecting the firm’s future performance.c. inform the firm’s shareholders of its likely prospects for growth and cash flows.d. All of the aboveANSWER: dPOINTS: 1DIFFICULTY: EasyQUESTION TYPE: Multiple ChoiceHAS VARIABLES: FalseLEARNING OBJECTIVES: FINA.LASH.17.03.01 – Financial InformationNATIONAL STANDARDS: BUSPROG: Analytic – BUSPROG: Analytic skills: Statistics and Management ScienceTOPICS: Financial InformationKEYWORDS: Bloom’s: KnowledgeDATE CREATED: 5/26/2015 8:56 AMDATE MODIFIED: 6/28/2015 6:52 PM 2. Annual reports are in a sense, evaluations of management’s performance but since they are prepared by management they are likely to:a. exclude the details of management discussion and analysis.b. portray the firm’s past performance in a most favorable light.c. give the shareholders the opportunity to objectively evaluate management’s day-to-day performance during the past year.d. exclude the details of the minority interests groups.ANSWER: bPOINTS: 1DIFFICULTY: EasyQUESTION TYPE: Multiple ChoiceHAS VARIABLES: FalseLEARNING OBJECTIVES: FINA.LASH.17.03.01 – Financial InformationNATIONAL STANDARDS: BUSPROG: Analytic – BUSPROG: Analytic skills: Statistics and Management ScienceTOPICS: Financial InformationKEYWORDS: Bloom’s: ComprehensionDATE CREATED: 5/26/2015 8:56 AMDATE MODIFIED: 6/28/2015 6:53 PM 3. Firms sometimes disguise the cost or layoffs and reorganizations that may be attributable to poor management as:a. continuing operations.b. unusual activities.c. restructuring charges.d. None of the aboveANSWER: cPOINTS: 1DIFFICULTY: EasyQUESTION TYPE: Multiple ChoiceHAS VARIABLES: FalseLEARNING OBJECTIVES: FINA.LASH.17.03.01 – Financial InformationNATIONAL STANDARDS: BUSPROG: EthicsTOPICS: Financial InformationKEYWORDS: Bloom’s: KnowledgeDATE CREATED: 5/26/2015 8:56 AMDATE MODIFIED: 6/28/2015 6:54 PM 4. The principal function of financial statements is to:a. convey confidential information to the board of directors.b. accurately project future cash flows of a company.c. convey information to outside investors.d. guarantee an accurate accounting record.ANSWER: cPOINTS: 1DIFFICULTY: EasyQUESTION TYPE: Multiple ChoiceHAS VARIABLES: FalseLEARNING OBJECTIVES: FINA.LASH.17.03.01 – Financial InformationNATIONAL STANDARDS: BUSPROG: Analytic – BUSPROG: Analytic skills: Statistics and Management ScienceTOPICS: Financial InformationKEYWORDS: Bloom’s: KnowledgeDATE CREATED: 5/26/2015 8:56 AMDATE MODIFIED: 6/28/2015 6:54 PM 5. Free cash flow:a. includes investing cash flows as well as the financial cash flows.b. assumes that a company needs a constant asset base.c. assumes that the firm will remain competitive and continue growing.d. always includes increases in net fixed assets and in long-term liabilities.ANSWER: cPOINTS: 1DIFFICULTY: EasyQUESTION TYPE: Multiple ChoiceHAS VARIABLES: FalseLEARNING OBJECTIVES: FINA.LASH.17.03.01 – Financial InformationNATIONAL STANDARDS: BUSPROG: Analytic – BUSPROG: Analytic skills: Statistics and Management ScienceTOPICS: Financial InformationKEYWORDS: Bloom’s: KnowledgeDATE CREATED: 5/26/2015 8:56 AMDATE MODIFIED: 6/28/2015 6:55 PM 6. Accounting and finance each have significant responsibilities related to the firm’s financial performance; however, the accountant’s role is informational, while the financial analyst’s role is critical and investigative. Therefore, we can say that:a. the accountant’s job stops at the presentation of information.b. the analyst must rely on the accountant to assist in analyzing the financial statements because the accountant is more familiar with their content.c. the financial analyst assesses the information presented in the accountant’s financial statements to seek out problems and their ramifications for the firm.d. financial analysts qualified to practice as CPAs may undertake both responsibilities and eliminate any overlap of similar tasks.ANSWER: cPOINTS: 1DIFFICULTY: ModerateQUESTION TYPE: Multiple ChoiceHAS VARIABLES: FalseLEARNING OBJECTIVES: FINA.LASH.17.03.01 – Financial InformationNATIONAL STANDARDS: BUSPROG: Analytic – BUSPROG: Analytic skills: Statistics and Management ScienceTOPICS: Financial InformationKEYWORDS: Bloom’s: ComprehensionDATE CREATED: 5/26/2015 8:56 AMDATE MODIFIED: 6/28/2015 6:56 PM 7. Dividend payments are categorized as:a. cash flow from operating activities.b. cash flow from investment activities.c. cash flow from financing activities.d. All of the aboveANSWER: cPOINTS: 1DIFFICULTY: EasyQUESTION TYPE: Multiple ChoiceHAS VARIABLES: FalseLEARNING OBJECTIVES: FINA.LASH.17.03.02 – The Statement of Cash FlowsNATIONAL STANDARDS: BUSPROG: Analytic – BUSPROG: Analytic skills: Statistics and Management ScienceTOPICS: The Statement of Cash FlowsKEYWORDS: Bloom’s: KnowledgeDATE CREATED: 5/26/2015 8:56 AMDATE MODIFIED: 6/28/2015 6:57 PM
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