Exam (elaborations)
ACG 3173 UCF - Exam 3 Practice (1).
ACG 3173 UCF - Exam 3 Practice (1).
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ACG 3173 UCF - Exam 3 PracticeIf you were interested in evaluating the profitability of a company and could have only limited
historical data, would you prefer to know operating income or net income for the past five years?
- ANS-operating income
Which series of data is more meaningful?
operating income OR net income - ANS-Operating income
Assets = - ANS-Liabilities + PIC + RE
Ending RE = - ANS-Beginning RE + NI - Div
What accounts for the difference between issued shares and outstanding shares? -
ANS-Treasury Stock
When would an investor prefer to receive cash dividends rather than stock dividends? - ANS-If I
needed current income from my investment, I would want Cash dividends.
When would an investor prefer to receive stock dividends rather than cash dividends? - ANS-If
the company can reinvest its retained earnings at a higher ROI than I could earn on the money
paid to me in dividends.
ROE will ALWAYS be higher when using debt - ANS-True
Income Statement (Multiple Step) - ANS-Sales
- COGS
= Gross Profit
- Operating Expenses
= Operating Income
- Interest Expense
+/- Gain/Loss from Operations
= EBT
- Income Tax Expense
= Net Income/Loss
Most financially healthy company? - ANS-Company with HIGHEST operating income
Company with the most questionable earnings quality? - ANS-Company with the LOWEST
Cash provided by Operating Activities
, Company most likely will need to seek external financing? - ANS-Company with the LOWEST
cash provided by Investing Activities
Cash Flows from Operating Activities - ANS-Net Income
+/- Depreciation Expense
+/- Amortization
+/- Change in AR
+/- Change in Merchandise Inventory
+/- Change in AP
+/- Change in Other Accrued Liabilities
Cash Flows from Investing Activities - ANS-+/- Changes in Production Equipment (PPE)
Cash Flows from Financing Activities (Short Term Notes Payable) - ANS-+/- Common Stock
+/- Payment of Dividends
+/- Payment of Long Term Debt
Operating Activities - ANS-- Change in Current Assets
- Change in Current Liabilities
Investing activities - ANS-Change in Long-Term Assets
Financing Activities - ANS-- Change in Long-Term Liabilities
- Change in Equity
Finding Operating Activities - ANS-+ Cash collected from customers
- Interest & Taxes Paid
- Cash paid to suppliers & employees
Finding Investing Activities - ANS-- Purchases of Land & Buildings
+ Proceeds from Sale of Equipment
Finding Financing Activities - ANS-- Payment of L/T Debt
+ Issuance of Preferred Stock
- Cash Dividends Declared & Paid
Gross Profit = - ANS-Sales - COGS
Sales * GP Ratio
Gross Profit Ratio = - ANS-Gross Profit / Sales
If a bond is issued at a Premium, Coupon Payment will be HIGHER than the Interest Expense. -
ANS-True
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