Exam (elaborations)
Exam (elaborations) CPA - Certified Public Accountant
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C214 EXAM READY FOR BUSINESS AND FINANCE WELL ORGANIZED Q AND A.
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C214 EXAM READY FOR BUSINESSAND FINANCE Q AND A.
1. What does the Foreign Corrupt Practices Act forbid U.S. companies to do - CORRECT
ANSWER✅✅✅Prohibits U.S. firms and individuals from paying bribes to foreign officials
to further business deals.
2. What are two basic types of financial instruments - CORRECT ANSWER✅✅✅Stocks
and Bonds
3. What are secondary markets - CORRECT ANSWER✅✅✅Secondary financial markets
are where securities are traded after the initial offering.
4. What do cash flows from operating activities report - CORRECT
ANSWER✅✅✅Operating - day to day operations Investing - Property, plant, equipment,
long term items Financing - debt and equity changes
5. What does the statement of cash flows report - CORRECT ANSWER✅✅✅Cash inflow
and cash outflow of business for period of time
6. Write the equation that links the income statement to the balance sheet - CORRECT
ANSWER✅✅✅New Re= Old RE + Net Income - dividends
7. Net income 2,000 Depreciation 500 Change in operating assets 400 Change in PPE 1,000
Change on long term liabilities 600 Dividends paid 100 What is the firm's cash flow from
financing activities - CORRECT ANSWER✅✅✅Increase in debt 600 + (no change in stock)
0 - (dividends paid) 100 = 500
8. Describe an income statement - CORRECT ANSWER✅✅✅An income statement is a
financial statement that shows you how profitable your business was over a given reporting
period. It shows your revenue, minus your expenses and losses
, 9. What item is included in the income statement and not included in the statement of cash flows
- CORRECT ANSWER✅✅✅Depreciation
10. A company sold goods in 2016 for $30,000 and collected the cash in 2017. In 2016, the
company incurred and paid $20,000 in expenses related to the goods sold. How much income
should the company report in 2016 under the accrual basis of accounting - CORRECT
ANSWER✅✅✅30,000-20,000= $10,000
11. EBIT: $1,000,000 Depreciation: $30,000 Change in working capital($5,000) Net capital
expenditures: $10,000 Tax rate: 40% What is the company's free cash flow - CORRECT
ANSWER✅✅✅1,000,000*(1-.40) + 30,000) - (-5,000) - 10,000 = 625,000
12. Define Free Cash Flow - CORRECT ANSWER✅✅✅Represents the cash available for
the company to repay creditors or pay dividends and interest to investor
13. A company reported an increase in accounts payable of $4,000 during the recent period. Half
of this amount is expected to be paid next period. What is the impact on the cash flow from
operating activities - CORRECT ANSWER✅✅✅increase of $4000
14. An architect will receive $10,000 per year (at the end of the year) PMT for 10 years. The
annual interest earned on the investment is 6%. What is the present value of the architect's
investment - CORRECT ANSWER✅✅✅10,000 PMT (at the end of each year) 6 I/Y 10 N
CPT PV = -7360008705
15. An employee wants to retire 20 years from today and would like to have an annual income of
$300,000 per year for 10 years starting in exactly 20 years. The discount rate is 6%. What is the
present value, today - CORRECT ANSWER✅✅✅FUTURE 1000 PMT = 300,000 N = 10
I/Y = 6 CPT PV = 2,208,026.115 PRESENT FV = 2,208,026.115 N = 20 I/Y = 6 PV =
688,472,9797
16. A person won $75,000 in a lottery and invests this money for 2 years and 3 months at an
interest rate of 6% simple interest. How much will the person have in principal and interest at the
end of the period - CORRECT ANSWER✅✅✅10,125.000
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