Financial Management Theory and Practice Canadian 1st Edition Brigham Test Bank
Financial Management Theory and Practice Canadian 1st Edition Brigham Test Bank
Financial Management Theory and Practice Canadian 1st Edition Brigham Test Bank
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TRUE/FALSE
1. The annual report contains four basic financial statements: the income statement, balance sheet,
statement of cash flows, and statement of retained earnings.
ANS: T
LO: (2.1) Annual report
2. The primary reason the annual report is important in finance is that it is used by investors when they
form expectations about the firm’s future earnings and dividends, and the riskiness of those cash flows.
ANS: T
LO: (2.1) Annual report and expectations
3. Consider the balance sheet of Wilkes Industries as shown below. Because Wilkes has $800,000 of
retained earnings, the company would be able to pay cash to buy an asset with a cost of $200,000.
ANS: F
LO: (2.2) Retained earnings versus cash
4. On the balance sheet, total assets must always equal total liabilities plus equity.
ANS: T
LO: (2.2) Balance sheet
5. In Canada, amortization is a similar concept as depreciation and can be applied to both tangible and
intangible assets.
ANS: T
LO: (2.2) Amortization/depreciation
ANS: T
LO: (2.3) Income statement
ANS: F
LO: (2.3) Income statement
ANS: F
9. Net operating profit after taxes (NOPAT) is the amount of net income a company would generate from
its operations if it had no interest income or interest expense.
ANS: T
LO: (2.7) Net operating profit after taxes (NOPAT)
10. The fact that interest income received by a corporation is 50% taxable encourages firms to use more
debt financing than equity financing.
ANS: F
LO: (2.9) Corporate interest income taxes
11. If the tax laws were changed so that $0.50 out of every $1.00 of interest paid by a corporation was
allowed as a tax-deductible expense, this would probably encourage companies to use more debt
financing than they currently do, other things held constant.
ANS: F
ANS: F
LO: (2.9) Corporate taxes: interest expense and dividends
13. The balance sheet is a financial statement that measures the flow of funds into and out of various
accounts over time, while the income statement measures the firm’s financial position at a point in
time.
ANS: F
LO: (Comp: 2.2,2.3) Financial statements
14. The FIFO method leads to a higher balance sheet inventory value, but a lower cost of goods sold in the
income statement.
ANS: T
LO: (2.2) Inventory
15. The value of goodwill on intangible assets is calculated according to the impairment rule instead of a
fixed annual charge.
ANS: T
LO: (2.3) Goodwill
16. Retained earnings are the existing shareholders’ reinvested profit and do not represent cash.
ANS: T
LO: (2.4) Retained earnings
17. Since investors use net income to value the firm, cash flow becomes a secondary consideration simply
because cash is for operation only.
ANS: F
LO: (2.5) Cash flow and net income
Illustrator: L. J. Bridgman
Language: English
BY AMY E. BLANCHARD
Illustrated by
L. J. BRIDGMAN
BOSTON
DANA ESTES & COMPANY
PUBLISHERS
Copyright, 1909
By Dana Estes & Company
"I seem to have made an impression," she said as her aunt came up.
"I didn't know strangers were such a rarity here that people stared at
them the way that man did at me. I wonder who he is and what made
him look so taken by surprise."
"Oh, I suppose he didn't know that any of the summer residents had
arrived," returned Miss Elliott, "and he wondered who you were and
where you came from. There aren't usually any summer visitors here
before the middle of June."
"I suppose that must have been it," returned Gwen, at the same time
feeling that it did not quite explain matters.
At the side door, by which it seemed they were expected to enter,
they met Ora. She turned away her head and hurried around to the
kitchen.
"What a pretty girl," said Gwen, looking after her. "Such a lovely
complexion. But, oh dear, why does she lace so painfully? Doesn't
she know wasp waists are all out of style? That they belong to the
early Victorian age and passed out with ringlets and high
foreheads?"
"She probably doesn't know," returned Miss Elliott. "I notice that
many of the girls up here still cling to the traditions of their
grandmothers in more than one direction. I have heard that one, at
least, died from the effects of tight lacing."
"Then they need a missionary as much as the heathen Chinee
does," observed Gwen as she entered the house.
She had gone out bareheaded but she tossed aside the golf-cape,
which was none too warm for out-door wear, and sat down by the
window. Miss Phenie, established in a comfortable rocking-chair,
was quite ready for a chat while she knitted a "sweaterette" as she
called it. Miss Phosie was in the kitchen getting supper, but Miss
Phenie felt that it was due to her position as elder sister to entertain
the guests rather than to give a hand to the evening's work. It was
always her attitude and one of which no one had ever heard Miss
Phosie complain. The most that she had ever done was to remark to
Almira Green: "It's very easy to be hospitable when you do the
entertaining and some one else does the work." But that was under
great provocation when the minister, the surveyor, the doctor and the
editor of The Zephyr had all arrived on the island in one day and all
had been entertained at Cap'n Ben's house because there seemed
nowhere else for them to go. On that occasion Miss Phenie, as
usual, had asserted her right to the position of hostess, and had left
Miss Phosie alone to wash the dishes as well as to get the dinner,
Ora having gone to Portland for the day.
"Well," said Almira Green to whom Miss Phosie's remark was made,
"there was Cap'n Ben to do the talking, and as they was all men I
don't see why Phenie was called upon to set with them all the time."
"I guess she thought she had to," Miss Phosie had returned with the
feeling that perhaps she had said too much.
To-day, however, there was not much reason for Miss Phenie's
presence in the kitchen, for, while Miss Phosie made the soda
biscuits Ora could be setting the table. The lobsters had been boiled
that morning, so there were only the fish and potatoes to fry, and the
preserves to be set on the table with the cake. Miss Phenie, in tight
fitting black alpaca, rocked comfortably and asked questions till
Gwen, by the window, saw Luther Williams pass. "Who is that, Miss
Phenie?" she asked. "That tall man with the serious face and the
kind eyes?"
"I guess you mean Mr. Williams. I presume he is taking his after
supper smoke. He boards with us, you know."
"Oh!" Gwen wondered why he had not appeared at the table. "Is he
a relative of yours?"
"None in the world, and we never heard that he had any. He gets a
daily paper and advertising letters sometimes, but I never knew him
to get any other mail. He's real well educated, and reads everything
he can lay his hands on, but he is a very quiet man. He never talks
much to anybody, but there ain't a kinder man living. If anybody's in
trouble he's the first on hand, and the first to put his hand in his
pocket."
"Is he a fisherman?"
"Yes. His pound is just off your point. He's been real lucky and it's
said he's right well off."
"Has he boarded with you long?"
"Ever since he came to the island; that's about twenty years now. He
came for a week's fishing, he said, and he's stayed ever since. I
never heard a word against Mr. Williams. Everybody likes him, and if
he is rather close-mouthed you don't hear him speak ill of anyone.