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FIN3101 Keen Temple Exam 2 Chapters 16 and 2 Exam Prep T/F with Answers., Exams of Finance

University of North Texas (UNT)Finance

FIN3101 Keen Temple Exam 2 Chapters 16 and 2 Exam Prep T/F with Answers.

Typology: Exams

2024/2025

Available from 11/19/2024

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FIN3101 Keen Temple Exam 2 Chapters
16 and 2 Exam Prep T/F with Answers.
1. What are the 3 factors cited by Brooks that cause NI ≠ cash flow? -
Correct Ans: ✔✔
Accrual Accounting
Non-chase Expense
Treatment of Int Expense
2. How do changes in various expense items impact a firm's NI and
level of cash? - Correct Ans: ✔✔If expenses increase, the impact
on Net income will decrease.
3. What is the Cash Flow Identity and what does it tell us? - Correct
Ans: ✔✔Cash flow from assets=cash flow to creditors + cash flow
to stockholders.
4. It reflects the fact that a firm generates cash through its various
activities and that cash either is used to pay creditors or else is
paid out to the owners of the firm.
5. What is the difference between accounts receivable and payable?
- Correct Ans: ✔✔
Payable = Liability
Receivable = Asset
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Download FIN3101 Keen Temple Exam 2 Chapters 16 and 2 Exam Prep T/F with Answers. and more Exams Finance in PDF only on Docsity!

FIN3101 Keen Temple Exam 2 Chapters

16 and 2 Exam Prep T/F with Answers.

  1. What are the 3 factors cited by Brooks that cause NI ≠ cash flow? - Correct Ans: ✔✔ Accrual Accounting Non-chase Expense Treatment of Int Expense
  2. How do changes in various expense items impact a firm's NI and level of cash? - Correct Ans: ✔✔If expenses increase, the impact on Net income will decrease.
  3. What is the Cash Flow Identity and what does it tell us? - Correct Ans: ✔✔Cash flow from assets=cash flow to creditors + cash flow to stockholders.
  4. It reflects the fact that a firm generates cash through its various activities and that cash either is used to pay creditors or else is paid out to the owners of the firm.
  5. What is the difference between accounts receivable and payable?
    • Correct Ans: ✔✔ Payable = Liability Receivable = Asset
  1. How do changes in various balance sheet items represent sources or uses of funds? - Correct Ans: ✔✔Expenses will impact the cash
  2. What is meant by "capital structure"? - Correct Ans: ✔✔Mix of debt and equity
  3. What are two key features of "leverage"? - Correct Ans: ✔✔Fixed and Magnified
  4. What is meant by "financial leverage"? - Correct Ans: ✔✔Debt used for borrowed money to make money
  5. What are two major sources of financing for a corporation? - Correct Ans: ✔✔Debt and Equity
  6. Compared to equity, what is the major advantage and disadvantage of financing with debt? - Correct Ans: ✔✔Debt it cheaper for a company then equity.
  7. Debt loans take funds out of the company's cash flow, reducing the money needed to finance growth.
  1. What does the simple PV framework imply about the value of a firm at the optimal capital structure? - Correct Ans: ✔✔It applies that change in Pv/Dr is negative
  2. Capital structure refers to the make-up of the right-hand side of the balance sheet. - Correct Ans: ✔✔True
  3. The central question involved with long-term debt is the amounts of equity a corporation should have. [EQ1] - Correct Ans: ✔✔True
  4. The two key features of "leverage" are that something is fixed and something is magnified. [EQ2] - Correct Ans: ✔✔True
  5. The advantage of debt over equity is that debt is a cheaper form of financing for a corporation. [EQ5] - Correct Ans: ✔✔True
  6. Adding debt will be less than the return for owners equity if the cost of borrowing exceeds the return earned on the borrowed funds. [EQ7] - Correct Ans: ✔✔True
  7. The EBIT Break Down Graph can be used to illustrate the impact on owners of various levels of debt. [EQ7] - Correct Ans: ✔✔True
  1. In the EBIT Breakeven Graph, as the level of debt increases, the line representing this level of debt becomes steeper. [EQ7] - Correct Ans: ✔✔True
  2. The higher the level of EBIT, the more owners benefit from the use of debt financing. [EQ7] - Correct Ans: ✔✔True
  3. The greater the use of debt, the more the volatility of EPS [EQ7] - Correct Ans: ✔✔True
  4. A firm's cost of capital is a weighted average cost of debt. [EQ8] - Correct Ans: ✔✔True
  5. As a firm substitutes debt for equity, its cost of capital begins to go down. [EQ9] - Correct Ans: ✔✔True
  6. A firm's optimal capital structure is one at which its cost of capital is at a minimum. [EQ10&11] - Correct Ans: ✔✔True
  7. COGS appears on the income statement. [EQ1&3] - Correct Ans: ✔✔True
  1. Accounts payable represents short-term loans extended to corporation by the suppliers by the [EQ9] - Correct Ans: ✔✔True
  2. What are the basic parts of the balance sheet? - Correct Ans: ✔✔  Assets  Liabilities  Owners equity
  3. What is the Balance Sheet or Accounting Identity? - Correct Ans: ✔✔Assets = Liabilities + Owner's Equity
  4. What are the basic parts of the income statement? - Correct Ans: ✔✔  Revenue  Net Sales  Taxable Income  EBIT  Depreciation
  5. To whom does Net Income belong and where does it go? - Correct Ans: ✔✔Bottom of Income Statement
  1. Why do we focus on cash flow rather than Net Income in Finance? - Correct Ans: ✔✔Much easier to * net income then cash
  2. A increase in inventory constitutes a use of cash. [EQ10] - Correct Ans: ✔✔True
  3. An increase in accounts receivable constitutes a use of cash while a decrease in accounts payable constitutes a source of cash.
    • Correct Ans: ✔✔True