ÔN TẬP LÝ THUYẾT

1. Which of the following statements is most correct?

a. Cash flows and accounting profit are not at all related since no common elements are
used in the calculation of either individual measure.
b. Accounting profits are more important than free cash flow.
c. High inflation can seriously distort firms' balance sheets, and since inflation also
affects depreciation and inventory costs, profits can also be affected.
d. None of the statements above is correct.

2. On its 2018 balance sheet, Sherman Books showed a balance of retained earnings equal
to $510 million. On its 2019 balance sheet, the balance of retained earnings was also equal
to $510 million. Which of the following statements is most correct?
a. The company must have had net income equal to zero in 2019.
b. The company did not pay a dividend in 2019.
c. If the company's net income in 2019 was $200 million, dividends paid must have also
equaled $200 million.
d. If the company lost money in 2019, they must have paid a dividend.
e. None of the statements above is correct.

3. Which of the following would not cause an increase in net operating working capital?
a. Inventory increases.
b. Accounts receivable increases.
c. Short-term investments increase.
d. Accounts payables decrease.

4. Which of the following are likely to occur if Congress passes legislation which forces
Carter Manufacturing to depreciate their equipment over a longer time period:
a. The company's physical stock of assets would increase.
b. The company's reported net income would decline.
c. The company's cash position would decline.
d. All of the answers above are correct.
e. Answers b and c are correct.

5. Assume that a company currently depreciates its fixed assets over 7 years. Which of the
following would occur if a tax law change forced the company to depreciate its fixed assets
over 10 years instead?
a. The company's tax payment would increase.
b. The company's cash position would increase.
c. The company's net income would increase.
d. Answers a and c are correct.
e. Answers b and c are correct.

6. Harmeling Enterprises experienced a decline in net operating profit after taxes (NOPAT).
Which of the following definitely cannot help explain this decline?
a. Sales revenues decreased.
b. Costs of goods sold increased.
c. Depreciation increased.
d. Interest expense increased.
e. Taxes increased.

7. Solo Company has been depreciating its fixed assets over 15 years. It is now clear that
these assets will only last a total of 10 years. Solo's accountants have encouraged the firm to
revise its annual depreciation to reflect this new information. Which of the following would
occur as a result of this change?
a. The company's earnings per share would decrease.
b. The company's cash position would increase.
c. The company's EBIT would increase.
d. Both a and b are correct.
e. All of the answers above are correct.

8. The CFO of Mulroney Brothers has suggested that the company should issue $300
million worth of common stock and use the proceeds to reduce some of the company's
outstanding debt. Assume that the company adopts this policy, and that total assets and
operating income (EBIT) remain the same. The company's tax rate will also remain the
same. Which of the following will occur:
a. The company's net income will increase.
b. The company's taxable income will fall.
c. The company will pay less in taxes.
d. All of the answers above are correct.
e. Answers b and c are correct.

9. Kramer Corporation recently announced that its net income was lower than last year.
However, analysts estimate that the company's net cash flow increased. What factors could
explain this discrepancy?
a. The company's depreciation expense increased.
b. The company's interest expense declined.
c. The company had an increase in its noncash revenues.
d. Answers a and b are correct.
e. Answers b and c are correct.
NI thấp hơn, NCF tăng

10. Holmes Aircraft recently announced an increase in its net income, yet its net cash flow
declined relative to last year. Which of the following could explain this performance?
a. The company's interest expense increased.
b. The company's depreciation expense declined.
c. The company's operating income declined.
d. All of the statements above are correct.
e. None of the statements above is correct.