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Exam 1: Interpreting Financial Statements

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Question 21

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A decline in the Net fixed assets account between year-end 2013 and year-end 2014 is a clear indication that fixed assets were sold during 2014.

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Question 22

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You can construct a sources and uses statement for 2014 if you have a company's year-end balance sheets for 2014 and 2015.

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Question 23

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Which one of the following is the financial statement that shows a financial snapshot,taken at a point in time,of all the assets the company owns and all the claims against those assets?

Which of the following is NOT a typical reason for differences between profits and cash flow?

Which one of the following is a source of cash?

$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Foodtek, Inc. $\quad$ $\quad$ $\quad$ $\quad$ Selected financial information ($ millions) $\begin{array}{lrr} &\underline{ 2013} &\underline{ 2014} \\ \text { Net sales } & \$ 296 & \$ 364 \\\text { Cost of goods sold } & 168 & 223 \\\text { Depreciation } & 51 & 65 \\\text { Net income } & 32 & 45 \\\text { Finished goods inventory } & 34 & 29 \\\text { Accounts receivable } & 47 & 87 \\\text { Accounts payable } & 39 & 44 \\\text { Net fixed assets } & 310 & 415 \\\text { Year-end cash balance } & \$ 186 & \$ 123 \\\hline\end{array}$ -Please refer to the financial information for Foodtek,Inc.above.Assuming that there were no financing cash flows during 2014 and basing your answer solely on the information provided,what were Foodtek's cash flows from operations (in $ millions) for 2014?

During 2011,Lele Design earned net income of $250,000.The firm neither bought nor sold any capital assets.The book value of its assets declined by the year's depreciation charge of $200,000.The firm's operating cash flow for the year was $450,000.The market value of its assets increased by $300,000.Based only on this information,what was Lele Design's economic income for the year? Why is this figure different from its accounting income? Please ignore taxes for this problem.

Accounting rules require U.S.companies to depreciate research and development (R&D)expenditures using the straight-line method.

The sources and uses of cash over a stated period of time are reflected on the:

Identify the sources and uses of cash for Blackhurst Corporation for 2014 based on the following year-end balance sheets.

Which one of the following is a source of cash?

Which of the following statements concerning the cash flow-production cycle is true?

Which of the following statements concerning a firm's cash flows and profits is false?

A reduction in long-term debt is a use of cash.

Playdough Products earned net income of $500,000 in 2011.The firm increased its accounts receivable during the year by $220,000.The book value of its assets declined by the year's depreciation charge,which was $140,000,and the market value of its assets increased by $50,000.Based only on this information,how much cash did Playdough Products generate during the year? Please ignore taxes for this problem.

Which of the following would NOT be considered a use of cash?

The book value of Little Statistic's total assets is $400,000.Suppose Number Crunching Inc.acquires Little Statistic's assets for $1 million and finances the purchase by selling $600,000 in new stock,$300,000 in new debt,and reducing cash by $100,000.Describe how the acquisition affects Number Crunching's balance sheet.

$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Foodtek, Inc. $\quad$ $\quad$ $\quad$ $\quad$ Selected financial information ($ millions) $\begin{array}{lrr} &\underline{ 2013} &\underline{ 2014} \\ \text { Net sales } & \$ 296 & \$ 364 \\\text { Cost of goods sold } & 168 & 223 \\\text { Depreciation } & 51 & 65 \\\text { Net income } & 32 & 45 \\\text { Finished goods inventory } & 34 & 29 \\\text { Accounts receivable } & 47 & 87 \\\text { Accounts payable } & 39 & 44 \\\text { Net fixed assets } & 310 & 415 \\\text { Year-end cash balance } & \$ 186 & \$ 123 \\\hline\end{array}$ -Please refer to the financial information for Foodtek,Inc.above.During 2014,what was the cost of merchandise (in $ millions) produced by Foodtek?

Which one of the following is a use of cash?