Net capital spending:
  • is equal to zero if the decrease in the net fixed assets is equal to the depreciation expense.
Which one of the following must be true if a firm had a negative cash flow from assets?
  • The firm utilized outside funding.
Which one of the following will increase the cash flow from assets, all else equal?
  • decrease in net capital spending
Which one of the following statements is correct concerning a corporation with taxable income of $125,000?
  • An increase in depreciation will increase the operating cash flow.
Which one of the following statements related to an income statement is correct?
  • Taxes reduce both net income and operating cash flow.
As of 2008, which one of the following statements concerning corporate income taxes is correct?
  • A firm's tax is computed on an incremental basis.
Which one of the following statements related to taxes is correct?
  • The marginal tax rate for a firm can be either higher or lower than the average tax rate.

Which one of the following statements related to an income statement is correct? Assume accrual accounting is used.

  • The labor costs for producing a product are expensed when the product is sold.
Which one of the following is true according to Generally Accepted Accounting Principles?
  • Costs of goods sold are recorded based on the matching principle.

You recently purchased a grocery store. At the time of the purchase, the store’s market value equaled its book value. The purchase included the building, the fixtures, and the inventory. Which one of the following is most apt to cause the market value of this store to be lower than the book value?

  • construction of a new restricted access highway located between the store and the surrounding residential areas
The higher the degree of financial leverage employed by a firm, the:
  • higher the probability that the firm will encounter financial distress.
Which one of the following statements concerning net working capital is correct?
  • Net working capital increases when inventory is sold for cash at a profit.