Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-01 Differentiate between accounting value (or "book" value) and market value. Section: 2.1 Topic: Liquidity 108. Which is more important from a finance perspective—net income or operating cash flow? What is the difference between these two values? From a finance perspective, operating cash flow is more important because it reveals the actual net amount of cash generated or used by a firm's daily operations. The difference between net income and operating cash flow consists of depreciation and other noncash expenses plus the interest paid. Feedback: From a finance perspective, operating cash flow is more important because it reveals the actual net amount of cash generated or used by a firm's daily operations. The difference between net income and operating cash flow consists of depreciation and other noncash expenses plus the interest paid. AACSB: Reflective Thinking Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-04 Determine a firm's cash flow from its financial statements. Section: 2.4 Topic: Operating cash flow 109. Explain why the marginal tax rate, rather than the average tax rate, is used when computing the cash flows from a proposed new project. The marginal tax rate is used because that is the tax rate that will apply to the incremental taxable income generated by the new project. Feedback: The marginal tax rate is used because that is the tax rate that will apply to the incremental taxable income generated by the new project. AACSB: Reflective Thinking Blooms: Understand Difficulty: 1 Easy Learning Objective: 02-03 Explain the difference between average and marginal tax rates. Section: 2.3 Topic: Marginal tax rate
Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-01 Differentiate between accounting value (or "book" value) and market value. Section: 2.1 Topic: Liquidity 108. Which is more important from a finance perspective—net income or operating cash flow? What is the difference between these two values? From a finance perspective, operating cash flow is more important because it reveals the actual net amount of cash generated or used by a firm's daily operations. The difference between net income and operating cash flow consists of depreciation and other noncash expenses plus the interest paid. Feedback: From a finance perspective, operating cash flow is more important because it reveals the actual net amount of cash generated or used by a firm's daily operations. The difference between net income and operating cash flow consists of depreciation and other noncash expenses plus the interest paid. AACSB: Reflective Thinking Blooms: Apply Difficulty: 2 Medium Learning Objective: 02-04 Determine a firm's cash flow from its financial statements. Section: 2.4 Topic: Operating cash flow 109. Explain why the marginal tax rate, rather than the average tax rate, is used when computing the cash flows from a proposed new project. The marginal tax rate is used because that is the tax rate that will apply to the incremental taxable income generated by the new project. Feedback: The marginal tax rate is used because that is the tax rate that will apply to the incremental taxable income generated by the new project. AACSB: Reflective Thinking Blooms: Understand Difficulty: 1 Easy Learning Objective: 02-03 Explain the difference between average and marginal tax rates. Section: 2.3 Topic: Marginal tax rate
Essentials-of-Corporate-Finance-8th-Edition-Ross,-Westerfield,-Jordan-Test-Bank.docx