implying that more of the firm's suppliers are being paid on time. a. True b. False False ANSWER: Easy DIFFICULTY: Days sales outstanding (DSO) TOPICS: 25. supplied by common stockholders mainly includes capital stock, paid-in capital, and retained earnings, while total equity is comprised of common equity plus preferred stock. a. True b. False True ANSWER: Medium DIFFICULTY: Total equity TOPICS: 26. Retained earnings is the cash that has been generated by the firm through its operations which has not been paid out to stockholders as dividends. Retained earnings are kept in cash or near cash accounts and thus, these cash accounts, when added together, will always be equal to the total retained earnings of the firm. a. True b. False ANSWER: Medium DIFFICULTY: Retained earnings TOPICS: 27. The financial position of companies whose business is seasonal can be dramatically different depending upon the time of year chosen to construct financial statements. This time sensitivity is especially true with respect to the firm's balance sheet. a. True b. False True ANSWER: Medium DIFFICULTY: Balance changes TOPICS: 28. In order to accurately estimate cash flow from operations, depreciation must be added back to net income. The reason for this is that even though depreciation is deducted from revenue it is really a non-cash charge. a. True b. True ANSWER: Medium DIFFICULTY: Cash TOPICS: 29. In accounting, emphasis is placed on determining net income. In finance, the primary emphasis also is on net income because that is what investors use to value the firm. However, a secondary consideration is cash flow because that's what is used to run the business.
implying that more of the firm's suppliers are being paid on time. a. True b. False ANSWER: False DIFFICULTY: Easy TOPICS: Days sales outstanding (DSO) 25. supplied by common stockholders mainly includes capital stock, paid-in capital, and retained earnings, while total equity is comprised of common equity plus preferred stock. a. True b. False ANSWER: True DIFFICULTY: Medium TOPICS: Total equity 26. Retained earnings is the cash that has been generated by the firm through its operations which has not been paid out to stockholders as dividends. Retained earnings are kept in cash or near cash accounts and thus, these cash accounts, when added together, will always be equal to the total retained earnings of the firm. a. True b. ANSWER: False DIFFICULTY: Medium TOPICS: Retained earnings 27. The financial position of companies whose business is seasonal can be dramatically different depending upon the time of year chosen to construct financial statements. This time sensitivity is especially true with respect to the firm's balance sheet. a. True b. False ANSWER: True DIFFICULTY: Medium TOPICS: Balance changes 28. In order to accurately estimate cash flow from operations, depreciation must be added back to net income. The reason for this is that even though depreciation is deducted from revenue it is really a non-cash charge. a. True b. ANSWER: True DIFFICULTY: Medium TOPICS: Cash 29. In accounting, emphasis is placed on determining net income. In finance, the primary emphasis also is on net income because that is what investors use to value the firm. However, a secondary consideration is cash flow because that's what is used to run the business.
Test-Bank-for-CFIN-4-4th-Edition-by-Besley.docx