totalequityiscomprisedofcommonequitypluspreferredstock. a.True b.False True ANSWER: Medium DIFFICULTY: Total equity TOPICS: 26.Retainedearningsisthecashthathasbeengeneratedbythefirmthroughitsoperationswhichhasnotbeenpaidout tostockholdersasdividends.Retainedearningsarekeptincashornearcashaccountsandthus,thesecash accounts,whenaddedtogether,willalwaysbeequalto thetotalretainedearningsofthefirm. a.True b.False False ANSWER: Medium DIFFICULTY: Retainedearnings TOPICS: 27.Thefinancialpositionofcompanieswhosebusinessisseasonalcanbedramaticallydifferentdependinguponthe timeof yearchosentoconstructfinancialstatements.Thistimesensitivityisespeciallytruewithrespecttothefirm's balancesheet. a.True b.False True ANSWER: Medium DIFFICULTY: Balancesheetchanges TOPICS: 28.Inorderto accuratelyestimatecashflowfromoperations,depreciationmustbeaddedbackto netincome.The reasonforthisis thateventhoughdepreciationis deductedfromrevenueitis reallyanon-cashcharge. a.True b.False True ANSWER: Medium DIFFICULTY: Cashflows TOPICS: 29.Inaccounting,emphasisisplacedondeterminingnet income.Infinance,the primaryemphasisalsoisonnet income becausethatiswhatinvestorsusetovaluethefirm.However,asecondaryconsiderationiscashflowbecausethat's whatisusedtorunthebusiness. a.True b.False False ANSWER: Medium DIFFICULTY: Cashflowandnetincome TOPICS:
totalequityiscomprisedofcommonequitypluspreferredstock. a.True b.False ANSWER: True DIFFICULTY: Medium TOPICS: Total equity 26.Retainedearningsisthecashthathasbeengeneratedbythefirmthroughitsoperationswhichhasnotbeenpaidout tostockholdersasdividends.Retainedearningsarekeptincashornearcashaccountsandthus,thesecash accounts,whenaddedtogether,willalwaysbeequalto thetotalretainedearningsofthefirm. a.True b.False ANSWER: False DIFFICULTY: Medium TOPICS: Retainedearnings 27.Thefinancialpositionofcompanieswhosebusinessisseasonalcanbedramaticallydifferentdependinguponthe timeof yearchosentoconstructfinancialstatements.Thistimesensitivityisespeciallytruewithrespecttothefirm's balancesheet. a.True b.False ANSWER: True DIFFICULTY: Medium TOPICS: Balancesheetchanges 28.Inorderto accuratelyestimatecashflowfromoperations,depreciationmustbeaddedbackto netincome.The reasonforthisis thateventhoughdepreciationis deductedfromrevenueitis reallyanon-cashcharge. a.True b.False ANSWER: True DIFFICULTY: Medium TOPICS: Cashflows 29.Inaccounting,emphasisisplacedondeterminingnet income.Infinance,the primaryemphasisalsoisonnet income becausethatiswhatinvestorsusetovaluethefirm.However,asecondaryconsiderationiscashflowbecausethat's whatisusedtorunthebusiness. a.True b.False ANSWER: False DIFFICULTY: Medium TOPICS: Cashflowandnetincome
Test-Bank-CFIN-4-4th-Edition-Besley.docx