According to SFAS 95, cash and cash equivalents includes
Answer(s): B
Bank accounts, U.S. Treasury Bills, and similar assets qualify.
The following is true about the price earnings ratio
Answer(s): A
PE ratio is calculated based on expected earnings per share and a ratio of less than 5 to 8 makes a stock appear underpriced.
According to U.S. GAAP, the format of the income statement
Answer(s): E
F. S. GAAP do not specify the format of the income statement. Actual formats vary across firms, especially in the reporting of equity in earnings of affiliates, and nonoperating income and expense.
If a firm's net income after dividends is greater than zero, then
Answer(s): C
The income not paid out as dividends becomes part of retained earnings, which is a component of equity. A firm's market value is not determined solely by its current book value but expected future earnings. If the current period's income falls short of expectations, then the stock price will fall even if nothing else changes simply because the unrealized part of the income was factored into the original price. A further complication arises if the market interprets the fall in income as an unfavorable signal about future earnings. Thus, while book value of the stock increases, the market value could increase or decrease.
The following information should be used according to the provisions of SFAS 95 (Statement of Cash flows) and using the following data.Net Income $50,000Provision for bad debts $2,000Increase in Inventory $1,000Increase in accounts payable $2,000Purchase of new equipment $15,000Sale of equipment for $10,000 gain $20,000Depreciation expense $5,000Repurchase of common stock $10,000Payment of dividend $4,000Interest payment $3,000What is net cash flow from financing?
Answer(s): D
($14,000) = ($10,000) for repurchase of stock and ($4,000) for payment of dividend
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