财务报表分析（英文版·第11版）测试题TestBank Chap003 Analyzing Financing Activities

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Chapter03

AnalyzingFinancingActivities

MultipleChoiceQuestions

1.

Themajorityoffinancingformostcompaniescomesfromwhichofthefollowingsources?

A.

Ownersandcustomers

B.

Creditorsandcustomers

C.

Ownersandmanagers

D.

Creditorsandowners

2.

Whichofthefollowingwouldnotbefoundlistedasaliabilityonacompany'sbalancesheet?

A.

Operatingleaseobligations

B.

Capitalleaseobligations

C.

Bondspayable

D.

Taxespayable

3.

Whichofthefollowingwouldbefoundlistedasaliabilityonacompany'sbalancesheet?

A.

Operatingleaseobligations

B.

Projectedbenefitobligation

C.

Purchasecommitmentobligation

D.

Otherpostretirementemployeebenefits

4.

Whichofthefollowingisnotacriterionfordefiningaleaseasacapitallease?

A.

Ownershipistransferredattheendoftheleaseagreement.

B.

Theleasecontainsanoptiontopurchasetheassetatabargainprice.

C.

Thepresentvalueoftheleasepaymentsatthebeginningoftheleaseis75%ormorethanthevalueoftheasset.

D.

Theleasetermisatleast75%oftheeconomiclifeoftheasset.

5.

Whichofthefollowingistrueconcerningbondcovenants?

A.

Bondcovenantsarerestrictionsplacedonbondholderstoprotectrightsofequityholders.

B.

Violationofabondcovenantrequiresthatacompanydeclaresbankruptcy.

C.

Ifacompanyviolatesabondcovenant,itmeansithasfailedtomakeinterestorprincipalrepaymentsondebtinatimelymanner.

D.

Bondcovenantsarelegalrestrictionsplacedinordertominimizetheriskofdefaultonbonds.

6.

Recordingalong-termleaseasanoperatinglease,asopposedtoacapitallease,foralesseewillcausethefollowingratiostobe:

A.

OptionA

B.

OptionB

C.

OptionC

D.

OptionD

7.

Ifacompanyleasesequipmenttoothercompaniesandrecordstheseleasesasoperatingleasesratherthancapitalleases,its:

I.recordedliabilitieswillbelower.

II.recordedassetswillbehigher.

III.totalcashflowswillbehigher.

IV.debttoequityratioswillbelower.

A.

IandIII

B.

IIandIV

C.

Ionly

D.

II,III,andIV

8.

Ifacompanythatleasesequipmentfromanothercompanyrecordstheseleasesasoperatingleasesratherthancapitalleases,its:

I.recordedliabilitieswillbelower.

II.recordedassetswillbehigher.

III.totalcashflowswillbehigher.

IV.leverageratioswillbehigher.

A.

IandIII

B.

IIandIV

C.

Ionly

D.

II,III,andIV

9.

Whichoneofthefollowingstatementsisfalse?

A.

Short-termobligationsmaybeclassifiedaslong-termifthecompanyintendstorefinancethemonalong-termbasisandcandemonstratetheabilitytodoso.

B.

Violationofalong-termdebtcovenantautomaticallymeansthecompanymustreclassifythedebtascurrent.

C.

Currentliabilitiesarerecordedattheirmaturityvalue,andnottheirpresentvalue.

D.

Ifabondisissuedatadiscounttheeffectiveinterestrateisgreaterthanthecouponrate.

10.

Whenconsideringdefinedbenefitpensionplans,whichofthefollowingwillnotincreasetheprojectedbenefitobligation(PBO)?

A.

Adecreaseinthediscountrate

B.

Anincreaseinestimatedcompensationgrowth

C.

Anincreaseinexpectedaveragelengthoflivesofemployees

D.

Adecreaseintheexpectedrateofreturnonplanassets

11.

Withrespecttopensionliabilities,whichofthefollowingstatementsistrue?

I.Theprojectedbenefitobligation(PBO)isalwaysgreaterthanorequaltotheaccumulatedbenefitobligation(ABO).

II.Thevestedbenefitobligation(VBO)isalwaysasleastasorasbigastheaccumulatedbenefitobligation(ABO).

III.IfthePBOisgreaterthantheplanassets,theplanissaidtobeoverfunded.

IV.Iftheweighted-averageassumeddiscountrateisincreased,thePBOwilldecrease.

A.

I,III,andIV

B.

IandIII

C.

IIandIV

D.

IandIV

12.

Thedifferencebetweentheaccumulatedbenefitobligation(ABO)andtheprojectedbenefitobligation(PBO)is:

A.

thePBOconsidersnon-vestedobligationsandtheABOdoesnot.

B.

thePBOtakesintoaccountthetimevalueofmoneyandtheABOdoesnot.

C.

thePBOtakesintoaccountfuturepayincreasesandtheABOdoesnot.

D.

thePBOtakesintoaccountmortalityratesofemployeesandtheABOdoesnot.

13.

HertCorporationacquiredacapitalleasethatiscarriedonitsbooksatapresentvalueof$100,000(discountedat12%).Itsannualrentalpaymentis$15,000.Whatistheamountofinterestexpensefromthislease?

A.

OptionA

B.

OptionB

C.

OptionC

D.

OptionD

14.

Whichofthefollowingwillgiverisetooff-balancesheetfinancing?

I.Take-or-payarrangements

II.Saleofreceivableswithoutrecourse

III.Through-putagreements

IV.Purchasecommitments

A.

I,II,III,andIV

B.

I,II,andIV

C.

II,III,andIV

D.

I,III,andIV

15.

Whichofthefollowingisanexampleofoff-balancesheetfinancing?

A.

Operatingleases

B.

Capitalleases

C.

Issuanceofconvertiblebonds

D.

Issuanceofcommonstock

16.

Ifacompanyengagesinoff-balancesheetfinancing,generallytheeffectis:

I.tocauseassetstobeunderstated.

II.toincreaseleverageratios.

III.toincreasecashflows.

IV.tocauseliabilitiestobeunderstated.

A.

I,II,III,andIV

B.

I,III,andIV

C.

Ionly

D.

IVonly

17.

Minorityinterestappearsonthebalancesheetofsomecompanies.Minorityinterest:

A.

isclassifiedasaliability.

B.

isclassifiedasanequity.

C.

ariseswhenacompanyrecordsinvestmentsusingtheequitymethod.

D.

ariseswhenacompanyownscontrollinginterestinanothercompany,butlessthan100%.

18.

Alesseemustaccountforaleaseasacapitalleaseif:

I.leasetransfersownershiptolesseeattheendofthelease.

II.leasecontainsoptiontopurchasetheassetattheendoftheleaseatabargainprice.

III.leaseislongerthan20years.

IV.presentvalueofleaseisgreaterthan10%oflessee'sassets.

A.

IandII

B.

I,IIandIII

C.

I,IIIandIV

D.

I,IIandIV

19.

DylanCorporationissuesazerocouponbondwith$100,000facevalue,witha5-yearmaturity,andthemarketrateis7%.Interestoncorporatebondsisnormallypaidsemiannually.IntheliabilitysectionofDylan'sbalancesheet,theproceedsfromsellingthezero-couponimmediatelyafterissuancewillbeclosestto:

A.

$70,892.

B.

$71,299.

C.

$70,000.

D.

$100,000.

20.

Whichofthefollowingstatementsaboutstockdividendsistrue?

A.

Stockdividendsincreasethenumberofsharesoutstanding.

B.

Stockdividendsaremorevaluablethanstocksplits.

C.

Stockdividendsarerecordedasareductionincash.

D.

Stockdividendsaredividendsgivenintheformofstockfromanothercompany.

21.

Treasurystockis:

A.

investmentsingovernmentsecurities.

B.

retainedearningsthathavebeenappropriatedtomakeequityinvestments.

C.

acompany'sownstockthatithasrepurchased.

D.

assetsheldforsafekeepingincompany'svaults.

RelingCompanyreportsthefollowinginformationasof12/31/05

22.

Thebookvaluepershareofcommonstockis:

A.

$12.20.

B.

$12.40.

C.

$15.25.

D.

$15.50.

23.

Thebookvaluepershareofpreferredstockis:

A.

$22.

B.

$20.

C.

$11.

D.

$10.

24.

Whichofthefollowingstatementsconcerningcontingenciesiscorrect?

I.Gaincontingenciesarerecordediftheyareprobableandreasonablyestimable.

II.Unredeemedfrequentflyermileageisanexampleofalosscontingency.

III.Alosscontingencyisaformofoff-balancesheetfinancing.

IV.Losscontingenciesarenotrecognizedunlessthereisagreaterthan95%chancetheywillberealized.

A.

I,II,III,andIV

B.

II,III,andIV

C.

IIandIII

D.

IIonly

25.

Manyofthepostretirementhealthbenefitplansofferedbycompaniestotheiremployeesareunfunded,whilealloftheirpensionplanshavesomedegreeoffunding.Whichofthefollowingstatementsisfalse?

A.

Thereisnolegalrequirementtofundpostretirementhealthbenefits,buttherearelegalrequirementscoveringpensionfunding.

B.

Contributionstopensionplansarenormallytaxdeductible,butcontributionstopostretirementhealthplansarenottaxdeductible.

C.

Fundscontributedtoapensionplancanbewithdrawnatanytime,butfundscontributedtoapostretirementhealthplancannotbewithdrawnbylaw.

D.

Taxesdonothavetobepaidoninvestmentincomeearnedbyassetsinpensionplan,buttheydonormallyhavetobepaidonpostretirementhealthplans.

26.

Onewayforacompanytoincreaseitsbookvaluepershareisto:

A.

issuelong-termdebt.

B.

retirelong-termdebt.

C.

increasedividendpayoutratio.

D.

buybacksharesatmarketpricesbelowtheirbookvalue.

27.

Acompany'scurrentratiois1.5.Ifthecompanyusescashtoretirenotespayableduewithinoneyear,wouldthistransactionincreaseordecreasethecurrentratioandreturnonassetsratio?

A.

Currentratio:Increase;Returnonassets:Increase

B.

Currentratio:Increase;Returnonassets:Decrease

C.

Currentratio:Decrease;Returnonassets:Increase

D.

Currentratio:Decrease;Returnonassets:Decrease

28.

Ananalystshouldconsiderwhetheracompanyacquiredassetsthroughacapitalleaseoranoperatingleasebecauseacompanymaystructure:

A.

leasestobetreatedlikecapitalleasestoenhanceitsleverageratios.

B.

leasestobetreatedlikecapitalleasestoenhanceitscashflow.

C.

leasestobetreatedlikeoperatingleasestoloweritsdebttoequityratio.

D.

leasestobetreatedlikeoperatingleasestoenhanceitscashflow.

29.

Whichofthefollowingleaseprovisionswouldcausealeasetobeclassifiedasanoperatinglease?

A.

Theleasecontainsabargainpurchaseoption.

B.

Thecollectabilityofleasepaymentsbythelessorisunpredictable.

C.

Thetermoftheleaseismorethan75percentoftheestimatedeconomiclifeoftheleasedproperty.

D.

Thepresentvalueoftheminimumleasepaymentsequalsorexceeds90percentofthefairvalueoftheleasedproperty.

30.

OnJanuary1,acompanyenteredintoacapitalleaseresultinginanobligationof$20,000beingrecordedonthebalancesheet.Estimatedeconomiclifeoftheleasedassetistenyearswithanexpectedsalvagevalueofzeroattheendoftenyears.Thecompanywilldepreciatethisassetonastraight-linebasisoveritseconomiclife.Thelessor'simplicitinterestwas10percent.Attheendofthefirstyearofthelease,thecashflowfromfinancingactivitiessectionofthelessee'sstatementofcashflowsshowedauseofcashof$2,200applicabletothelease.Howmuchdidthecompanypaythelessorinthefirstyearofthelease?

A.

$2,000

B.

$2,200

C.

$4,200

D.

$20,000

31.

WhichofthefollowingisnotacomponentofrecognizedOPEBcost?

A.

Servicecost

B.

Amortizationofpriorservicecosts

C.

Interestcost

D.

Amortizationofpriorinterestcosts

32.

Whichofthefollowingisreportedintheequitysectionofthebalancesheet?

A.

Redeemablepreferredstock

B.

Treasurystock

C.

Investmentinaffiliates

D.

Debentures

33.

Whichofthefollowingisnotacomponentofpensionexpense?

A.

Servicecost

B.

Interestcost

C.

Actualreturnonplanassets

D.

Expectedreturnonplanassets

34.

Ifacompanyincreasesitsexpectedreturnonplanassetsthisyear,theeffectwouldbeto:

I.increaseplanassets.

II.decreasePBO.

III.decreasepensionexpense.

IV.decreaseminimumliability.

A.

I,II,andIV

B.

IandIV

C.

IIIandIV

D.

IIIonly

HarmsInc.reportedinits2006annualreportthefollowinginformation:

35.

Fundedstatusattheendof2006was:

A.

$15million.

B.

$12million.

C.

$10million.

D.

$0million.

36.

IfHarmshaddecreaseditscompensationgrowthrateto4.5%in2006,theeffectwouldhavebeen:

A.

anincreasedABO.

B.

anincreasedPBO.

C.

adecreasedABO.

D.

adecreasedPBO.

37.

Theestimatedinterestcostfor2007is:

A.

$7.95million.

B.

$7.60million.

C.

$7.36million.

D.

$7.20million.

38.

Syntheticleasesmayachieveallofthefollowingbenefitstotheborrowerexcept:

A.

window-dressthebalancesheet.

B.

increasecashflow.

C.

reducetaxexpenseontheincomestatement.

D.

increasenetincome.

39.

Aplanissaidtobeunderfunded,if:

A.

thepensionobligationismorethantheassetvalue.

B.

thepensionobligationislessthantheassetvalue.

C.

thepensionobligationisequaltotheassetvalue.

D.

Noneoftheabove

40.

Whichofthefollowingisnotanactuarialassumptionunderlyingthecomputationofthepensionobligation?

A.

Employeeturnover

B.

Lifeexpectancy

C.

Interestrate

D.

Servicecost

41.

Pensionintensityofacompanycanbemeasuredbyexpressingthepensionplanassetsandthepensionobligationseparatelyas:

A.

apercentageofitstotalliabilities.

B.

apercentageofitstotalassets.

C.

apercentageofitsnetincome.

D.

apercentageofitsshareholders'equity.

42.

Thenetdeferralsareincludedinthebalancesheetaspartof:

A.

assets.

B.

currentliabilities.

C.

shareholders'equity.

D.

long-termliabilities.

True/FalseQuestions

43.

Currentliabilitiesshouldalwaysbeexpectedtobeliquidatedwithinoneyear.

True

False

44.

Acompanywillrecordacontingentgainifthegainisprobableandreasonablyestimable.

True

False

45.

Creditorsofabusinessaremoreconcernedwiththefuturecashflowsofabusinessthanthefuturereturnonequity.

True

False

46.

Evaluatingriskoflong-termcreditors(e.g.bondholders)involvesmoredetailthanevaluatingtheriskofequityholders.

True

False

47.

Investinginequityisconsideredtobemoreriskythaninvestinginbonds.

True

False

48.

Stockholdersaretheresidualclaimantsofacompany.

True

False

49.

Acompanyissuesa$100,000,9%bondandreceives$99,000(ignoringtransactioncosts).Thisimpliesthattheeffectiveinterestrateislessthan9%.

True

False

50.

Iftheleasetermis75%ormoreoftheeconomiclifeoftheasset,theleaseneedstobeclassifiedasacapitallease.

True

False

51.

Operatingleasescaninflatebothreturnoninvestmentandassetturnoverratios.

True

False

52.

Aconvertiblebondisanequityinvestment,whichisconvertibleintobondsattheoptionoftheowneroftheconvertiblebond.

True

False

53.

Ifacompanyincreasestheamountofdebtithas,allotherthingsbeingequal,therisktotheshareholdersincreases.

True

False

54.

Acompanywhichleasesapieceofmachinery(thelessee)willrecorditasasales-typeleaseifthelessormakesaprofitonthelease.

True

False

55.

Withadefinedcontributionplantheriskofpensionfundperformancerestswiththeemployees/retireesofthecompany,whilewithadefinedbenefitplanthisriskrestswiththecompany.

True

False

56.

Manypostretirementbenefitsotherthanpensionsarenotfunded,inpartbecausetheyarenotrequiredtobefundedbylaw,unlikepensionplans.

True

False

57.

Threeelementsofpensionexpensefordefinedbenefitplansare:servicecost,interestcost,andactualreturnonplanassets.

True

False

58.

Pensionaccountingfordefinedbenefitplansrequiresthatretroactiveadjustmentstotheplan(priorservicecosts)berecognizedimmediatelyinfullinthepensionexpense.

True

False

59.

Ifacompanyincreasesitsexpectedrateofcompensationincreaseforthepurposesofcalculatingitspensionobligations,theaccumulatedbenefitobligationandtheprojectedbenefitobligationwillbothincrease.

True

False

60.

Ifacompanyincreasesitsdiscountrateforthepurposesofcalculatingitspensionobligations,theaccumulatedbenefitobligationandtheprojectedbenefitobligationwillbothdecrease.

True

False

61.

Onereasonmanycompaniesdonotfundtheirpostretirementobligationsotherthanpensionsisbecausetheyarenotrequiredtodosobylaw.

True

False

62.

Whenanalyzingpostretirementbenefits,oneshouldevaluatetheactuarialassumptionsandtheireffectsonthefinancialstatements.

True

False

63.

ActuarialgainorlossisthechangeinPBOthatoccurswhenoneormoreactuarialassumptionsarerevisedinestimatingPBO.

True

False

64.

Companiesmustreporttheeconomicpensioncostintheirfinancialstatements.

True

False

65.

Adecreaseinthegrowthrateofthefuturecompensationwillcauseanincreaseinpensioncost.

True

False

66.

Foracompanytoreportacontingentlossitshouldbeeitherprobableorreasonablyestimable.

True

False

67.

FundingofpensionplansisrequiredbyGAAP.

True

False

68.

Ifacompanyissuesnewstock,thiswillalwaysdecreasebookvaluepershare.

True

False

69.

Theparvalueofcommonstockrepresentsthepriceatwhichacompanyoffereditsstocktoinvestorswhenitmadeitsinitialpublicoffering.

True

False

70.

Ananalystshouldtreatpreferredstockonafirm'sbalancesheetasdebtwhencalculatingleverageratiosifthepreferredstockisconvertibleintocommonstock.

True

False

71.

FollowingrecentSPEabuses,anewrulerequiringaminimumof3%externalfinancingwasenacted.

True

False

72.

AnSPEinvestormaysecureitsinvestmentwithaguaranteesothattheSPEremainsunconsolidated.

True

False

73.

Anincreaseinthepensionobligationbecauseofpassageoftimeisreferredtoastheinterestcost.

True

False

74.

Companiesreportthefundedstatusofpensionplansasaseparatelineitemonthebalancesheet.

True

False

75.

Pensionriskarisestotheextenttowhichplanassetshaveadifferentriskprofilethanthepensionobligation.

True

False

EssayQuestions

76.

Leases

Comparetheeffectsofoperatingleasesascomparedtocapitalizedleases,inthefirstyearofalease,onthefollowingitemslisted.Explainyouranswer.

1.EBIT

2.Netincome

3.Returnonassets(levered)

4.Cashflowfromoperations

5.Currentratio

77.

Liabilitiesnotrecordedonbalancesheet

Youareconsideringpurchasingacompany.Youareawarethatsometimesliabilitiesdonotalwaysshowuponthebalancesheet.Givefiveexamplesofliabilitiesthatmaynotbeexplicitlyrecognizedonthebalancesheet,beingsuretoexplainwhytheyareliabilities.

78.

BookValuepershare

ThefollowinginformationwastakenfromWicom'sfinancialstatementsasofDecember31,2006.

a.Calculatebookvaluepershareofcommonstock.

b.Assumethatthecompanyalsohad$1,000,000worthofconvertiblebonds.Thebondsareconvertibleatone$1,000bondinto150sharesofstock.Therearealsostockoptionstobuy120,000sharesatapriceof$5pershare.Thestockiscurrentlytradingat$30pershare.

Recalculateyouranswertoparta)takingintoaccountdilutiveeffectsoftheabove.

79.

OperatingLeases

RetailInc.hasbothoperatingandcapitalleases.Belowisaportionofitsleasefootnotetakenfromits2006financialstatements.

a.Obtainacrudeestimateoftheremaininglengthoftheoperatingandcapitalleases.

b.Estimatetheinterestrateimplicitinthecapitalleases.

c.Computethepresentvalueoftheoperatingleases.

80.

Theeffectofleasesonfinancialratios

SomefinancialinformationaboutRetailInc.andStoreInc.isgivenbelow:

Youareaskedtoanalyzethesecompaniesandspecificallyanalyzetheimpactoftheleasesondifferentfinancialratios.

a.ComputethepresentvalueoftheleaseobligationsforRetailInc.usinganannualinterestrateof8%.Youshouldassumeallpaymentsaremadeattheendoftheyear,andallpaymentsafteryearX6areequaltothepaymentinyearX6.

b.ComputethepresentvalueoftheleaseobligationsforStoresInc.usinganannualinterestrateof8%.Youshouldassumeallpaymentsaremadeattheendoftheyear,andallpaymentsafteryearX6areequaltothepaymentinyearX6.

c.Computethetotalliabilitiestoassetratioandthelong-termdebttoassetsratioforRetailInc.fortheendofyearX1.

d.Computethetotalliabilitiestoassetratioandthelong-termdebttoassetsratioforStoresInc.fortheendofyearX1.

e.Repeatcanddandcomputethetotalliabilitiestoassetratioandthelong-termdebttoassetsratioforbothcompaniesfortheendofyearX1assumingthecompaniescapitalizetheleases.

81.

PostretirementHealthBenefits

WardenCorp.hasapostretirementhealthbenefitplanforitsemployees.AsofDecember31,2006,theaccumulatedpostretirementbenefitobligation(APBO)is$250millionandthepostretirementhealthbenefitcostfortheyearwas$23million.Theplanassetsare$10million.Wardenchosetorecognizeitsunfundedliabilityimmediately.Wardenalsohasapensionplan,whichisfullyfunded.

a.Whatreasonsaretherefortheminimalfundingofthepostretirementhealthbenefitsplansversusthefullfundingofthepensionplan?

b.In2006Wardenmakesthefollowingchanges.

•Increasesitsexpectedrateofreturnonplanassets.

•Increasestheexpectedcompensationgrowthrate.

•Increasesitsdiscountrate.

Explaintheeffectofeachoftheseon

i.economiccostasoftheendof2007.

ii.reportedcostfor2007.

82.

PensionExpense

WerterInc.hasadefinedbenefitpensionplan.Informationrelatedtothisplanasoftheendof2006isasfollows:

a.Estimatepensionexpensefor2006assumingthatthepensionplanassumptionsremainunchangedfrom2006,servicecostis10%ofbeginningofyearPBOandthatthepriorservicecostsandtransitionassetsarebeingamortizedover20years.

b.Calculatetheliabilitytoberecordedinthebalancesheetattheendoffiscal2006.

83.

Pensions

PawnCompany's2006AnnualReportincludedthefollowinginformationaboutitsdefinedbenefitpensionplan:

a.IfPawnhadincreaseditsdiscountrateto10%in2006whatwouldbetheeffectontheaccumulatedbenefitobligation,theprojectedbenefitobligation,servicecostandinterestcost?

b.Estimatetheinterestcostfor2007undertheexistingplan.

84.

Post-retirementBenefitsotherthanpensions

BelowispartofHarnischfeger'sfootnoteonPostretirementBenefitsotherthanPensionsfromitsX6Annualreport.

a.WhatamountisHarnischfegershowingasaliabilityontheirbalancesheetwithrespecttopostretirementbenefitsotherthanpensionsattheendoffiscalX6?

b.WhatamountisHarnischfegershowingasanexpenseontheincomestatementforthefiscalyearX6?

c.WhyisHarnischfeger'saccruedpostretirementbenefitliabilitygreaterthantheAPBO?

d.IfHarnischfegerwantedtoreduceitsAPBOhowmighttheydoit?Providethreeways.

85.

SpecialPurposeEntities

WhatarethefourimportantrequirementswhenstructuringavalidSPE?HowweretheyabusedbyEnron?

86.

SyntheticLeases

FollowingisselectedfinancialinformationforUniversalSkyhook:

SkyhookinstalledanewgiantforgingmachineonJanuary1,2006.Itwasfinancedasafive-yearcapitalizedleasewithyear-endpaymentsof$1,002withanimplied8%interestrate.Aftertheleaseperiod,thescrapvaluewilljustaboutcoverthecosttoremovethemachine.Skyhookhadnotaxexpensein2006andusesstraight-linedepreciationforbookandtaxpurposes.

a.Thecompanyisexaminingfinancingalternativesforanothermachineandhasreceivedasyntheticleaseproposalfromabank.Tobetterunderstandthisstructure,theCEOasksyouhowtheabove2006numberswouldhavechangedhadSkyhookusedasyntheticleasefortheforgingmachine.

b.Howwouldyouinterpretyourresultsandwhatwouldyourrecommendationbe?

c.WouldyourrecommendationchangeifSkyhookhadataxrateof36%andusedaccelerateddepreciationfortaxpurposes?

Chapter03AnalyzingFinancingActivitiesAnswerKey

MultipleChoiceQuestions

1.

Themajorityoffinancingformostcompaniescomesfromwhichofthefollowingsources?

A.

Ownersandcustomers

B.

Creditorsandcustomers

C.

Ownersandmanagers

D.

Creditorsandowners

2.

Whichofthefollowingwouldnotbefoundlistedasaliabilityonacompany'sbalancesheet?

A.

Operatingleaseobligations

B.

Capitalleaseobligations

C.

Bondspayable

D.

Taxespayable

3.

Whichofthefollowingwouldbefoundlistedasaliabilityonacompany'sbalancesheet?

A.

Operatingleaseobligations

B.

Projectedbenefitobligation

C.

Purchasecommitmentobligation

D.

Otherpostretirementemployeebenefits

4.

Whichofthefollowingisnotacriterionfordefiningaleaseasacapitallease?

A.

Ownershipistransferredattheendoftheleaseagreement.

B.

Theleasecontainsanoptiontopurchasetheassetatabargainprice.

C.

Thepresentvalueoftheleasepaymentsatthebeginningoftheleaseis75%ormorethanthevalueoftheasset.

D.

Theleasetermisatleast75%oftheeconomiclifeoftheasset.

5.

Whichofthefollowingistrueconcerningbondcovenants?

A.

Bondcovenantsarerestrictionsplacedonbondholderstoprotectrightsofequityholders.

B.

Violationofabondcovenantrequiresthatacompanydeclaresbankruptcy.

C.

Ifacompanyviolatesabondcovenant,itmeansithasfailedtomakeinterestorprincipalrepaymentsondebtinatimelymanner.

D.

Bondcovenantsarelegalrestrictionsplacedinordertominimizetheriskofdefaultonbonds.

6.

Recordingalong-termleaseasanoperatinglease,asopposedtoacapitallease,foralesseewillcausethefollowingratiostobe:

A.

OptionA

B.

OptionB

C.

OptionC

D.

OptionD

7.

Ifacompanyleasesequipmenttoothercompaniesandrecordstheseleasesasoperatingleasesratherthancapitalleases,its:

I.recordedliabilitieswillbelower.

II.re