Question

5. Which of the following are items accounts that typically appear on a balance sheet? a. cost of goods sold, operating expenses, taxes. b. net sales, inventories, notes payable. e. net fixed assets, depreciation expense, advertising expenditures. d. cash, depreciation expense, taxes. e. None of the combinations listed above are correct. 6. Which of the following would directly increase net cash flow from operating activities (assuming all else remains constant)? Note: there is more be more than one answer for this question -record the letters of all answers that apply This is an all or nothing wer). a. An increase in dividends paid b. A decrease in accounts receivable. c. A decrease in notes payable (i.e., bank loans). d. An increase in inventory e. An increase in accounts payable. f. An increase in retained earnings. g. A decrease in cash. h. An increase in accruals. i. A decrease in gross plant and equipment. 7. If a firm increases its debt ratio, but total assets, net profit margin and net sales (.e., revenue) remain the same as they were before the debt ratio increased, the firm's: a. ROE would not change. b. ROE could either increase or decrease depending on the interaction between the equity multiplier and the days payable ratio. c. ROE would increase. d. ROE would decrease. e. There is insufficient information to determine the effect on ROE 8. Which of the following steps is most likely to decrease a company's cash conversion cycle (assume that none of the following actions has any impact on sales or COGS)? Note: there more be more than one answer for this questions - record the letter of all that apply (this is an all or nothing answer). a. Change its receivables policy from net 35 to net 40 (note that this action will increase the firm's average collection period from 35 days to 40 days) b. Change its payables policy to pay bills in 40 days instead of in 30 days. c. Decrease the inventory conversion period from 50 days to 40 days. d. Reduce the firm's notes payable (1.e., bank loan) balance by 20%. e. None of the actions listed above will decrease the firm's cash conversion eyele. 9. Which of the following actions would decrease the current ratio (assuming an initial current ratio of 0.8, current liabilities equal to $1,000,000)? a. Borrow $100,000 in short term debt and deposit this money (i.e., $100,000) into the firm's cash ace b. Borrow $200,000 in long-term debt to buy $200,000 worth of additional inventory. c. Borrow $50,000 of short-term debt and use the proceeds to pay all operating expenses soone lowering accruals (i.e., accrued expenses) by $50,000. d. Sell $250,000 of fixed assets to pay off an equal amount of long-term debt. e. None of the above - that is, none of the actions listed about will decrease the current ratio.

Answer 1

First 2 questions are being answered here.

1. Option (e) is correct

None of the combinations given are correct

Option (a) is incorrect as all items given are income statement items.

Option (b) is incorrect as net sales is an item of income statement

Option (c) is incorrect as depreciation expense and advertising expenditure appear in income statement.

Option (d) is incorrect as depreciation expense and tax appear in income statement.

2. Options (b), (e) and (h) are correct

A decrease in accounts receivable, an increase in accounts payable and an increase in accruals, will increase net cash flows from operating activities.