1. Profit margin provides the user with a comprehensive profit picture of a firm

Question

1. Profit margin provides the user with a comprehensive profit picture of a firm. true or false?

2. Which of the following is a source of cash?

A) Increase in accounts receivable.

B) Gain on sale of a piece of equipment.

C) a decrease in inventories.

D) a decrease in long-term debt.

3. Which of the following would appear in the operating activities sections of a statement of cash flows prepared using the direct method, but not in one prepared using the indirect method.

A) Change in accounts receivable

B) Depreciation Expense

C) Cash paid to employees

D) Change in accounts payable

E) Change in retained earnings

4. Which of the following items listed below would you subtract from Net Income to arrive at Cash Provided (Used) by operating Activities.

A) Depreciation on a delivery truck.

B) Amortization of a patent.

C) The gain arising from the sale of a new fork lift which was carried on the books at $21,500 and was sold for $26,000.

D) All of the above

E) None of the above

5. Revenue and expense accounts are nothing more than temporary accounts. true or false?

Explanation / Answer

1 Decrease in Current assets will bring cash. Decrease in Inventories will bring cash The correct option is C) A decrease in inventories 3 Cash Paid to employees is a operating cash flows It will not be shown if preapred using indirect method as it is already included in the net income The correct option is C) cash Paid to employees 4 The gain will be added to the operating income The correct option is C) The gain arising from the sale of a new fork lift which was carried on the books at $21,500 and was sold for $26,000.

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