Financial Management: Core Concepts, Third Edition

Prepping for Exams

1. A major metric of a company’s health and its prospects for a long life is how much            it can generate.

   1. cash flow

   2. depreciation

   3. tax deferral

   4. net income

2. The revenue is $24,000, the cost of goods sold is $12,000, other expenses (from selling and administration) are $6,000, and depreciation is $2,000. What is the EBIT?

   1. $12,000

   2. $6,000

   3. $4,000

   4. $2,000

3.            involve(s) a cash flow that never occurs, but we need to add it as a cost or outflow of a new project.

   1. Cost recovery of divested assets

   2. Capital expenditures

   3. Sunk costs

   4. Opportunity costs

4. Which of the statements below is true?

   1. The increase in working capital accounts necessary to support a project also provides for cost increases at the end ...