Q11. Compared with firms that expense costs, firms that capitalize costs can be expected to report: A) higher asset levels and lower equity levels in the early years of the asset's life. B) lower asset levels and higher equity levels in the early years of the asset's life. C) higher asset levels and higher equity levels in the early years of the asset's life.
Q12. Ironman Nutrition has traditionally followed a conservative policy of expensing most costs. However, the new CFO is an advocate of capitalization. During a meeting with company executives he explains that compared to expensing, capitalization is least likely to result in: A) lower debt to equity ratio. B) greater initial return on assets. C) higher net cash flows.
Q13. A firm that capitalizes rather than expensing costs will have: A) lower cash flows from operations. B) lower profitability in the earlier years. C) lower cash flows from investing.
Q14. Train, Inc.’s cash flow from operations (CFO) in 2004 was $14 million. Train paid $8 million cash to acquire a franchise at the beginning of 2004 that was expensed in 2004. If Train had elected to amortize the cost of the franchise over eight years, 2004 cash flow from operations (CFO) would have been: A) unchanged. B) $21 million. C) $22 million.
Q15. Which of the following statements regarding capitalizing versus expensing costs is least accurate? A) Total cash flow is higher with capitalization than expensing. B) Capitalization results in higher profitability initially. C) Cash flow from investing is higher with expensing than with capitalization.
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发表于 2009-1-19 10:10
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