Q1. For firms that expense rather than capitalize costs, which of the following statements is least accurate? A) Net cash flows are the same regardless of which method is used. B) Higher debt/equity and debt/assets will occur because of lower asset and equity levels. C) Lower ROA and ROE will occur because of higher asset and equity levels in the early years.
Q2. Meyer Investment Advisory and Smith Brothers Investments are operationally identical except that Meyer capitalizes some costs that Smith expenses. Compared to Smith, Meyer is likely to have: A) higher debt/equity ratio and higher debt/assets ratio. B) higher cash flows from operations and lower cash flow from investing. C) lower profitability (ROA & ROE) in early years and higher in later years.
Q3. The management of Berger Investments has changed their policy and will capitalize some costs instead of expensing them. Due to the new policy, Berger will: A) report a smooth income pattern initially, but income variability will increase over time. B) have smoother reported income over time. C) have lower income variability as it grows, but the variability will increase as the firm matures.
Q4. Which of the following statements regarding firms that capitalize versus expense costs is least accurate? A) Marketing costs related directly to sales are capitalized. B) Cash flow from financing is the same whether costs are capitalized or expensed. C) Firms that capitalize costs initially have lower profitability ratios compared to expensing firms.
Q5. When comparing capitalizing versus expensing costs which of the following statements is most accurate? A) Capitalizing costs creates higher cash flows from operations and lower cash flows from investing. B) Expensing costs creates lower cash flows from operations and lower cash flows from investing. C) Capitalizing costs creates lower cash flows from operations and higher cash flows from investing.
Q6. Compared to firms that expense costs, firms that capitalize expenses will have:
A) higher leverage ratios. B) lower income variablity. C) lower cash flow from operations.
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发表于 2009-1-19 10:06
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thank you
