Questions from Managerial Finance

Q: Explain why the income statement can also be called a “profit

Explain why the income statement can also be called a “profit-and-loss statement.” What exactly does the word balance mean in the title of the balance sheet? Why do we balance the two halves?

Q: Briefly describe the first four modified accelerated cost recovery system (MACRS

Briefly describe the first four modified accelerated cost recovery system (MACRS) property classes and recovery periods. Explain how the depreciation percentages are determined by using the MACRS reco...

Q: Describe the overall cash flow through the firm in terms of cash

Describe the overall cash flow through the firm in terms of cash flow from operating activities, cash flow from investment activities, and cash flow from financing activities.

Q: Explain why a decrease in cash is classified as a cash inflow

Explain why a decrease in cash is classified as a cash inflow (source) and why an increase in cash is classified as a cash outflow (use) in preparing the statement of cash flows.

Q: Why is depreciation (as well as amortization and depletion) considered

Why is depreciation (as well as amortization and depletion) considered a noncash charge?

Q: Describe the general format of the statement of cash flows. How

Describe the general format of the statement of cash flows. How are cash inflows differentiated from cash outflows on this statement?

Q: Why do we exclude interest expense from operating cash flow?

Why do we exclude interest expense from operating cash flow?

Q: Define and differentiate between a firm’s operating cash flow (OCF)

Define and differentiate between a firm’s operating cash flow (OCF) and its free cash flow (FCF).

Q: What is the difference between future value and present value? Which

What is the difference between future value and present value? Which approach is generally preferred by financial managers?

Q: What is the difference between an ordinary annuity and an annuity due

What is the difference between an ordinary annuity and an annuity due? Which is more valuable? Why?