AGB Exam 2

C

Al's Sport Store has sales of $897,400, cost of goods sold of $628,300, inventory of $208,400, and accounts receivables of $74,100. What is average holding period in days (rounded number)? Assume 365 days as working days. a. 75 days b. 85 days c. 122 days d. 139 days e. 152 days

30000 * .40 (diffrence between new % and normal. 100 - 60= 40

Earnings before interest and taxes (EBIT) are projected to be $30,000 if economic conditions are normal. If there is a recession, then EBIT will be 60% lower. Calculate EBIT

30000 * 1.30

Earnings before interest and taxes (EBIT) are projected to be $30,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. Calculate EBIT for expasion

break even

FC / P - VC

ROE

Financial leverage helps increase _____ at the time of expansion

Return on assets ratio

Net Income after taxes + Interest(1-mtr) / Total Assets

Return on equity ratio

Net Profit / Owners Equity

Asset Turnover Ratio

Net Sales / Net total assets Net total assets = Total assets - depreciation

E

Net working capital is defined as: a. Total liabilities minus shareholders' equity b. Current liabilities minus shareholder's equity c. fixed assets minus long-term liabilities d. total assets minus total liabilities e. Current assets minus current liabilities

New considered debt issue / market price of outstanding shares

By issuing debt, Big Ben's Buffet can buy back how many shares?

Inventory Turnover

COGS / Ending Inventory

C

Your grandmother has promised to give you $5,000 when you graduate from college. She is expecting you to graduate two years from now. What happens to the present value of this gift if you delay your graduation by one year and graduate three years from now? a.Remains constant b.Increases c.Decreases d.Becomes negative e.Cannot be determined from the given information

Quick Ratio

(Current Assets - Inventory) / Current liabilities

EPS after proprsed change in captial structure

EPS - (New considered debt issue * Interest rate) * difference from tax rate and 100%

E

A firm has net working capital of $640. Long- term debt of $4,180, total assets are $6,230, and fixed assets are $3,910. What is the amount of the total liabilities? a. $2,050 b. $2,690 c. $4,130 d. $5,590 e. $5,860

Receivables Turnover

Credit Sales / Accounts Receivables

Current Ratio

Current Assets / Current Liabilities

Number of days to collection (365)

Days in period / Receivable Turnover Ratio

EPS

EBIT * (Difference from tax rate and 100%)

Times interest earned ratio

EBIT / Total Interest Expense

D

Russell's Deli has cash of $136, accounts receivables of $95, accounts payable of $210, and inventory of $409. What is the value of the quick ratio? a. 0.31 b. 0.53 c.0.71 d. 1.10 e. 1.07

Municipal Bonds

The following are the sources of equity finance for agriculture cooperatives, except(2 Points) a.Preferred Stock b.Membership Certificates c.Deferred Patronage refunds d.Municipal Bonds e.Revolving Fund Financing

Market Value / Shares Outstanding

The market price of the outstanding shares of Big Ben's Buffet, based on the current market value of the company, is

Debt-Equity Ratio

Total Debt / Owners Equity

B

Tracy invested $1,000 five years ago and earns 4 percent interest on her investment. By leaving her interest earnings in her account, she increases the amount of interest she earns each year. The way she is handling her interest income is referred to as which one of the following? a.Simplifying b.Compounding c.Aggregation d.Accumulation e.Discounting

C

You are comparing two investment options that each pay 5 percent interest, compounded annually. Both options will provide you with $12,000 of income. Option A pays three annual payments starting with $2,000 the first year followed by two annual payments of $5,000 each. Option B pays three annual payments of $4,000 each. Which one of the following statements is correct given these two investment options? a.Both options are of equal value given that they both provide $12,000 of income b.Option A has the higher value at the end of year three. c.Option B has a higher present value at time zero than does option A. d.Option A is annuity.

B

You have justreceived notification that you have won the $1.4 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday, 78 years from now. The appropriate discount rate is 8 percent. What is the present value of your winnings? a.$3,288 b.$3,460 c.$5,310 d.$13,333 e.$25,000