FIN Ch 2

Tucker Electronic System's current balance sheet shows total common equity of $3,125,000. The company has 125,000 shares of stock outstanding, and they sell at a price of $52.50 per share. By how much do the firm's market and book values per share differ? Select one: a. $27.50 b. $28.88 c. $30.32 d. $31.83 e. $33.43

a. $27.50

Which of the following statements is CORRECT? Select one: a. A typical industrial company's balance sheet lists the firm's assets that will be converted to cash first, and then goes on down to list the firm's longest lived assets last. b. The balance sheet for a given year is designed to give us an idea of what happened to the firm during that year. c. The balance sheet for a given year tells us how much money the company earned during that year. d. The difference between the total assets reported on the balance sheet and the debts reported on this statement tells us the current market value of the stockholders' equity, assuming the statements are prepared in accordance with generally accepted accounting principles (GAAP). e. For most companies, the market value of the stock equals the book value of the stock as reported on the balance sheet.

a. A typical industrial company's balance sheet lists the firm's assets that will be converted to cash first, and then goes on down to list the firm's longest lived assets last.

On 12/31/2020, Heaton Industries Inc. reported retained earnings of $675,000 on its balance sheet, and it reported that it had $172,500 of net income during the year. On its previous balance sheet, at 12/31/2019, the company had reported $555,000 of retained earnings. No shares were repurchased during 20205. How much in dividends did Heaton pay during 2020? Select one: a. $47,381 b. $49,875 c. $52,500 d. $55,125 e. $57,881

c. $52,500

Which of the following statements is CORRECT? Select one: a. The statement of cash needs tells us how much cash the firm will require during some future period, generally a month or a year. b. The four most important financial statements provided in the annual report are the balance sheet, income statement, cash budget, and the statement of stockholders' equity. c. The balance sheet gives us a picture of the firm's financial position at a point in time. d. The income statement gives us a picture of the firm's financial position at a point in time. e. The statement of cash flows tells us how much cash the firm has in the form of currency and demand deposits.

c. The balance sheet gives us a picture of the firm's financial position at a point in time.

Analysts following Armstrong Products recently noted that the company's net cash flow from operations increased over the prior year, yet cash as reported on the balance sheet decreased. Which of the following factors could explain this situation? Select one: a. The company issued new long-term debt. b. The company cut its dividend. c. The company made a large investment in a profitable new plant. d. The company sold a division and received cash in return. e. The company issued new common stock.

c. The company made a large investment in a profitable new plant.

Below are the year-end balance sheets for Wolken Enterprises: Assets: 2020 2019 Cash $ 200,000 $ 170,000 Accounts receivable 864,000 700,000 Inventories 2,000,000 1,400,000 Total current assets $3,064,000 $2,270,000 Net fixed assets 6,000,000 5,600,000 Total assets $9,064,000 $7,870,000 Liabilities and equity: Accounts payable $1,400,000 $1,090,000 Notes payable 1,600,000 1,800,000 Total current liabilities $3,000,000 $2,890,000 Long-term debt 2,400,000 2,400,000 Common stock 3,000,000 2,000,000 Retained earnings 664,000 580,000 Total common equity $3,664,000 $2,580,000 Total liabilities and equity $9,064,000 $7,870,000 Wolken has never paid a dividend on its common stock, and it issued $2,400,000 of 10-year non-callable, long-term debt in 2019. As of the end of 2020, none of the principal on this debt had been repaid. Assume that the company's sales in 2019 and 2020 were the same. Which of the following statements must be CORRECT? Select one: a. Wolken increased its short-term bank debt in 2020. b. Wolken issued long-term debt in 2020. c. Wolken issued new common stock in 2020. d. Wolken repurchased some common stock in 2020. e. Wolken had negative net income in 2020.

c. Wolken issued new common stock in 2020.

Which of the following items is NOT included in current assets? Select one: a. Short-term, highly liquid, marketable securities. b. Accounts receivable. c. Inventory. d. Bonds. e. Cash.

d. Bonds.

Other things held constant, which of the following actions would increase the amount of cash on a company's balance sheet? Select one: a. The company purchases a new piece of equipment. b. The company repurchases common stock. c. The company pays a dividend. d. The company issues new common stock. e. The company gives customers more time to pay their bills.

d. The company issues new common stock.

Which of the following items cannot be found on a firm's balance sheet under current liabilities? Select one: a. Accrued payroll taxes. b. Accounts payable. c. Short-term notes payable to the bank. d. Accrued wages. e. Cost of goods sold.

e. Cost of goods sold.

Which of the following statements is CORRECT? Select one: a. Depreciation and amortization are not cash charges, so neither of them has an effect on a firm's reported profits. b. The more depreciation a firm reports, the higher its tax bill, other things held constant. c. People sometimes talk about the firm's net cash provided (used) by operations, which is shown as the lowest entry on the income statement, hence it is often called "the bottom line." d. Depreciation reduces a firm's cash balance, so an increase in depreciation would normally lead to a reduction in the firm's net cash flow. e. Net cash provided (used) by operations is often defined as follows:Net cash flow provided (used) by operations = Net Income + Noncash Adjustments + Working Capital Adjustments.

e. Net cash provided (used) by operations is often defined as follows:Net cash flow provided (used) by operations = Net Income + Noncash Adjustments + Working Capital Adjustments.