FIN HW Questions

Which of the following is the correct representation of the total debt ratio?

(total assets - total equity)/total assets

Tremonti, Inc., is obligated to pay its creditors $9,000 during the year. a.What is the value of the shareholders' equity if assets equal $10,500? b.What is the value of the shareholders' equity if assets equal $8,100?

a. $1500 b. $0 equity = assets - liabilities

Sidewinder, Inc., has sales of $710,000, costs of $347,000, depreciation expense of $92,000, interest expense of $57,000, and a tax rate of 24 percent. What is the net income for this firm?

a. $162,640 net income = (sales - costs of goods sold - depreciation - interest) x (24%)

During the year, Belyk Paving Co. had sales of $2,515,000. Cost of goods sold, administrative and selling expenses, and depreciation expense were $1,355,000, $670,000, and $468,000, respectively. In addition, the company had an interest expense of $293,000 and a tax rate of 21 percent. (Ignore any tax loss or carryforward provision and assume interest expense is fully deductible.) a. What is the company's net income? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. What is its operating cash flow?

a. $22000 b. $490000

Common-size statements are best used for comparing: a. year-to-year for your firm b. firms of different sizes c. competitors d. firms in different industries

a. year-to-year for your firm b. firms of different sizes c. competitors

In the long-run, costs may be considered as

all variable

The short run is a period when there are ______ costs.

both fixed and variable

Uptown Markets is financed with 45 percent debt and 55 percent equity. This mixture of debt and equity is referred to as the firm's:

capital structure

Non-cash items do not affect:

cash flow

In finance, the value of a firm depends on its ability to generate ______.

cash flows

The price at which willing buyers and sellers would trade is called ______ value.

market

Which of the following is NOT one of the basic areas of finance?

personal fianance

Margie opened a used bookstore and is both the 100 percent owner and the store's manager. Which type of business entity does Margie own if she is personally liable for all the store's debts?

sole proprietorship

_____ financial statements enable one to compare firms that differ in size.

standardized

Cash flow refers to

the difference between the number of dollars that came in and the number that went out

Assets can be categorized as (select all that are appropriate)

- tangible and intangible assets - current and fixed assets

According to GAAP, when is revenue recognized on an income statement?

- when the earnings process is virtually completed - when the value of an exchange of goods or services is known or reliably determined

Which of the following are true of a sole proprietorship? (Selct all that apply.)

1. a sole proprietorship has a limited life. 2. It is one of the simplest types of businesses to form

a partnership must have at least ____ owners

2

True or false: Financial ratios are computed using only balance sheet information.

false

True or false: If there is a conflict between market and accounting data, accounting data should be given precedence. True false question.

false

True or false: Inventory turnover is sales divided by inventory.

false

Will and Bill both enjoy sunshine, water, and surfboards. Thus, the two friends decided to create a business together renting surfboards, paddle boats, and inflatable devices in California. Will and Bill will equally share in the decision making and in the business profits or losses. Which type of business did they create if they both have full personal liability for the firm's debts?

general partnership

a sole proprietorship:

has its profits taxed as personal income.

The information needed to compute the profit margin can be found on the ____

income statement

A corporation:

is a legal entity separate from its owners

Which one of the following forms of business organization offers liability protection to some of its owners but not to all of its owners?

limited partnership

Since ________ and ownership are separated, a corporation's life is unlimited.

management

Time-trend analysis is an example of

management by exception

Whenever ___________ information is available, it should be used instead of accounting data.

market

How is the price-earnings (PE) ratio computed?

market price per share/earnings per share

The price-earnings (PE) ratio is a ____ ratio.

market value

Current assets (plus/minus) current liabilities equals NWC.

minus

The balance sheet identity shows that stockholders' equity equals assets ______ liabilities.

minus

Which one of the following best explains why financial managers use a common-size balance sheet?

to track changes in a firm's capital structure

A common-size balance sheet expresses accounts as a percentage of

total assets

True or false: It is important to investigate trends in financial ratios to identify the reason for the trend. True false question.

true

True or false: The total debt ratio equals the total assets minus total equity divided total assets.

true

A sole proprietor has ______ personal liability for all business debts and obligations.

unlimited

Financial leverage refers to a firm's _________.

use of debt in its capital structure

A bad financial decision is defined as a decision that ______ shareholder wealth.

decrease

A bad financial decision is defined as a decision that ______ shareholder wealth.

decreases

The more debt a firm has, the greater its:

degree of financial leverage

Which of the following is an example of a non-cash item on an income statement?

depreciation

When a firm smooths earnings to please investors, it is called

earnings management

For the past year, Hawkeye, Inc., had a cost of goods sold of $65,382. At the end of the year, the accounts payable balance was $12,489. How long on average did it take the company to pay off its suppliers during the year?

69.72 days

Which of the following represents a use of cash? Accounts payable increases Accounts receivable increases Repurchasing stock Paying off a loan

Accounts receivable increases, Repurchasing stock, & Paying off a loan

Which one of the following applies to a general partnership?

Any one of the partners can be held solely liable for all of the partnership's debt

Sidewinder, Inc., has sales of $714,000, costs of $348,000, depreciation expense of $93,000, interest expense of $58,000, and a tax rate of 25 percent. The firm paid out $88,000 in cash dividends and has 39,000 shares of common stock outstanding. a.What is the earnings per share, or EPS, figure? b.What is the dividends per share figure?

a. $4.13 per share Earning per share =[Net income -preferred dividend if any]/Number of common shares outstanding b. $2.26 per share Dividend per share = Dividend /number of common shares outstanding

Sidewinder, Inc., has sales of $686,000, costs of $341,000, depreciation expense of $86,000, interest expense of $51,000, and a tax rate of 23 percent. The firm paid out $81,000 in cash dividends. What is the addition to retained earnings?

a. $79160 (sales - costs - dep exp) = earnings before interest & taxes (earnings before int/taxes - interest) = earnings before taxes (earnings before taxes)(tax rate) = net income (net income - dividends) = final answer

SDJ, Inc., has net working capital of $2,360, current liabilities of $5,430, and inventory of $1,220. a. What is the current ratio? b. What is the quick ratio?

a. 1.43 b. 1.21

Prepare a balance sheet for Alaskan Peach Corp. as of December 31, 2019, based on the following information: cash = $201,000; patents and copyrights = $855,000; accounts payable = $288,000; accounts receivable = $261,000; tangible net fixed assets = $5,180,000; inventory = $546,000; notes payable = $181,000; accumulated retained earnings = $4,666,000; long-term debt = $1,170,000.

chegg

The four basic areas of finance include investments, financial institutions, international finance, and _____ finance

corporate

The current ratio computes the relationship between

current assets and current liabilities

The daily financial operations of a firm are primarily controlled by managing the:

working capital

Theo's BBQ has $48,000 in current assets and $39,000 in current liabilities. Decisions related to these accounts as referred to as:

working capital management

According to GAAP, when is income reported?

When it is earned or accrued

Dove, Inc., had additions to retained earnings for the year just ended of $636,000. The firm paid out $75,000 in cash dividends, and it has ending total equity of $7.31 million. a. If the company currently has 680,000 shares of common stock outstanding, what are earnings per share? Dividends per share? What is book value per share? b. If the stock currently sells for $30.10 per share, what is the market-to-book ratio? The price-earnings ratio? c. If total sales were $10.61 million, what is the price-sales ratio?

a. 1.05 a. 0.11 a. 10.75 b. 2.80 b. 28.67 c. 1.93

A7X Corporation has ending inventory of $719,973 and cost of goods sold for the year just ended was $9,935,413. a.What is the inventory turnover? b. What is the days' sales in inventory? c.How long on average did a unit of inventory sit on the shelf before it was sold?

a. 13.8 b. 26.45 c. 26.45

Trout Lumber Yard has a current accounts receivable balance of $448,016. Credit sales for the year just ended were $9,153,500. a.What is the receivables turnover? b. What is the days' sales in receivables? c. How long did it take on average for credit customers to pay off their accounts during the past year?

a. 20.43 times b. 17.87 days c. 17.87 days

Wims, Inc., has sales of $18.8 million, total assets of $13.8 million and total debt of $4.6 million. The profit margin is 11 percent. a. What is the company's net income? b. What is the company's ROA? c. What is the company's ROE?

a. 2068000 b. 14.99% c. 22.48%

Kaleb's Karate Supply had a profit margin of 9 percent, sales of $28.2 million, and total assets of $7.7 million. a.What was the total asset turnover? b. If management set a goal of increasing total asset turnover to 3.75 times, what would the new sales figure need to be, assuming no increase in total assets?

a. 3.66 b. 28875000

Matt and Alicia created a firm that is a separate legal entity and will share ownership of that firm on a 75/25 basis. Which type of entity did they create if they have no personal liability for the firm's debts?

corporation

True or false: In a common-size income statement, each item is expressed as a percentage of total sales.

True

Which one of the following statements about a limited partnership is correct?

There must be at least one general partner

How is the inventory turnover ratio computed?

Cost of Goods Sold / Inventory

True or false: Current assets plus current liabilities equals net working capital.

False, CA - CL = NWC

Which one of the following is an advantage of being a limited partner?

Losses limited to capital invested

Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $4.9 million. The machinery can be sold to the Romulans today for $7.1 million. Klingon's current balance sheet shows net fixed assets of $3.7 million, current liabilities of $800,000, and net working capital of $139,000. If all the current accounts were liquidated today, the company would receive $915,000 cash. a. What is the book value of Klingon's total assets today? b. What is the sum of the market value of NWC and the market value of fixed assets?

a. 4639000 b. 8015000 NWC = current assets - current liabilities a. (939000 - 3700000) = 4639000 b. (915000 - 7100000) = 8015000

Which of these questions can be answered by reviewing a firm's balance sheet? Select all that apply. a. How much debt is used to finance the firm? b. How much of the firm's net income was paid out in dividends? c. What is the total amount of assets the firm owns? d. How much net income has the firm earned this period?

a. How much debt is used to finance the firm? c. What is the total amount of assets the firm owns?

Which of the following is (are) true of financial ratios? a. They are used for comparison purposes. b. They are developed from a firm's financial information. c. They always reflect market values. d. They use only balance sheet data. e. They are computed in the same manner by all firms.

a. They are used for comparison purposes b. They are developed from a firms financial information

Which of the following items are used to compute the current ratio? a. Accounts payable b. Cash c. Equipment d. Earnings

a. accounts payable b. cash

Grey Wolf, Inc., has current assets of $2,310, net fixed assets of $10,700, current liabilities of $1,420, and long-term debt of $4,120. a.What is the value of the shareholders' equity account for this firm? b.How much is the company's net working capital?

a. shareholders' equity = $7470 (2,310 + 10,700) - ( 1,420 + 4,120) b. net working capital = $890 (2,310 - 1,420)

One advantage of the corporate form of organization is the:

ability to raise larger sums of equity capital than other organizational forms

A balance sheet reflects a firm's:

accounting value on a specific date

Net earnings refers to income earned

after interest and taxes

Which of the following is the balance sheet equation?

assets = liabilities + stockholders' equity

Liquidity refers to the ease of changing

assets to cash

The December 31, 2018, balance sheet of Justin's Golf Shop, Inc., showed current assets of $1,185 and current liabilities of $955. The December 31, 2019, balance sheet showed current assets of $1,400 and current liabilities of $1,075. What was the company's 2019 change in net working capital, or NWC?

change in net working capital = $95 (Change in current assets -change in current liability) (1400-1185)-(1075-955)

Rotweiler Obedience School's December 31, 2018, balance sheet showed net fixed assets of $1,820,000, and the December 31, 2019, balance sheet showed net fixed assets of $2,230,000. The company's 2019 income statement showed a depreciation expense of $340,000. What was the company's net capital spending for 2019?

net capital spending =$750,000 increase in NFA + Depreciation = net capital spending = (2230000-1820000)+340000

The last item (or "bottom line") on the income statement is typically the

net income

Which of the following activities by a firm will increase cash? Selling stock Obtaining a loan Buying property Selling bonds

obtaining a loan, selling stock, & selling bonds

Benson, Inc., has sales of $40,280, costs of $13,200, depreciation expense of $2,750, and interest expense of $2,000. The tax rate is 25 percent. What is the operating cash flow, or OCF?

operating cash flow = $21,498

Earnings management is a controversial practice in which corporations ________ or ___________ their earnings to "smooth out" dips and surges and keep investors calm.

overstate; understate

A business without separate legal authority formed by two or more people is known as a _____.

partnership

Limited liability companies are primarily designed to:

provide limited liability while avoiding double taxation

Liquidity has two dimensions which are the ability to:

quickly convert assets into cash without significant loss in value

In a common-size income statement, each item is expressed as a percentage of total

sales

The profit margin is equal to net income divided by

sales

Capital budgeting includes the evaluation of which of the following?

size, timing, and risk of future cash flows

Physical assets are termed ______________ assets.

tangible

A shareholder's liability is limited to which of these?

the amount of shareholder invested in the corportation

The market value of an item is:

the cash value you'd get if you sold it