FINA 470
The contractor building my new house has incurred costs equal to 40% of the expected $300,000 costs of his contract with me. He has billed me 50% of the contract price of $400,000. How much does my contractor recognize as revenues this year?
$160,000
At the beginning of 2019, Company A purchased a machine for a cost of $600,000. It had an estimated useful life of 10 years and estimated residual value of $50,000. Under the straight-line method, how much depreciation would the company take in 2020 for financial reporting purposes?
$55,000
Company A had revenue of $1,000,000, returns of goods sold of $100,000, cash collected of $800,000, and cost of goods sold of $700,000. Under the accrual basis of accounting, how much net revenue would be reported on its income statement?
$900,000
During the year, Columbia Water reported net income of $12 million and a weighted average of 2 million common shares outstanding. The company paid $800,000 in preferred dividends and had 100,000 options outstanding with an average exercise price of $20. Its market price averaged $25/share. What is its diluted EPS closest to?
(Net income - preferred dividends)/(weighted average number of shares outstanding + (Options outstanding - (exercise price * Options outstanding / average market price)) = $5.54
Suppose a firm pays $2,000,000 dividends in a given year ($500,000 in each quarter). Suppose its net income is $5,000,000, its market price per share is $50, and that it has 1,000,000 shares outstanding. What is the firm's earnings yield? (remember to provide your answer as a DECIMAL; e.g., if the answer is 12.3%, then write 0.123; please round your answer to three decimal points)
0.1
Suppose you have two firms in the same industry, with one (Firm A) being larger and having more market power than the other (Firm B). They both create intermediate steel products that are used by other companies. All else equal, which firm would you expect to more often have a smaller/shorter days sales outstanding?
Firm A
In the Be Our Guest case, which covenant is Be Our Guest at a significant risk of violating in the subsequent quarter?
Incur two consecutive quarters of net losses; nor incur a net loss for any fiscal year
The amount and value of patents, trademarks, and other intellectual property produced in-house has increased over the years. All else equal, what effect would this have had on the average market-to-book ratio across firms?
It would have increased
In 2017, More Vino experienced negative net income but positive net cash flow from operations. How is this possible?
Its accounts payable balance increased
Which inventory method would lead to a reduction of tax liability in periods of rising prices?
LIFO
We learned that management forecasts and earnings calls move the stock price more than an earnings announcement. Which of the following reasons would be explain this?
Management forecasts sometimes contain new information about future cash flows, which are more relevant to a firm's stock price than prior earnings
What is a potential advantage of managers paying out a larger proportion of their net income in dividends?
Managers could potentially be more disciplined and less likely to waste cash
In the Be Our Guest case, the owners were limited by financial covenants in the amount of dividends (ie, distributions) they could pay out. How were they circumventing this covenant?
They were paying the owners via G&A salaries
Which of the following best describes the role of financial statement analysis?
To form expectations about a company's future performance and financial position
In the Target-Ackman case, what is a potential reason for why WalMart had shorter days payable with its suppliers than did Target?
Walmart might have gotten lower prices for quicker payments
From the Target Ackman case, which is the most likely reason behind WalMart's sales turnover being so much quicker than Target's?
Walmart's larger share of groceries.
XYZ Corporation sold a widget to ABC Corporation for $100 on 90 day terms. At the time of the sale which of the following is not true?
XYZ does not recognize the sale until it is paid and there is no impact on either company's financial statements for 90 days.
Retained earnings represent:
accumulated undistributed earnings since inception
An example of a contra asset account is:
allowances for doubtful accounts
Money received from customers for products to be delivered in the future is recorded as:
an asset and a liability
If the owner invests personal cash in the business, then assets:
increase
If the owner invests personal cash in the business, then owner's/stockholders' equity:
increase
Which item in a 10-K provides notes to the financial statements?
item 8
Which of the following is subject to the least amount of depreciation or amortization during its useful life?
land
What is an advantage to the firm of using accelerated depreciation over straight-line depreciation?
lower tax liabilities in the near future
Information about a company's objectives, strategies, and significant risks are most likely to be found in the:
management commentary
If a company's accounts payable decreased $16,000 during the year, will the $16,000 appear as a positive or negative amount on the statement of cash flows?
negative
Using the Gordon Constant Growth Model, which of the following is not used in determining value?
net income
If the owner invests personal cash in the business, then liabilities:
no effect
Shareholders' equity reported on the balance sheet is most likely to differ from the market value of shareholders' equity because:
some factors that affect the generation of future cash flows are excluded
For Chang Dental case, which of the following was closest to the interest coverage ratio at the end of FY2005?
100x
A firm has a net income of $200, an increase in accounts receivable of $30, depreciation of $55, and a decrease in accounts payable of $25. Its operating cash flow is:
200
Resources owned by a company (such as cash, accounts receivable, vehicles) are reported on the balance sheet and are referred to as _______.
Assets
Which of the following measures the cash flow regardless of the level of debt?
FCFF
The principal objective of financial reporting is to:
Facilitate investment decisions by users outside the firm.
All else equal, in the fiscal year when long-lived equipment is purchased:
Cash flow from operating activities increases
The amount spent for capital expenditures will be reported in which section of the statement of cash flows?
Cash provided/used in investing activities
Which of the following suggests the firm is becoming more efficient with its capital from year 1 to year 2?
Collection Period from 45 days in year 1 to 40 days in year 2
Company X has a Fixed Asset Turnover ratio of 4.7x. Company Y has a fixed Asset Turnover ratio of 3.2x. Both companies are in the same industry. Which company makes the most efficient use of its fixed assets?
Company X
More Vino is planning on transitioning from wholesale (with payment terms) to retail (without). Assuming the same revenue, what effect would this most likely have on accounts receivable?
Decrease
Suppose two firms, Firm A and Firm B have the same leverage and turnover. But Firm A has a higher net margin. Which of the following statements is true?
Firm A has higher net income
Which of the following statements would be correct based on the information provided in the Ford Ratios case:
Ford is more liquid but is less solvent than its competitors
Which is the annual report to the SEC that contains the financial statements of a publicly-traded company?
Form 10-K
We discussed performing a collaterla analysis for the Chang Dental case. Which of the following would represent the least value of collateral from the bank's perspective?
Goodwill
The financial statement that reports the revenues and expenses for a period of time such as a year or a month is the:
Income statement
Which financial statement will allow you to determine the gross margin for a retailer or manufacturer?
Income statement
On December 1st a company borrowed $100,000 at 12% per year. The interest will be paid quarterly, with the first payment due on march 1st. What should the company report on its income statement for December?
Interest expense of $1000
Which field on the statement of cash flows does proceeds from the sale of equipment used in the business affect?
Investing
Which of the following statements is most correct regarding the current ratio?
Investors would prefer for non-distressed firms to have a low current ratio
In calculating the weighted average cost of capital (WACC), which is the appropriate value of equity to use?
Market value of equity
Using the following income statement, what was the company's return on average assets in FY2019?Show to only 1 decimal point, no $ or % sign or comma. Round up. (so if your answer is 65.2%, then write "65.2" Net Income 2019: 978.8 Net Income 2018: 1012.1 Total Assets 2019: 8109.0 Total Assets 2018: 8142.3
Net Income 2019/ ((Total assets 2019 + Total Assets 2018)/2) = 12.04
Which field on the statement of cash flows does depreciation expense affect?
Operating
Does the heading of a balance sheet indicate a period of time or a point in time?
Point in time
The type of stock that gets its dividend before common is ________ stock.
Preferred
Which of the following do analysts claim is most important in developing their earnings forecast and stock recommendations?
Private communication with management
A corporation's net income will cause an increase to which of the following?
Retained earnings
Under the accrual basis of accounting, revenues are reported in the accounting period when the _______.
Service or goods have been delivered
Current assets minus current liabilities is the:
Working capital
Information about management and director compensation are least likely to be found in the:
auditor's report
A company's financial position would best be evaluated using the:
balance sheet
The amounts needed to calculate a firm's working capital come from which financial statement:
balance sheet
A company issues $1 million in bonds at face value. When the bonds are issued, the company will record a:
cash inflow from financing activities
A firm is purchased for more than the fair market value of its net assets. The excess is:
considered as goodwill
Which of the following actions can a firm take to make its cash flow look better in any given year?
delay payments to its suppliers
All else equal, in the fiscal year when equipment is purchased:
depreciation expense increases
The income statement is best used to evaluate a company's:
financial results from business activities
Which of the following is not a current asset?
property, plant, and equipment
The initial measurement of goodwill is most likely affected by:
the acquisition's purchase price
The recognition of revenue on the income statement is a function of:
when cash is earned
If sales is $8 million, and net working capital turnover is 5.0, then what is the value for net working capital?
$1.6 million
Suppose the total revenue for 2019 was $9,497.3, and the total revenue for 2018 was $9,545.7. Suppose the net income for 2019 was $978.8 and the net income for 2018 was $1,012.1. Suppose the total assets at the end of 2019 was $8,109.0 and the total assets at the end of 2018 was $8,142.3. The company had an interest expense of $120.2 in 2019 and of $145.6 in 2018. The company had an income tax expense of $218.4 in 2019 and of $215.7 in 2018. Assume a 21% corporate tax. What was the company's return on average assets in FY2019? (provide your answer as a decimal to three decimal places; therefore, if the answer is 12.3%, then write 0.123)
0.132
Which of the following presents your financial statement on an unaudited basis:
10-Q
During a recent year, a company's inventory balance averaged $100,000; its sales were $500,000; and its cost of goods sold was $400,000. The company's inventory turnover ratio for that year was __________ times.
4
Assume net income for a firm is $1,000,000. Assume its average number of common shares outstanding was 100,000. It has no preferred dividends or preferred shares. It does have a certain number of options that it has given to employees, all with a strike price of $750. The average market price over the year is $2,000. If diluted EPS is $8, then how many options outstanding are there under the treasury method of calculation? (just write the number of options, so if you think the correct answer is 12,345 options, then write 12,345)
40,000
During a recent year, a company had an average inventory balance of $100,000; its sales were $500,000; and its cost of goods sold was $400,000. Using a 360-day year, the days' sales in inventory for the year averaged __________ days.
90
Your company acquires a new manufacturing equipment line for $10,000. The economic life in 10 years and the Salvage Value is $1,000 at the end of 10 year period. If you elect to use Straight Line Depreciation, what is the depreciation amount you will recognize in year 3? (No decimals, commas, $ signs, etc.)
900
