FIN 301 HW 2

A firm's liquidity level decreases when: inventory is purchased with cash. inventory is sold on credit. inventory is sold for cash. an account receivable is collected. proceeds from a long-term loan are received.

inventory is purchased with cash.

Net working capital increases when: fixed assets are purchased for cash. inventory is purchased on credit. inventory is sold at cost. a credit customer pays for his or her purchase. inventory is sold at a profit.

inventory is sold at a profit.

The market value: of accounts receivable is generally higher than the book value of those receivables. of an asset tends to provide a better guide to the actual worth of that asset than does the book value. of fixed assets will always exceed the book value of those assets. of an asset is reflected in the balance sheet. of an asset is lowered each year by the amount of depreciation expensed for that asset

of an asset tends to provide a better guide to the actual worth of that asset than does the book value.

Red's Tractors owes $52,311 in taxes on a taxable income of $608,606. The company has determined that it will owe $56,211 in tax if its taxable income rises to $620,424. What is the marginal tax rate at this level of income? 39 percent 38 percent 35 percent 34 percent 33 percent

Marginal tax rate = ($56,211 -52,311)/($620,424-608,606) = .33, or 33 percent

Andre's Dog House had current assets of $67,200 and current liabilities of $71,100 last year. This year, the current assets are $82,600 and the current liabilities are $85,100. The depreciation expense for the past year is $9,600 and the interest paid is $8,700. What is the amount of the change in net working capital? -$2,800 -$1,400 $1,400 $2,100 $2,800

Change in net working capital = ($82,600 -85,100) - ($67,200 -71,100) = $1,400

Dockside Warehouse has net working capital of $42,400, total assets of $519,300, and net fixed assets of $380,200. What is the value of the current liabilities? $61,700 $88,40000 $102,900 $96,700 $111,500

Current liabilities = $519,300 -380,200 -42,400 = $96,700

Wes Motors has total assets of $98,300, net working capital of $11,300, owners' equity of $41,600, and long-term debt of $38,600. What is the value of the current assets? $21,600 $18,100 $28,900 $29,400 $6,800

Current liabilities = $98,300-38,600 -41,600 = $18,100 Current assets = $11,300 + 18,100 = $29,400 Value is $29,400

An increase in which one of the following will increase operating cash flow for a profitable, tax-paying firm? Fixed expenses Marginal tax rate Net capital spending Inventory Depreciation

Depreciation

The Pretzel Factory has net sales of $821,300 and costs of $698,500. The depreciation expense is $28,400 and the interest paid is $8,400. What is the amount of the firm's operating cash flow if the tax rate is 34 percent? $87,620 $89,540 $91,220 $93,560 $95,240

EBIT = $821,300 -698,500 -28,400 = $94,400 Tax = ($94,400 -8,400) ×.34 = $29,240 OCF = $94,400 + 28,400 -29,240 = $93,560

The balance sheet of a firm shows beginning net fixed assets of $348,200 and ending net fixed assets of $371,920. The depreciation expense for the year is $46,080 and the interest expense is $11,460. What is the amount of the net capital spending? -$22,360 -$4,780 $23,720 $58,340 $69,800

Net capital spending = $371,920 -348,200 + 46,080 = $69,800

The Embroidery Shoppe had beginning retained earnings of $18,670. During the year, the company reported sales of $83,490, costs of $68,407, depreciation of $8,200, dividends of $950, and interest paid of $478. The tax rate is 34 percent. What is the retained earnings balance at the end of the year? $21,947.30 $22,193.95 $22,233.24 $23,783.24 $21,883.25

Net income = ($83,490 -68,407 -8,200 -478) ×(1 -.34) = $4,227.30 Ending retained earnings = $18,670 + 4,227.30-950 = $21,947.30

Which one of the following is included in the market value of a firm but not in the book value? Raw materials Partially built inventory Long-term debt Reputation of the firm Value of a partially depreciated machine

Reputation of the firm