Fin 355

The least problems encountered when comparing the financial statements of one firm with those of another firm occur when the firms:

have the same fiscal year-end.

You Save Bank has a unique account. If you deposit $8,000 today, the bank will pay you an annual interest rate of 3 percent for 5 years, 3.6 percent for 4 years, and 4.3 percent for 8 years. How much will you have in your account in 17 years?

$14,962.00

Last year, Bad Tattoo Co. had additions to retained earnings of $5,715 on sales of $98,255. The company had costs of $77,535, dividends of $3,640, and interest expense of $2,920. If the tax rate was 40 percent, what the depreciation expense?

$2,208

One year ago, the Jenkins Family Fun Center deposited $5,300 into an investment account for the purpose of buying new equipment four years from today. Today, they are adding another $7,100 to this account. They plan on making a final deposit of $9,300 to the account next year. How much will be available when they are ready to buy the equipment, assuming they earn a rate of return of 8 percent?

$29,162.23

Mo will receive a perpetuity of $16,000 per year forever, while Curly will receive the same annual payment for the next 35 years. If the interest rate is 6 percent, how much more are Mo's payments worth?

$34,694.72

Your grandparents would like to establish a trust fund that will pay you and your heirs $115,000 per year forever with the first payment 8 years from today. If the trust fund earns an annual return of 2.2 percent, how much must your grandparents deposit today?

$4,488,682.52

Gerritt wants to buy a car that costs $30,000. The interest rate on his loan is 5.59 percent compounded monthly and the loan is for 7 years. What are his monthly payments?

$432.38

Beatrice invests $1,430 in an account that pays 5 percent simple interest. How much more could she have earned over a 6-year period if the interest had been compounded annually?

$57.34

Both you and your older brother would like to have $25,500 in 10 in years. Because of your success in this class, you feel that you are a more savvy investor than your brother and will be able to earn an annual return of 11.5 percent compared to your brother's 10.4 percent. How much less than your brother will you have to deposit today?

$894.89

Your parents are giving you $215 a month for 4 years while you are in college. At an interest rate of .35 percent per month, what are these payments worth to you when you first start college?

$9,484.46

You have just started a new job and plan to save $5,400 per year for 32 years until you retire. You will make your first deposit in one year. How much will you have when you retire if you earn an annual interest rate of 9.26 percent?

$933,751.77

You find the following financial information about a company: net working capital = $897; fixed assets = $5,769; total assets = $8,382; and long-term debt = $4,437. What are the company's total liabilities?

6153

A firm has sales of $1,030, net income of $207, net fixed assets of $506, and current assets of $262. The firm has $82 in inventory. What is the common-size balance sheet value of inventory?

10.68%

Teddy's Pillows had beginning net fixed assets of $465 and ending net fixed assets of $538. Assets valued at $313 were sold during the year. Depreciation was $30. What is the amount of net capital spending?

103

A firm has a return on equity of 23 percent. The total asset turnover is 3.1 and the profit margin is 5 percent. The total equity is $6,200. What is the net income?

1426

Your credit card company charges you 1.26 percent per month. What is the EAR on your credit card?

16.21%

Weston's has sales of $38,900, net income of $2,400, total assets of $43,100, and total equity of $24,700. Interest expense is $830. What is the common-size statement value of the interest expense?

2.13 percent

Bob bought some land costing $15,840. Today, that same land is valued at $45,717. How long has Bob owned this land if the price of land has been increasing at 5 percent per year?

21.72 years

Jupiter Explorers has $8,600 in sales. The profit margin is 4 percent. There are 4,300 shares of stock outstanding, with a price of $1.90 per share. What is the company's price-earnings ratio?

23.75 times

What is the average tax rate for a firm with taxable income of $121,513?

25.22%

One year ago, you invested $2,700. Today, it is worth $3,500. What rate of interest did you earn?

29.63 percent

Southwest Co. has equipment with a book value of $3,560 that could be sold today for $3,900. Its inventory is valued at $1,780 and could be sold immediately to a competitor at a discount of 25 percent. The firm has $260 in cash and customers owe the firm $950, of which 98 percent is collectible. What is the current market value of the firm's assets?

6426

Rousey, Inc., had a cash flow to creditors of $16,830 and a cash flow to stockholders of $7,370 over the past year. The company also had net fixed assets of $49,630 at the beginning of the year and $57,040 at the end of the year. Additionally, the company had a depreciation expense of $12,180 and an operating cash flow of $50,935. What was the change in net working capital during the year?

7145

The Green Giant has a 7 percent profit margin and a 38 percent dividend payout ratio. The total asset turnover is 1.3 times and the equity multiplier is 1.4 times. What is the sustainable rate of growth?

8.58%

In the accounting statement of cash flows, which one of these is calculated by adding back noncash expenses to net income and adjusting for changes in current assets and liabilities?

Cash flow from operations

You would like to compare your firm's cost structure to that of your competitors. However, your competitors are much larger in size than your firm. Which one of these would best enable you to compare costs across your industry?

Common-size income statement

Given a stated interest rate, which form of compounding will yield the highest effective rate of interest?

Continuous compounding

Which one of these statements is correct concerning the time value of money?

Decreasing the PV decreases the FV.

An increase in which one of the following will cause the operating cash flow to increase for a profitable firm?

Depreciation

If you sell an asset, you are most apt to receive which value for that asset?

Market value

The basic regulatory framework for the public trading of securities in the United States was provided by the:

Securities Act of 1933 and the Securities Exchange Act of 1934.

What rate of return should be used to compute the NPV of a proposed purchase of Smiley's, an operating business?

The discount rate applicable to other investments with similar risks

Which one of the following statements concerning a sole proprietorship is correct?

The owner may be forced to sell his/her personal assets to pay company debts.

Binder and Sons borrowed $138,000 for three years from their local bank and now they are paying monthly payments that include both principal and interest. Paying off debt by making instalment payments, such as this firm is doing, is referred to as

amortizing the debt.

Ratios that measure how efficiently a firm uses its assets to generate sales are known as _______ ratios.

asset management

The treasurer and the controller of a corporation generally report to the:

chief financial officer.

Accounting profits and cash flows are generally:

different because of GAAP rules regarding the recognition of income.

Capital spending is equal to:

ending net fixed assets minus beginning net fixed assets plus depreciation.

An annuity stream of cash flow payments is a set of:

equal cash flows occurring at equal periods of time over a fixed length of time.

The financial statement summarizing a firm's accounting performance over a period of time is the:

income statement

One of the reasons why cash flow analysis is popular is because:

it is difficult to manipulate, or spin the cash flows.

balance sheet

liabilites+ stockholders equity

Financial managers should primarily strive to:

maximize the current value per share of existing stock.

Which account is least apt to vary directly with sales?

notes a

Stock options granted to a corporation's managers are primarily designed to:

reduce agency costs.

accounting income

revenue- expenses

The maximum rate at which a firm can grow while maintaining a constant debt-equity ratio is best defined by its:

sustainable rate of growth.

A firm starts its year with positive net working capital. During the year, the firm acquires more short-term debt than it does short-term assets. This means that:

the ending net working capital can be positive, negative, or equal to zero.

internal growth rate

the maximum growth rate a firm can achieve without external financing of any kind, using funds within the business such as retained earnings.

Financial planning models are most apt to omit:

the timing, risk, and size of the cash flows.

At the beginning of the year, a firm had total assets of $51,400, fixed assets of $32,800, and current liabilities of $13,280. At the end of the year, the current assets are $14,800, the fixed assets are $34,100, and the current liabilities are $14,210. What is the change in net working capital for the year?

−$4,730