Finance 320 Chapters 1 and 2

A business owned by a solitary individual who has unlimited liability for its debt is called

sole proprietorship

A firm has a networking capital of $640. Long term debt is $4,180, total assets are $6,230, and fixed assets are $3,910. What is the amount of total liabilities?

Total Assets - fixed assets = total current assets 6,230 - 3,910 = 2,320 Current Assets - current liabilities = NWC 2,320 - x = 640 solve for x current liabilities = 1,680 current liabilities + long term debt = total liabilities 1,680 + 4,180 = 5,860

Which one of the following accounts is the most liquid?

Accounts recievable

What statement related to liquidity is correct?

Liquid assets are valuable to a firm

BFI has sales of $546,000, costs of $295,000, depreciation expense of $37,000, interest expense of $15,000, and a tax rate of 32%. The firm paid $59,000 in cash dividends. What is the addition to retained earnings?

Net income = (sales-costs-depreciation- interest)(tax) (546,000- 295,000-37,000-15,000)(1-.32)= 135,320 Addition to Retained Earnings: Net income - what the firm paid 135,320-59,000 = 76,320

What best states the primary goal of financial management?

maximize the current value per share

What is a financial statement that shows the accounting value of a firm's equity at a particular date?

Balance Sheet

Suppose you are given the following information for Bayside Bakery: Sales = $30,000; costs = $15,000; addition to retained earnings = $4,221; dividends paid = $469; interest expense = $1,300; tax rate = 30% What is the amount of the depreciation expense?

Depreciation = Sales - Costs - EBIT net income = dividends paid + addition to Retained earnings 469+ 4,221 = 4,690 EBT= net income/ taxes 4,690/(1-.30)= 6,700 EBIT = EBT + interest expense 6,700+ 1,300 = 8,000 Depreciation = 30,000 - 15,000 - 8,000 = 7,000

Kaylor equipment rental paid $75 in dividends and $511 in interest expense. The addition to Retained earnings is $418 and net new equity is $500. The tax rate is 35%. Sales are $15,900 and depreciation is $680. What are the EBIT?

EBIT = EBT + interest expense net income 75 + 418 = 493 EBT= 493/(1-.35) = 758.46 EBIT= 758.46 + 511 = 1,269.46

A firm has a common stock of $96, paid-in-surplus of $330, total liabilities of $440, current assets of $450, and fixed assets of $660. What is the amount of shareholders equity?

Shareholders equity = current assets + fixed assets - total liabilities 450 + 660 - 440 = 670

What is defined as a firm's short-term assets and its short-term liabilities?

Working Capital

A stakeholder is

any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of a firm

What is not included in cash flow from assets?

interest expense