Finance 350
which of the following items are used to compute current ratio? - accounts payable -Earnings - Equipment - Cash
-Accounts Payable - cash
If net income is 77 million dollars, depreciation is 13 million dollars, and deferred taxes are 2 million dollars, what is the cash flow from operating activities
92 million
How many tax brackets are their for forms of business other than corporations
>1
What is depreciation?
A systematic expensing of an asset based on the asset's estimated life
EBITDA
EBITDA/sales
Depreciation is the accountants estimate of the cost of _____ used up in the production process
Equipment
Asset Turnover
Sales/Total Assets
Balance Sheet
an accountant snapshot of a firms accounting value on a particular date, as though the firm stood momentarily still
Accounts receivable
are amounts not yet collected from eh customers for goods and services sold to them.
Fixed assets
are the least liquid kind of assets
current assets
are the most liquid and include cash and assets that will be turned into cash within a year from the date of the balance sheet
The cash flow identity states that cash flows from _____ should equal cash flows to creditors and equity investors.
assets
On the balance sheet, assets are listed at their ______ value
book
it is difficult to manipulate _______
cash-flow statement
The cash flows from financing activities include changes in?
common stock; long-term debt
cash flow analysis is popular because?
it is harder to spin and mislead
Changes in capital spending can be negative when the acquisition of fixed assets is ____ the sale of fixed assets
less than
EPS
net income/shares outstanding
Taxes
one of the largest cash outflows a firm experiences
Operating cash flow reflects on what
tax payments
Quick Ratio (Acid Test)
(Current Assets - Inventory) / Current Liabilities
what is the debt equity ratio for a company with $3.5 million in total assets and $1.4 million in equity?
1. 3.5-1.4=2.1 2. 2.1/1.4= 1.50 equation= assets-equity/equity
Rock corporation has current assets of $45 million, total liabilities and equity of $67 million. how would current assets be expressed on a common-size balance sheet
45/67= 67%
Which of the following are included in cash flow from investing activities? -Acquisition of fixed assets -Sales of fixed assets - Depreciation -Retirement of long-term debt
Acquisition of fixed assets; sales of fixed assets
Cash Ratio
Cash / Current Liabilities
Which of the following calculates cash flow from the operations
EBIT + Depreciation - Taxes
Times Interest Earned
EBIT/ interest expense
Enterprise Value Multiples
EV/EBITDA
Enterprise Value
Market Capitalization + Debt - Cash
if the acquisition of fixed assets is $10,000,000 and the sales of fixed assets is $15,000,000, capital spending will be:
Negative
Return on Equity
Net Income/Total Equity
int eh U.S., taxes on proprietorships and partnerships follow which type of system after passage of the Tax Cuts and Jobs Act of 2017
Progressive
Common-size statements are best used for comparing firms with differing ________
Sizes
An official accounting statement that helps to explain the change in cash and cash equivalents is called the ______.
Statements of Cash flow
Assets equal
liabilities + stockholders equity
Market to Book Ratio
market value per share/book value per share
Income Statement
measures performance over a specific period
Return on Assets
net income/average total assets
profit margin
net income/net sales
Liquidity
the ease with which an asset can be converted into the economy's medium of exchange
Market Value
the price at which willing buyers and sellers would trade the assets
a common size balance sheet expresses accounts as a percentage of ________
total assets
Financial managers use a common-size income statement to determine ________
which cost are rising or falling as a percentage of sales
Alpha Manufacturing has interest expense of $12 million, total assets of $184 million, sales of $176 million, long-term debt of $16.4 million, and net income of $15 million. How will interest expense be recorded in the common-size income statement?
$12 million / $176 million = 6.52 %
Cash Coverage Ratio
(EBIT + Depreciation) / Interest
Total Debt Ratio
(Total Assets - Total Equity) / Total Assets
which of the following are traditional financial ratio categories? - Turnover ratio - Real options ratios - Liquidity ratios - Employee ratios - Financial leverage ratios
- Turnover ratios - Liquidity ratios - financial leverage ratios
which of the following will change fixed assets? - Buying a new machine -issuing new bonds - Selling a plant - Amortizing goodwill
Buying a new machine; selling a plant
Changes in notes payable are included in the _____ section of the accounting statement of cash flow?
Financing
Receivables Turnover
Sales / Accounts Receivable
What is treasury stock?
Stock the firm has repurchased
intangible assets
assets that do not have physical existence but can be very valuable Example. Trade mark or the value of a patent
Inventory Turnover Ratio
cost of goods sold/average inventory
the cash flow identity states that cash flow from assets equal cash flows to
creditors and stockholders
the current ratio computes the relationship between _________
current assets and current liabilities
Current Ratio
current assets divided by current liabilities
Principle of GAAP:
dictates that revenue be matched with expenses
deferred taxes
difference between accounting income and true taxable income
Selling a firms plant and equipment results in a change in _______
fixed assets
Statement of Cash Flows
helps explain the change in accounting cash and equivalents
Tangible fixed assets
include property, plant, and equipment
when a firm pays out fewer dividend, it_______ the accounting value of its retained earnings
increases
Inventory
is composed of raw materials to be used in production, work in process, and finished goods.
which of the following are examples of financial activities ? -Federal tax payments - Net payments to owners - net payments to creditors -Interest expense to payments
net payments to owners; net payments to creditors
Net capital spending is equal to ending net fixed assets minus beginning net fixed assets_______
plus depreciation
Market Capitalization
price per share x shares outstanding
PE Ratio
price per share/earnings per share
revenue
recognized on an income statement when the earning process is virtually completed and an exchange of Goods and Services has occurred
Depreciation
reflects the accountant's estimate of the cost of equipment used up in the production process
income equals
revenue- Expenses
Cash flow from operations is calculated by adding depreciation to EBIT and ______ current taxes
subtracting
what is the most important item that can be extracted from financial statements?
the firms actual cash flow
Who owns treasury stock?
the issuer of the stock
Short Run vs. Long Run Costs
the period in which certain equipment, resources, and commitments of the firm are fixed. But the time is long enough for the firm to vary its output by using more labor and raw materials. For the other all cost are variable
net capital spending is equal to the change in net fixed assets plus:
Depreciation
a one-time profit from an asset sale makes it________ to compare financial statement.
Difficult