Financial Management: Chapter 2 Questions

The A corporation has an operating profit margin of 20%, operating expenses of $500,000, and financing costs of $15,000. Therefore

the corporation's gross profit margin is greater than 20%.

Rogue Industries reported the following items for the current year: Sales = $3,000,000; Cost of Goods Sold = $1,500,000; Depreciation Expense = $170,000; Administrative Expenses = $150,000; Interest Expense = $30,000; Marketing Expenses = $80,000; and Taxes = $300,000. Rogue's operating income is equal to

$1,100,000

Siskiyou, Inc. has total current assets of $1,200,000; total current liabilities of $500,000; and long-term assets of $800,000. How much is the firm's Total Liabilities & Equity?

$2,000,000

The Lakeside Inn had operating cash flow of $48,450. Depreciation was $6,700 and interest paid was $2,480. A net total of $2,620 was paid on long-term debt. The firm spent $24,000 on fixed assets and decreased net working capital by $1,330. What is the amount of the cash flow to stockholders?

$20,680

At the beginning of the year, a firm had current assets of $121,306 and current liabilities of $124,509. At the end of the year, the current assets were $122,418 and the current liabilities were $103,718. What is the change in net working capital?

$21,903

The income statement for Simpson, Inc. indicates that tax expense was $30,000. The balance sheet indicates that taxes payable for the same year increased by $5,000. What amount did Simpson, Inc. actually pay in taxes during this year?

$25,000

Your firm has total assets of $4,900, fixed assets of $3,200, long-term debt of $2,900, and short-term debt of $1,400. What is the amount of net working capital?

$300

A company with negative net income will also have negative operating cash flow.

False

Which one of the following statements related to an income statement is correct?

Taxes reduce both net income and operating cash flow.

Rogue Industries reported the following items for the current year: Sales = $3,000,000; Cost of Goods Sold = $1,500,000; Depreciation Expense = $170,000; Administrative Expenses = $150,000; Interest Expense = $30,000; Marketing Expenses = $80,000; and Taxes = $300,000. Rogue's net profit margin is equal to

25.67%

Given the tax rates as shown, what is the average tax rate for a firm with taxable income of $311,360? (See Picture)

33.62 percent

Rogue Industries reported the following items for the current year: Sales = $3,000,000; Cost of Goods Sold = $1,500,000; Depreciation Expense = $170,000; Administrative Expenses = $150,000; Interest Expense = $30,000; Marketing Expenses = $80,000; and Taxes = $300,000; Rogue's operating profit margin is equal to

36.67%

Rogue Industries reported the following items for the current year: Sales = $3,000,000; Cost of Goods Sold = $1,500,000; Depreciation Expense = $170,000; Administrative Expenses = $150,000; Interest Expense = $30,000; Marketing Expenses = $80,000; and Taxes = $300,000. Rogue's gross profit is equal to

$1,500,000

What is the cash flow to creditors for 2011? (See Picture)?

$432

A firm has net working 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 the total liabilities?

$5,860

Universal Financial, Inc. has total current assets of $1,200,000; long-term debt of $600,000; total current liabilities of $500,000; and long-term assets of $800,000. How much is the firm's net working capital?

$700,000

Andre's Bakery has sales of $687,000 with costs of $492,000. Interest expense is $26,000 and depreciation is $42,000. The tax rate is 35 percent. What is the net income?

$82,550

Winston Industries had sales of $843,800 and costs of $609,900. The firm paid $38,200 in interest and $18,000 in dividends. It also increased retained earnings by $62,138 for the year. The depreciation was $76,400. What is the average tax rate?

32.83 percent

Which one of the following statements related to the cash flow to creditors is correct?

A positive cash flow to creditors represents a net cash outflow from the firm.

An income statement reports a firm's cumulative revenues and expenses from the inception of the firm through the income statement date.

False

Common-sized income statements are used to compare companies that have the same amount of revenues.

False

In order to be conservative, accrual accounting requires that expenses be recorded when incurred, but revenues are recorded only after the cash has been received.

False

Intangible assets such as copyrights and goodwill are not included on the balance sheet because they are impossible to value objectively.

False

On an accrual basis income statement, revenues equal cash receipts and expenses equal cash expenditures.

False

The more debt a company uses to finance its assets, the lower will be its operating income due to higher interest expense.

False

Which one of the following must be true if a firm had a negative cash flow from assets?

The firm utilized outside funding.

Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date?

balance sheet

The two principal sources of financing for corporations are

debt and equity

For a tax-paying firm, an increase in _____ will cause the cash flow from assets to increase.

depreciation