Financial Management Midterm Review

What are the four financial statements that all public companies must produce?

1. Balance Sheet 2. Income Statement 3. Statement of Cash Flows 4. Statement of Stockholder's Equity

What is the role of an auditor in financial statement analysis?

1. To ensure that the annual financial statements are prepared accurately. 2. To ensure that the annual financial statements are prepared according to GAAP. 3. To verify that the information used in preparing the annual financial statements is reliable.

Which of the following balance sheet equations is INCORRECT?

Assets - Current Liabilities = Long Term Liabilities

Zoe Dental Implements has gross property, plant and equipment totaling $1.4 million, depreciation expense this year of $200,000, and accumulated depreciation of $750,000. What is the book value of Zoe's property, plant and equipment?

Book value = $1,400,000 - $750,000 = $650,000

Which of the following is an example of an intangible asset?

Brand names and trademarks Patents Customer relationships All of the above are intangible assets.

Zoe Dental Implements has gross property, plant and equipment totaling $1.4 million, depreciation expense this year of $200,000, and accumulated depreciation last year of $550,000. What is Zoe's net property, plant and equipment?

Ending Accumulated Depreciation = $550,000 + $200,000 = $750,000. Net PP&E = $1,400,000 - $750,000 = $650,000

Perrigo's enterprise value is closest to:

Enterprise Value = MV Equity + Debt - Cash = $39.2 × 91.33 + $845.01 - $257.09 = $4168.06

Debt for calculating Enterprise Valie

Long term debt + current maturities of long term debt + note payable/short term debt

Perrigo's market capitalization is closest to: had a share price of $39.20. They had 91.33 million shares outstanding

Market cap = price × shares outstanding = $39.2 × 91.33 million = $3580.14 million

Perrigo's book value of equity is closest to:

Market to Book = (MV Equity)/(BV Equity) = ($39.2 × 91.33 million)/(BV Equity) = 3.76; BV Equity = $952.16 million.

If ECE's stock is currently trading at $24.00 and ECE has 25 million shares outstanding, then ECE's market-to-book ratio is closest to: Shareholder Equity = $100 million

Market to Book = (MV Equity)/(BV Equity) = ($24 × 25 million)/100 million = 6.0

Which of the following is NOT a financial statement that every public company is required to produce?

Statement of Sources and Uses of Cash

Which of the following statements regarding the balance sheet is INCORRECT?

The balance sheet reports liabilities on the left hand side.

Which of the following statements regarding the income statement is INCORRECT?

The income statement shows the earnings and expenses at a given point in time.

Gross profit is calculated as:

Total sales - cost of sales

Dustin's Donuts experienced a decrease in the value of the trademark of a company it acquired two years ago. This reduction in value results in:

an impairment charge

The third party who checks annual financial statements to ensure that they are prepared according to GAAP and verifies that the information reported is reliable is the:

auditor

The statement of financial position is also known as the

balance sheet

The firm's assets and liabilities at a given point in time are reported on the firm's:

balance sheet or statement of financial position

Cash is a:

current asset.

Net Working Capital (NWC)

current assets - current liabilities

Accounts payable is a:

current liability

On the balance sheet, current maturities of long-term debt appears:

in the Current Liabilities section

On the balance sheet, short-term debt appears:

in the Current Liabilities section

A 30 year mortgage loan is a:

long-term liability