QUIZ 8 Finance 3824

What is the cash flow to creditors for 2011? -$1,020 -$1,100 $280 $1,580 $1,760

$1,580 Net new borrowing = $1,100 − $2,400= -$1,300 Cash flow to creditors = 280 - (-$1,300) = $1,580

A firm has a debt-equity ratio of 57 percent, a total asset turnover of 1.12, and a profit margin of 4.9 percent. The total equity is $511,640. What is the amount of the net income? $28,079 $35,143 $44,084 $47,601 $52,418

$44,084 Return on equity = .049 × 1.12 × (1 + 0.57) = .0861616 Net income = $511,640 × .0861616 = $44,084

Which one of the following must be true if a firm had a negative cash flow from assets? The firm borrowed money. The firm acquired new fixed assets. The firm had a net loss for the period. The firm utilized outside funding. Newly issued shares of stock were sold.

The firm utilized outside funding.

The cash flow of a firm which is available for distribution to the firm's creditors and stockholders is called the: operating cash flow. net capital spending. net working capital. cash flow from assets. cash flow to stockholders.

cash flow from assets.

Which one of the following will increase the cash flow from assets, all else equal? decrease in cash flow to stockholders decrease in operating cash flow increase in the change in net working capital decrease in cash flow to creditors decrease in net capital spending

decrease in net capital spending

If a firm produces a twelve percent return on assets and also a twelve percent return on equity, then the firm: may have short-term, but not long-term debt. is using its assets as efficiently as possible. has no net working capital. has a debt-equity ratio of 1.0. has an equity multiplier of 1.0.

has an equity multiplier of 1.0.

Dandelion Fields has a Tobin's Q of .96. The replacement cost of the firm's assets is $225,000 and the market value of the firm's debt is $101,000. The firm has 20,000 shares of stock outstanding and a book value per share of $2.09. What is the market to book ratio? 2.75 times 3.18 times 3.54 times 4.01 times 4.20 times

2.75 times

Beach Wear has current liabilities of $350,000, a quick ratio of 1.65, inventory turnover of 3.2, and a current ratio of 2.9. What is the cost of goods sold? $980,000 $1,060,000 $1,200,000 $1,400,000 $1,560,000

$1,400,000 Current assets = 2.9 × $350,000 = $1,015,000 ($1,015,000 - Inventory)/$350,000 = 1.65; Inventory = $437,500 Costs of goods sold = 3.2 × $437,500 = $1,400,000

Uptown Men's Wear has accounts payable of $2,214, inventory of $7,950, cash of $1,263, fixed assets of $8,400, accounts receivable of $3,907, and long-term debt of $4,200. What is the value of the net working capital to total assets ratio? 0.31 0.42 0.47 0.51 0.56

0.51 Net working capital to total assets = ($1,263 + $3,907 + $7,950 - $2,214)/($1,263 + $3,907 + $7,950 + $8,400) = 0.51

Lancaster Toys has a profit margin of 7.5 percent, a total asset turnover of 1.71, and a return on equity of 21.01 percent. What is the debt-equity ratio? 0.42 0.64 0.66 0.72 0.78

0.64 Equity multiplier = .2101/(.075 × 1.71) = 1.638 Debt-equity ratio = 1.638 - 1 = 0.638

The Dockside Inn has net income for the most recent year of $8,450. The tax rate was 35 percent. The firm paid $1,300 in total interest expense and deducted $1,900 in depreciation expense. What was the cash coverage ratio for the year? 10.48 times 11.48 times 12.39 times 12.46 times 13.07 times

12.46 times Earnings before taxes = $8,450/(1 - .35) = $13,000.00 Earnings before interest, taxes, and depreciation = $13,000.00 + $1,300 + $1,900 = $16,200.00 Cash coverage ratio = $16,200.00/$1,300 = 12.46 times

The Flower Shoppe has accounts receivable of $3,506, inventory of $4,407, sales of $218,640, and cost of goods sold of $169,290. How many days does it take the firm to sell its inventory and collect the payment on the sale assuming that all sales are on credit? 14.67 days 15.35 days 16.23 days 17.18 days 17.47 days

15.35 days Days in inventory = 365/($169,290/$4,407) = 9.502 days Days' sales in receivables = 365/($218,640/$3,506) = 5.853 days Total days in inventory and receivables = 9.502 + 5.853 = 15.35 days

The Bike Shop paid $1,990 in interest and $1,850 in dividends last year. The times interest earned ratio is 2.2 and the depreciation expense is $520. What is the value of the cash coverage ratio? 1.67 1.80 2.21 2.46 2.52

2.46 EBIT = 2.2 × $1,990 = $4,378; Cash coverage ratio = ($4,378 + $520)/$1,990 = 2.46

Crandall Oil has total sales of $1,349,800 and costs of $903,500. Depreciation is $42,700 and the tax rate is 34 percent. The firm does not have any interest expense. What is the operating cash flow? $129,152 $171,852 $179,924 $281,417 $309,076

$309,076 Earnings before interest and taxes = $1,349,800 − $903,500 − $42,700 = $403,600 Tax = $403,600 × .34 = $137,224 Operating cash flow = $403,600 + $42,700 − $137,224 = $309,076

Dee's has a fixed asset turnover rate of 1.12 and a total asset turnover rate of 0.91. Sam's has a fixed asset turnover rate of 1.15 and a total asset turnover rate of 0.88. Both companies have similar operations. Based on this information, Dee's must be doing which one of the following? utilizing its fixed assets more efficiently than Sam's utilizing its total assets more efficiently than Sam's generating $1 in sales for every $1.12 in net fixed assets generating $1.12 in net income for every $1 in net fixed assets maintaining the same level of current assets as Sam's

utilizing its total assets more efficiently than Sam's

What is the cash flow from assets for 2011? $1,230 $1,580 $1,770 $1,810 $1,980

$1,580 Operating cash flow = ($6,423 - $4,109 - $122) + $122 - $670 = $1,644 Net capital spending = $4,123 − $4,006 + $122 = $239 Change in net working capital = ($313 + $1,162 + $1,521 − $1,051) - ($250 + $1,092 + $1,495 − $717) = -$175 Cash flow from assets = $1,644 − $239 - (-$175) = $1,580

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? $5,100 $7,830 $18,020 $19,998 $20,680

$20,680 Cash flow from assets = $48,450 - (-$1,330) − $24,000 = $25,780 Cash flow to creditors = $2,480 - (-$2,620) = $5,100 Cash flow to stockholders = $25,780 − $5,100 = $20,680

Lassiter Industries has annual sales of $220,000 with 10,000 shares of stock outstanding. The firm has a profit margin of 6 percent and a price-sales ratio of 1.20. What is the firm's price-earnings ratio? 14 16 18 20 22

20 Price per share = 1.20 × ($220,000/10,000) = $26.40 Earnings per share = ($220,000 × .06)/10,000 = $1.32 Price-earnings ratio = $26.40/$1.32 = 20

Shareholders probably have the most interest in which one of the following sets of ratios? return on assets and profit margin long-term debt and times interest earned price-earnings and debt-equity market-to-book and times interest earned return on equity and price-earnings

return on equity and price-earnings

Webster World has sales of $12,900, costs of $5,800, depreciation expense of $1,100, and interest expense of $700. What is the operating cash flow if the tax rate is 32 percent? $4,704 $5,749 $5,404 $7,036 $7,100

$5,404 Earnings before interest and taxes = $12,900 - $5,800 - $1,100 = $6,000 Taxable income = $6,000 - $700 = $5,300 Tax = .32($5,300) = $1,696 Operating cash flow = $6,000 + $1,100 - $1,696 = $5,404

Gladstone Pavers has a long-term debt ratio of 0.6 and a current ratio of 1.6. Current liabilities are $700, sales are $4,440, the profit margin is 9.5 percent, and the return on equity is 19.5 percent. How much does the firm have in net fixed assets? $4,880.18 $4,987.69 $5,666.67 $5,848.15 $6,107.70

$4,987.69 Current assets = 1.6 × $700 = $1,120 Net income = .095 × $4,440 = $421.80 Total equity = $421.80/.195 = $2,163.0769 0.6 = Long term debt/(Long-term debt + $2,163.0769); Long-term debt = $3,244.6153 Total debt = $700 + $3,244.6153 = $3,944.6153 Total assets = $3,944.6153 + $2,163.0769 = $6,107.6922 Net fixed assets = $6,107.6922 - $1,120 = $4,987.69

A firm has a debt-total asset ratio of 74 percent and a return on total assets of 13 percent. What is the return on equity? 26 percent 50 percent 65 percent 84 percent 135 percent

50 percent

Which one of the following accurately describes the three parts of the Du Pont identity? operating efficiency, equity multiplier, and profitability ratio financial leverage, operating efficiency, and profitability ratio equity multiplier, profit margin, and total asset turnover debt-equity ratio, capital intensity ratio, and profit margin return on assets, profit margin, and equity multiplier

equity multiplier, profit margin, and total asset turnover

Which one of the following statements related to the cash flow to creditors is correct? f the cash flow to creditors is positive then the firm must have borrowed more money than it repaid. If the cash flow to creditors is negative then the firm must have a negative cash flow from assets. A positive cash flow to creditors represents a net cash outflow from the firm. A positive cash flow to creditors means that a firm has increased its long-term debt. If the cash flow to creditors is zero, then a firm has no long-term debt.

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

Net capital spending: is equal to ending net fixed assets minus beginning net fixed assets. is equal to zero if the decrease in the net fixed assets is equal to the depreciation expense. reflects the net changes in total assets over a stated period of time. is equivalent to the cash flow from assets minus the operating cash flow minus the change in net working capital. is equal to the net change in the current accounts.

is equal to zero if the decrease in the net fixed assets is equal to the depreciation expense.