test 1

scranton shipyards has $11 m in total invested operating capital and its WACC is 10%.

$1,300,000

kwok enterprises has the following income statement. how much after tax operating incoming-- also referred to as ebit (1-tau) -- does the firm have?

$120 (ebit * tax rate)

brown fashion inc's december 31, 2014 balance sheet showed total common equity of $4,050,000 and 290,000 shares of stock outstanding. During 2015, the firm had $450,000 of net income and it paid out $100,000 as dividends. what was brown's book value per share at 12/31/15 assuming no common stock was either issued or retired during 2015?

$15.17

vasudevan inc recently reported earnings before interest and taxes (ebit) of $5.35 m and depreciation expense of $1.2 m . the firm reports a tax rate of 40%. the firm's cash spending on fixed assets and net operating working capital together totaled $0.6 m . how much was its free cash flow in millions?

$3.81

hayes corporation has $300 m of common equity, with 6 m shares of common stock outstanding. if hayes market value added is $198 m what is the company's stock price

$83.00

byrd lumber has 2 m shares of common stock outstanding that sell for $17 a share. if the company has $49 m of common equity on its balance sheet, what is the company's market value added?

-15,000,000

hoagland corps stock price at the end of last year was $48.50 and its book value per share was $25.00. what was its market to book ratio?

1.94

change corp. has $375,000 of assets and it uses only common equity capital (zero debt). its sales for the last year were $520,000 and its net income was $25,000. stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15%. what profit margin would the firm need in order to achieve the 15% ROE, holding everything else constant?

11.03% 25,000 / 375,000

song corps stock price at the end of last year was $16.75 and its earnings per share for the year were $1.30. what was its P/E ratio?

12.88

Herring corp has operating income of $235,000 and a 40% tax rate. the firm has short term debt of $115,000, long term debt of $321,000 and common equity of $436,000. what is its return on invested capital?

16.17%

precision aviation had a profit margin of 8%, a total assets turnover of 1.5 and an equity multiplier of 1.8. what was the firm's ROE

21.60%

prezas companys balance sheet showed total assets of $3,250.its current liabilities of $1825 consisted of $925 of accounts payable, $600 of 6% short term notes payable to the bank and $250 of accrued wages and taxes. what was its net operating working capital

3250-1825+600=2025

rao construction recently reported $20 million of sales and $12.6 million of operating expenses. Operating expenses are calculated before depreciation and interest expense. rao had $3 million of depreciation. it also had $8.5 million of bonds outstanding that carry a 7.0% interest rate, its federal-plus-state income tax rate was 40%. what was rao's pre-tax operating income or earnings before interest and taxes in millions?

4.4

river corp's total assets at the end of last year were $480,000 and its net income was $32,750. what was its return on total assets?

6.82% 32,750/480,000

which of the following is a primary transaction?

IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker

which of the following statements is correct

a time line used for cash-flow analysis is not meaningful unless all cash flows occur annually

select the correct tern

all are incorrect

useful types of financial ration analysis include

all are useful industry comparison analysis, benchmark analysis trend analysis

which of the following is a weakness of using ratio analysis to evaluate a firm?

all of the above except d no set standard on ratios, ratios implicitly assume linearity, management may engage in window dressing

considered alone, with no indirect or follow on effects, which of the following would increase a company current ratio?

an increase in accounts receivable

which of the following statements is correct

bond covenants are designed to protect bondholders and to reduce potential conflicts between stockholders and bondholders

which of the following items are not normally considered to be a current asset?

bonds

which of the following statements is correct?

c. it is usually easier to transfer ownership in a corporation than in a partnership

which of the following actions do not reduce potential conflicts of interest between stockholders and bondholders

compensate managers with stock options instead of cash

a disadvantage of the corporate form of organization is that the corporate stockholders are more exposed to personal liabilities in the event of bankruptcy than are investors in a typical partnership

f

if a stock's market price is above its intrinsic value, then the stock can be thought of as being undervalued, and it would be a good buy

f

to maximize the shareholders value, a firm's management must attempt to maximize the expected earnings per share in the current year

f

hazel inc had the following data for 2014: net income $600. after tax operating income (ebit (1-tau)=$700 and total assets $2000.)

idk

which of the following statements is correct, all else held constant?

if a firm increases its sales while holding its inventories constant, then its inventory turnover ratio (i.e. sales/inventories) will increase

which of the following statements is correct

if a firm is more profitable than most other firms, we would normally expect to see its book value per share exceed its stock price, especially after several years of high inflation

a firm's president wants to strengthen the company's financial position. which of the following actions would make it financially stronger?

increase earnings before interest and taxes while holding sales and total assets constant

which one of the following mechanisms would be the most likely to help motivate managers to act in the best interest of the shareholders?

increase the proportion of excutive compensation that comes from stock options relative to the proportion that is paid as cash salaries

other things held constant, which of the following actions would increase the amount of cash on a company's balance sheet

issue new common stock

the primary operating goal of a publicly-owned firm interested in serving its stockholders should be

maximize the stock price per share over the long run, which is the stock's intrinsic value

which of the following actions would increase a firm's quick ratio?

offer price reduction and generous credit terms that would 1 enable the firm to sell some of its excuses inventory and 2 lead to an increase in accounts receivable

which of the following statements is correct

one drawback of forming a corporation is that it generally subjects the firm to additional regulations

If a firm's fixed assets turnover ratio is significantly higher than its industry average, this could indicate that it uses its fixed assets very efficiently or is operating at over capacity and should probably add fixed assets.

t

a stock markets price would equal its intrinsic value if all investors had all the information that is available about the stock. in this case the stock's market price would equal its intrinsic value

t

if you decide to buy 100 shares of google, you would probably do so by calling your broker and asking him to execute the trade for you. this would be defined as a secondary market transaction, not a primary transaction

t

in finance, we are generally more interested in cash flows than in accounting profits. free cash flow is calculated as after tax operating income (ebit x (1-tau)) plus depreciation expense less the sun of capital expenditures and changes in net operating working capital

t

other things held constant, the more debt a firm uses, the lower its return on total assets will be

t

proprietorship, limited liability corporations, and c-corporations are business structures that are essentially legal classifications for doing business in a state

t

starting to invest early for retirement increases the benefits of compound interest

t

the advantage of the basic earning power ratio over the return on total assets for focusing on a company operating efficiency is that the BEP is designed so as to exclude the effects debt and taxes have on returns

t

the more capital a firm is likely to require, the greater the probability that it will be organized as a c-corporation

t

the statement of cash flows has four main sections, one each for operating, investing, and financing activities, and one that shows a summary of the cash and cash equivalents at the end of the year

t

analysts who follow howe industries recently noted that, relative to the previous year, the company's net cash provided from operations increased, yet cash as reported on the balance sheet decreased. which of the following factors could explain this situation?

the company made large investments in fixed assets

which of the following factors could explain why michigan energy's cash balance increased even though it had a negative cash flow from operations last year?

the company sold a new issue of bonds

which of the following would indicate an improvement in a company's financial position, holding other things constant?

the current ratio and quick ratio both increase

common equity section of timeless technology

the firm issued common stock in 2015

which of the following statements about the statements of cash flows is correct

the statement of cash flows shows (among other things) how much the firm's cash-- the total of currency, bank deposits, and short term liquid securities (or cash equivalents)-- increased or decreased during a given year

which of the following statements is correct

~ conflicts can exist between stockholders and managers, but potential conflicts are reduced by the possibility of hostile takeovers