FIN 301 Practice Exam I

Hinojosa Music has projected annual net income of $272,600, of which 28 percent will be distributed as dividends. The company will sell $75,000 worth of common stock. What will be the cash flow to stockholders if the tax rate is 21 percent?

$1,328

Yarratu Signs has sales of $84,300 net income of $16,860, total assets of $421,500, and total debt of $168,600. Assets and costs are proportional to sales. Debt and equity are not. No dividends or taxes are paid. Next year's sales are projected to be $90,201. What is the amount of the external financing needed?

$11,465

Cookies by Casey has sales of $487,000 with costs of $263,000. Interest expense is $26,000 and depreciation is $42,000. The tax rate is 21 percent. What is the net income?

$123,240

Wommack Interiors had beginning long-term debt of $51,207 and ending long-term debt of $36,714. The beginning and ending total debt balances were $59,513 and $42,612, respectively. The interest paid was $2,808. What is the amount of the cash flow to creditors?

$17,301

The Paper Mill is operating at full capacity. Assets, costs, and current liabilities vary directly with sales. The dividend payout ratio is constant. The firm has sales of $42,700, net income of $5,500, total assets of $48,900, current liabilities of $3,650, long-term debt of $18,100, owners' equity of $27,150, and dividends of $1,925. What is the external financing need if sales increase by 14 percent?

$2,260

Randall's Bakery has sales of $42,000 and a net profit margin of 5.8 percent. The firm estimates that sales will increase by 4.5 percent next year and that all costs will vary in direct relationship to sales. What is the pro forma net income?

$2,545.62

Herrera Corporation has total sales of $3,110,400 and costs of $2,776,000. Depreciation is $258,000 and the tax rate is 21 percent. The firm is all-equity financed. What is the operating cash flow?

$318,356

Khadimally, Incorporated, expects sales of $763,500 next year. The net profit margin is 5.3 percent and the firm has a dividend payout ratio of 18 percent. What is the projected increase in retained earnings?

$33,181.71

Barnett Saddlery had beginning net fixed assets of $218,470 and ending net fixed assets of $209,411. During the year, assets with a book value of $6,943 were sold. Depreciation for the year was $42,822. What is the amount of net capital spending?

$33,763

Krauss Upholstery purchased all of its fixed assets three years ago for $4 million. These assets can be sold today for $2 million. The current balance sheet shows net fixed assets of $2,500,000, current liabilities of $1,375,000, and net working capital of $725,000. If all the current assets were liquidated today, the company would receive $1.9 million in cash. The book value of the total assets today is ________ and the market value of those assets is ________.

$4,600,000; $3,900,000

Lewis & Price Corporation paid $700 in dividends and $320 in interest this past year. Common stock remained constant at $6,800 and retained earnings decreased by $180. What is the net income for the year?

$520

The balance sheet of Perez Printing shows $680 in inventory, $2,140 in fixed assets, $210 in accounts receivables, $250 in accounts payable, and $80 in cash. How much net working capital does the company have?

$720

Shen & Sanchez Engineering is an all-equity firm that has net income of $96,200, depreciation expense of $6,300, and an increase in net working capital of $2,800. What is the amount of the net cash from operating activity?

$99,700

The retention ratio can be computed as:

1 − (Cash dividends/Net income).

Oldie's Vintage has sales of $4,300, net income of $320, total assets of $4,800, and total equity of $2,950. Interest expense is $65. What is the common-size statement value of the interest expense?

1.51%

Brusewitz Drilling has annual sales of $96,700, a net profit margin of 7.45 percent, and a payout ratio of 40 percent. The firm has $11,500 of debt and owners' equity of $31,200. What is the internal growth rate for this firm assuming the payout ratio remains constant?

11.26%

Fierro Fitness had sales of $3,340, net income of $274, net fixed assets of $2,600, and current assets of $920. The firm has $430 in inventory. When evaluating last year's performance, what is the common-size statement value of inventory?

12.22%

Humphries has cash of $10,000, accounts receivable of $2,500, accounts payable of $900, and inventory of $1,200. What is the value of the quick ratio?

13.89

Nielsen's has annual sales of $352,400 and a net profit margin of 5.2 percent. The firm has beginning owners' equity of $136,400 and ending owners' equity of $139,900. The firm neither sold nor repurchased shares during the year. What is the firm's retention ratio?

19.10%

Wood Recovery has sales of $397,000, total assets of $225,000, and total debt of $101,700 million. The net profit margin is 6.2 percent. What is the return on equity?

19.96%

Based on the tax table below, what is the average tax rate for a sole proprietor with taxable income of $155,000? Ignore any standard or itemized deductions.

20.18%

Sweet Home Bakery has a return on assets of 10.9 percent, a return on equity of 16.7 percent, and a retention ratio of 40 percent. What is its sustainable growth rate?

7.16%

Campos Restaurant Supply has a return on assets of 9 percent, a return on equity of 11.3 percent, and a payout ratio of 22 percent. What is its internal growth rate?

7.55%

Halabi's Market has annual sales of $813,200, total debt of $171,000, total equity of $396,000, and a net profit margin of 5.78 percent. What is the return on assets?

8.29%

Hamner Time has sales of $122,000, costs of $54,600, depreciation of $32,800, interest of $12,000, and a tax rate of 21 percent. The firm has total assets of $422,900, long-term debt of $146,800, and current liabilities of $65,200. What is the return on equity?

8.47%

Which one of the following accounts is the most liquid?

Accounts Receivable

Which one of the following statements related to corporate income taxes is correct?

Corporations pay the same rate of taxes regardless of the amount of taxable income.

Which one of the following is a source of cash?

Decrease in inventory

Which one of the following is a disadvantage of the corporate form of business?

Distributed profits may experience double taxation.

Which of the following questions should be considered when developing a corporation's financial plan? I. How much net working capital will be needed? II. Will additional fixed assets be required? III. Will dividends be paid to shareholders? IV. How much new debt must be obtained?

I, II, III, and IV

Which one of the following financial statements summarizes a firm's revenue and expenses during a period of time?

Income statement

Which one of the following is correct in relation to pro forma statements?

The addition to retained earnings is equal to net income less cash dividends.

In a typical corporate organizational structure:

The controller reports to the chief financial officer.

Which one of the following involves a working capital management decision?

What is the maximum level of cash to be kept in the firm's bank account?

Deciding which long-term investment a firm should make is a ______ decision.

capital budgeting

A firm's mixture of debt and equity financing is the result of its ______ decisions.

capital structure

The cash flow that is available for distribution to a corporation's creditors and stockholders is called the:

cash flow from assets.

Agency problems are most likely to be associated with:

corporations.

Net working capital is defined as:

current assets minus current liabilities.

A firm's external financing need is met by:

debt and/or equity.

According to the statement of cash flows, an increase in inventory will ______ the cash flow from ______ activities.

decrease; operating

When developing a common-size balance sheet to evaluate last year's performance, all accounts are expressed as a percentage of:

last year's total assets.

The Sarbanes-Oxley Act of 2002 is a governmental response to:

management greed and abuses.

A firm's ______ is the firm's mix of short-term assets and short-term liabilities.

net working capital

A sole proprietorship:

requires the owner to be personally responsible for all of the company's debts.

Financial managers should primarily focus on the interests of:

shareholders.

During the year, the accounts payable of a company rose from $115,200 to $134,300. This change represents a:

source of $19,100 of cash as an operating activity.

The sources and uses of cash over a stated period of time are reflected on the:

statement of cash flows

Activities of a firm that require the spending of cash are known as:

uses of cash

When constructing a pro forma statement, net working capital generally:

varies proportionally with sales.