FIN 3060

Uptown Markets is financed with 45 percent debt and 55 percent equity. This mixture of debt and equity is referred to as the firm's:

capital structure

Which one of the following is a capital structure decision?

establishing the preferred debt-equity level

A firm has a current ratio of 1.4 and a quick ratio of .9. Given this, you know for certain that the firm:

has positive net working capital

CF to Creditors

interest paid - net new borrowing

Quick Ratio

(Current Assets - Inventory) / Current Liabilities

Cash Coverage Ratio

(EBIT + depreciation) / interest payments

Total Debt Ratio

(Total Assets - Total Equity) / Total Assets

The December 31, 2018, balance sheet of Whelan, Inc., showed $120,000 in the common stock account and $2,289,000 in the additional paid-in surplus account. The December 31, 2019, balance sheet showed $137,000 and $2,568,000 in the same two accounts, respectively. If the company paid out $149,500 in cash dividends during 2019, what was the cash flow to stockholders for the year?

-146,500

A company has $1,364 in inventory, $4,809 in net fixed assets, $652 in accounts receivable, $290 in cash, $610 in accounts payable, and $5,404 in equity. What is the company's long-term debt?

1101

A firm has $744 in inventory, $1,415 in fixed assets, $499 in accounts receivable, $273 in net working capital, and $153 in cash. What is the amount of current liabilities?

1123

Croc Gator Removal has a profit margin of 10 percent, total asset turnover of 1.06, and ROE of 14.4 percent. What is this firm's debt-equity ratio?

0.36 Explanation: We can use the DuPont identity and solve for the equity multiplier. With the equity multiplier we can find the debt-equity ratio. Doing so we find: ROE = (Profit margin)(Total asset turnover)(Equity multiplier) .1440 = (.10)(1.06)(Equity multiplier) Equity multiplier = 1.36 Now using the equation for the equity multiplier, we get: Equity multiplier = 1 + Debt-equity ratio 1.36 = 1 + Debt-equity ratio Debt-equity ratio = .36

A firm has sales of $1,050, net income of $209, net fixed assets of $510, and current assets of $266. The firm has $84 in inventory. What is the common-size balance sheet value of inventory?

10.82%

Teddy's Pillows had beginning net fixed assets of $476 and ending net fixed assets of $560. Assets valued at $324 were sold during the year. Depreciation was $52. What is the amount of net capital spending?

136

Sidewinder, Inc., has sales of $634,000, costs of $328,000, depreciation expense of $73,000, interest expense of $38,000, and a tax rate of 21 percent. What is the net income for this firm?

154,050

Benson, Inc., has sales of $38,530, costs of $12,750, depreciation expense of $2,550, and interest expense of $1,850. The tax rate is 21 percent. What is the operating cash flow, or OCF?

21,290

The tax rates for a particular year are shown below: Taxable Income Tax Rate $0 - 50,000 15 % 50,001 - 75,000 25 % 75,001 - 100,000 34 % 100,001 - 335,000 39 % What is the average tax rate for a firm with taxable income of $124,513?

25.55%

Disturbed, Inc., had the following operating results for the past year: sales = $22,609; depreciation = $1,410; interest expense = $1,136; costs = $16,540. The tax rate for the year was 40 percent. What was the company's operating cash flow?

4660

Levine, Inc., has an ROA of 7.4 percent and a payout ratio of 25 percent. What is its internal growth rate?

5.88% Explanation: To find the internal growth rate, we need the plowback, or retention, ratio. The plowback ratio is: b = 1 - Payout ratio b = 1 - .25 b = .75 Now we can use the internal growth rate equation to find: Internal growth rate = [(ROA)(b)]/[1 - (ROA)(b)] Internal growth rate = [.074(.75)]/[1 - .074(.75)] Internal growth rate = .0588, or 5.88%

Mario's Home Systems has sales of $2,820, costs of goods sold of $2,160, inventory of $504, and accounts receivable of $430. How many days, on average, does it take Mario's to sell its inventory?

85.17 days

The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict?

Agency

Duela Dent is single and had $189,000 in taxable income. Use the rates from Table 2.3. a. What is the average tax rate? b. What is the marginal tax rate?

Avg. tax rate= 22.31 marginal=32

Current Ratio

CA/CL

Cash Ratio

Cash / Current Liabilities

CF to Shareholders

Dividends - Net New Equity Raised

Which one of the following statements is correct?

NASDAQ has more listed stocks than does the NYSE.

eps

Net Income / # of Shares Outstanding

The sustainable growth rate is defined as the maximum rate at which a firm can grow given which of the following conditions?

No new external equity and a constant debt-equity ratio

Net Income

Revenues - Expenses

Grey Wolf, Inc., has current assets of $2,090, net fixed assets of $9,830, current liabilities of $1,710, and long-term debt of $4,520. a. What is the value of the shareholders' equity account for this firm? b. How much is net working capital?

Shareholder's Equity= 5,690 NWC=380

Capital budgeting includes the evaluation of which of the following?

Size, timing, and risk of future cash flows

Debt to Equity Ratio

Total Debt/Total Equity

Which one of the following statements is correct?

The primary purpose of the NYSE is to match buyers with sellers

Bello, Inc., has a total debt ratio of .68. a. What is its debt-equity ratio? b. What is its equity multiplier?

a. 2.13 b. 3.13 Explanation: To find the debt-equity ratio using the total debt ratio, we need to rearrange the total debt ratio equation. We must realize that the total assets are equal to total debt plus total equity. Doing so, we find: Total debt ratio = Total debt/Total assets .68 = Total debt/(Total debt + Total equity) .32(Total debt) = .68(Total equity) Total debt/Total equity = .68/.32 Debt-equity ratio = 2.13 And the equity multiplier is one plus the debt-equity ratio, so: Equity multiplier = 1 + D/E Equity multiplier = 1 + 2.13 Equity multiplier = 3.13

Wims, Inc., has sales of $19.6 million, total assets of $14.6 million and total debt of $5.4 million. The profit margin is 9 percent. a. What is the company's net income? b. What is the company's ROA? c. What is the company's ROE?

a. $1,764,000 b. 12.08 c. 19.17 Explanation: To find the return on assets and return on equity, we need net income. We can calculate the net income using the profit margin. Doing so, we find the net income is: Profit margin = Net income/Sales .09 = Net income/$19,600,000 Net income = $1,764,000 Now we can calculate the return on assets as: ROA = Net income/Total assets ROA = $1,764,000/$14,600,000 ROA = .1208, or 12.08% We do not have the equity for the company, but we know that equity must be equal to total assets minus total debt, so the ROE is: ROE = Net income/(Total assets - Total debt) ROE = $1,764,000/($14,600,000 - 5,400,000) ROE = .1917, or 19.17%

SDJ, Inc., has net working capital of $1,910, current liabilities of $5,610, and inventory of $1,265. a. What is the current ratio? b. What is the quick ratio?

a. 1.34 b. 1.12 Explanation: To find the current assets, we must use the net working capital equation. Doing so, we find: NWC = Current assets - Current liabilities $1,910 = Current assets - $5,610 Current assets = $7,520 Now use this number to calculate the current ratio and the quick ratio. The current ratio is: Current ratio = Current assets/Current liabilities Current ratio = $7,520/$5,610 Current ratio = 1.34 times And the quick ratio is: Quick ratio = (Current assets - Inventory)/Current liabilities Quick ratio = ($7,520 - 1,265)/$5,610 Quick ratio = 1.11 times

The shareholders of Weil's Markets would benefit if the firm were to be acquired by Better Foods. However, Weil's board of directors rejects the acquisition offer. This is an example of:

an agency conflict

One example of a primary market transaction would be the:

sale of 1,000 shares of newly issued stock by Alt Company to Miquel

Capital Management

short term money

An agency issue is most apt to develop when:

the control of a firm is separated from the firm's ownership.

The primary goal of financial management is to maximize:

the market value of existing stock

Capital Structure

the mix of equity and debt financing a firm uses to meet its permanent financing needs

Capital Budgeting

the process a firm uses to evaluate long-term investment proposals

enterprise value

total market value of the stock + book value of all liabilities - cash