FIN 325 - Ch. 1 & 2

The Underground Cafe has an operating cash flow of $187,000 and a cash flow to creditors of $71,400 for the past year. The firm reduced its net working capital by $28,000 and incurred net capital spending of $47,900. What is the amount of the cash flow to stockholders for the last year?

95,700

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

Jenna has been promoted and is now in charge of all external financing. In other words, she is in charge of:

capital structure management

Which one of the following occupations best fits into the corporate area of finance?

chief financial officier

All else held constant, the book value of owners' equity will decrease when:

dividends exceed net income for a period

When conducting a financial analysis of a firm, financial analysts:

frequently use accounting information.

A limited liability company (LLC):

hybrid between partnership and a sole proprietorship.

Which one of the following changes during a year will increase cash flow from assets but not affect the operating cash flow?

increase in accounts payable

Given a profitable firm, depreciation:

lowers taxes

What is the primary goal of financial management for a sole proprietorship?

maximize the market value of the equity

Shareholders' equity is equal to:

net fixed assets minus long-term debt plus net working capital.

Which one of the following indicates that a firm has generated sufficient internal cash flow to finance its entire operations for the period?

positive cash flow from assets

The issuer of a security must be involved in all _____ transactions involving that security.

primary market

A negative cash flow to stockholders indicates a firm:

received more from selling stock than it paid out to shareholders.

the recognition principle states that

sales should be recorded when the earnings process is virtually completed and the value of the sale can be determined.

you contacted your stock broker this morning and placed an order to sell 300 shares of a stock that trades on the NYSE. This sale will occur in the:

secondary market

Margie opened a used bookstore and is both the 100 percent owner and the store's manager. Which type of business entity does Margie own if she is personally liable for all the store's debts?

sole proprietorship

Levi had an unexpected surprise when he returned home this morning. He found that a chemical spill from a local manufacturer had spilled over onto his property. The potential claim that he has against this manufacturer is that of a(n):

stakeholder

An agency issue is most apt to develop when:

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

Which one of the following correctly defines a common chain of command within a corporation?

the controller reports directly to the chief financial officer

Shareholders' equity is best defined as:

the residual value of a firm

In a general partnership, each partner is personally liable for:

the total debts of the partnership, even if he or she was unaware of those debts.

Roscoe's fixed assets were purchased three years ago for $1.8 million. These assets can be sold to Stewart's today for $1.2 million. Roscoe's current balance sheet shows net fixed assets of $960,000, current liabilities of $348,000, and net working capital of $121,000. If all the current assets were liquidated today, the company would receive $518,000 cash. The book value of the firm's assets today is _____ and the market value is ____.

$1,429,000; $1,718,000

The Pretzel Factory has net sales of $821,300 and costs of $698,500. The depreciation expense is $28,400 and the interest paid is $8,400. What is the amount of the firm's operating cash flow if the tax rate is 34 percent?

$93,560

Marcie's has sales of $179,600,depreciation of $14,900, costs of goods sold of $138,200, and other costs of $28,400. The tax rate is 35 percent. What is the net income?

-1235

Andre's Dog House had current assets of $67,200 and current liabilities of $71,100 last year. This year, the current assets are $82,600 and the current liabilities are $85,100. The depreciation expense for the past year is $9,600 and the interest paid is $8,700. What is the amount of the change in net working capital?

1,400

Donegal's has compiled the following information: Sales$406,300 Interest paid 21,200 Long-term debt 248,700 Owners' equity 211,515 Depreciation 23,800 Accountsreceivable 24,400 Other costs 38,600 Inventory 41,500 Accountspayable 22,600 Cost of goods sold 218,900 Cash 16,300 Taxes 34,100 What is the operating cash flow for the year?

114700

Michael's Bakery had $236,400 in net fixed assets at the beginning of the year. During the year, the company purchased $53,200 in new equipment. It also sold, at a price of $22,000, some old equipment that had a book value of $5,900. The depreciation expense for the year was $13,400. What is the net fixed asset balance at the end of the year?

270,300

AV Sales has net revenue of $513,000 and costs of $406,800. The depreciation expense is $43,800,interest paid is $11,200, and dividends for the year are$4,500. The tax rate is 33 percent. What is the addition to retained earnings?

29,804

Leslie Printing has net income of $26,310 for the year. At the beginning of the year, the firm had common stock of $55,000, paid-in surplus of $11,200, and retained earnings of $48,420. At the end of the year, the firm had total equity of $142,430. The firm paid dividends of $32,500. What is the amount of the net new equity raised during the year?

34,000

Zoey Pet Supply had $314,000 in net fixed assets at the beginning of the year. During the year, the company purchased $98,200 in new equipment. It also sold, at a price of $10,000, some old equipment that had a book value of $12,500. The depreciation expense for the year was $24,500. What is the net fixed asset balance at the end of the year?

375,200

Home Supply, Inc. has compiled the following information: 2015 2016 Interest paid$10,500 $11,400 Long-term debt 287,400 293,500 Sales 614,200 718,900 Common stock 280,000 294,500 Accounts payable 42,600 58,700 Depreciation 38,400 43,700 Accounts receivable 54,200 59,000 Inventory 121,600 128,300 Other costs 46,800 42,100 Taxes 16,100 20,200 Cash 18,200 9,500 Retained earnings 65,400 89,800 Net fixed assets 481,400 539,700 Costs of goods sold 471,100 562,300 For 2016, the cash flow from assets is _____ and the cash flow to stockholders is ______.

5,600; 300

Thorkfeld Company incurred depreciation expenses of $28,900 last year. The sales were $755,000 and the addition to retained earnings was $10,200. The firm paid interest of $6,200 and dividends of $5,000. The tax rate was 33 percent. What was the amount of the costs incurred by the company?`

697,213

For the year, Movers United has net income of $31,800, net new equity of $7,500, and an addition to retained earnings of $24,200. What is the amount of the dividends paid?

7,600

Jackson Automotive has net working capital of $22,600, current assets of $56,500, equity of $62,700, and long-term debt of $31,900. What is the amount of the net fixed assets?

72,000

Blythe Industries reports the following account balances: inventory of $417,600, equipment of $2,028,300, accounts payable of $224,700, cash of $51,900, and accounts receivable of $313,900. What is the amount of the current assets?

783,400

Holly Farms has sales of $509,600, costs of $448,150, depreciation expense of $36,100, and interest paid of $12,400. The tax rate is 28 percent. How much net income did the firm earn for the period?

9,324

Which one of the following parties can sell shares of ABC stock in the primary market?

ABC company

Which one of the following is a working capital decision?

How much cash should the firm keep in reserve?

Which one of the following statements is correct?

NASDAQ has more listed stocks than does the NYSE.

Which of these is correct?

Net income is distributed either to dividends or retained earnings.

Which one of the following statements about a limited partnership is correct?

There must be at least one general partner.