Fina 4300 exam 2

The net operating cycle of a company is least likely to indicate:

The company's ability to generate profits from its resources.

Aquamarine Inc. is a manufacturer of perfumes and has several retail outlets throughout Europe. The company uses IFRS to report its financial statements and it recently entered into the following transactions: Transaction 1: Borrowed money from a bank for the purchase of inventory worth $180,000. Transaction 2: Made sales amounting to $990,000, of which $38,000 were made on credit. Transaction 3: Invested excess cash amounting to $12,000 in securities classified as held-for-trading and $8,000 in securities classified as held-to-maturity. Transaction 4: Paid dividends amounting to $130,000. Which of the following is the least likely effect on Aquamarine's financial statements due to Transaction 2?

an increase in cash flow from operating activities of 990000

which of the following is ,out likely a use of cash for a company

an increase in inventory

Gamma Corporation is involved in the manufacture of parts for the aerospace industry. Assuming U.S. GAAP applies, which of the following is least likelyclassified as an investing activity by the firm?

investing in securities classifies as held for trading

A company recorded proceeds from issuance of long‐term debt of $350 million, purchase of equipment of $35 million, and equity earnings of an affiliate of $10 million. The company's cash flows from investing are closest to: Correct Answer

(35 million)

Beta Inc. is an exporter of refined sugar. During 2009, it earned net income of $104,000, purchased inventory worth $13,000, and invested in new machinery worth $28,000. The company had previously invested in available-for-sale securities which were sold during the year for $8,000. The company's cash flow from investing activities is closest to:

-20,000

Using the following information and assuming that U.S. GAAP applies, the company's CFI is closest to: Proceeds from sale of equipment$32,000 Loss on equipment sale$9,000 Dividends paid$12,500 Purchase of office premises$100,000 Common stock repurchases$45,000 Dividends received$8,500 Interest received$1,200 Supplier accounts paid$3,700 Cash collections from customers$14,200 Ending cash balance$98,000

-68,000

Given the following information for a company, its CFO is closest to: Net income$1,000 Decrease in interest payable$85 Gain on sale of equipment$45 Increase in accounts payable$90 Decrease in inventory$35 Increase in prepaid assets$105 Depreciation$85 Increase in taxes payable$125

1,100

Solitaire Inc. prepares its financial statements according to U.S. GAAP. During 2009, the company earned net income amounting to $102 million. During the year, it purchased machinery worth $22 million and recognized a total depreciation expense of $2.4 million. The company also paid an annual dividend amounting to $1.5 million. Based on this information, the company's cash flow from operations is closest to:

104.4

A company has a net income of $150, an increase in accounts receivable of $30, depreciation of $55, and a decrease in accounts payable of $25. Its operating cash flow is closest to:

150

Tiara Corporation reported net income of $8 million for the year 2009. Total revenue and cost of goods sold for the period amounted to $35 million and $20 million respectively. If accounts receivable is increased by $5 million during the period, cash received from customers during the period was closest to:

30 million

Revenue = $85 million Cost of goods sold = $44 million Decrease in inventory = $7 million Increase in accounts payable = $4 million Decrease in accounts receivable = $5 millions Cash paid to suppliers is closest to:

33 million

Net income = $1,120,000 Depreciation expense for the year = $27,000 Decrease in inventory = $13,800 Increase in taxes payable = $1,500 Issuance of common stock = $60,000 Dividends paid = $32,300 Purchase of land = $28,300 Investment in associate = $58,000 Purchase of held-for-trading securities = $7,200 Sale of available-for-sale securities = $84,700 Assume the company uses U.S. GAAP to prepare its financial statements. The company's cash flow from financing activities is closest to:

27,000 cff= assurance of common stock - dividend paid

Magma Industries Ltd. reported a net profit of $104 million for 2009, with revenues of $500 million and COGS of $270 million. During the period, Magma made purchases worth $40 million. If the company's accounts payable increased by $4 million, cash paid to the company's suppliers was closest to:

36 million

A company reported the following information: Cash received from customers = $27,300 Cash paid to suppliers = $11,400 Cash paid for other operating expenses = $7,400 Cash paid for income taxes = $3,250 The company's cash flow from operating activities is closest to?

5,250

Revenue = $85 million Cost of goods sold = $44 million Decrease in inventory = $7 million Increase in accounts payable = $4 million Decrease in accounts receivable = $5 millions Cash received from customers is closest to:

90 million

Which of the following is least likely an investing activity under IFRS?

A manufacturing firm investing in held-for-trading securities

under US GAAP, dividend payments are classified as

CFF

Which of the following is least likely a limitation of ratio analysis?

Most companies around the world subscribe to the same set of accounting standards.

which of the following is least accurate about ratio analysis?

Ratios are not affected by different accounting treatments used by companies.

An analyst wants to evaluate the use of ratio analysis in analyzing the financial performance and condition of Go Inc. Which one is not a limitation of the use of ratio analysis?

Similar accounting practices and policies can distort comparisons.

fixed chanWhich of the following correctly describes the five‐way DuPont analysis?

Tax retention rate, interest burden, operating profit margin, financial leverage, and asset turnover

Which of the following statements is most accurate?

The cash to income ratio measures the ability of the business operations to generate cash.

An analyst observes that a company's days of inventory on hand (DOH) has declined from one fiscal year to the next. Which of the following would most likely explain this decline?

The company became more efficient in its current fiscal year by using a new inventory management system.

Which of the following is most likely a source of cash flow (outflow) for a company?

a decrease in accounts payable

A creditor will most likely consider an increase in which of the following ratios to be positive news?

interest coverage

Which of the following ratios is least affected by the purchase of Treasury stocks?

interest coverage ratio

Sparta Inc. is a manufacturer of heavy machinery, but frequently invests in securities that it classifies as held-to-maturity. The outflow of cash for these investments is most likely classified as a(n):

investing activities

Under U.S. GAAP, interest and dividends received may be classified as:

cfo only

Under IFRS, interest paid may be classified as:

cfo or cff

Under IFRS, dividends received may be classified as:

cfo or cfi

During 2009, Royal Superstores saw its accounts receivable and inventory increase by $5,600 and $3,700 respectively. At the same time, its accounts payable increased by $2,500. Based only on this information, the company's cash flow from operations will most likely:

decrease by 6,800

Whoop Company is a U.S. company following the U.S. GAAP. In which category of activities in the Statement of Cash Flows would Whoop include loans that it made to others?

investing activities

the sale of property would be classified as

investing cash flows

Assuming U.S. GAAP, which of the following is most likely classified as a financing activity by a trading company?

dividend paid

An analyst wishing to determine a company's solvency will most likely calculate the company's:

fixed charge coverage

Which of the following is most likely to be used to conduct trend analysis?

horizontal common- size financial statements

Aquamarine Inc. is a manufacturer of perfumes and has several retail outlets throughout Europe. The company uses IFRS to report its financial statements and it recently entered into the following transactions: Transaction 1: Borrowed money from a bank for the purchase of inventory worth $180,000. Transaction 2: Made sales amounting to $990,000, of which $38,000 were made on credit. Transaction 3: Invested excess cash amounting to $12,000 in securities classified as held-for-trading and $8,000 in securities classified as held to-maturity. Transaction 4: Paid dividends amounting to $130,000. Which of the following statements is most accurate regarding Transaction 3?

it will decrease cash flows from operating activities by 12,000

A common‐size cash flow statement shows each line item as a percentage of:

net revenues

Consider the following two statements: Statement 1: Companies should ideally have net income that exceeds operating cash flows. Statement 2: The variability of operating cash flow and net income is an important determinant of the overall risk inherent in the company. Which of the following is most likely?

only statement 2 is correct

Which section of the cash flow statement may be prepared following either the direct or indirect method?

operating

An analyst wishing to assess a company's ability to use its resources to generate profits will most likelycalculate the company's:

return on equity

Capital One Bank provided $2.5 million to Pharma One Pvt. Ltd. (a pharmaceutical company) as a loan to be repaid in 5 years. Which of the following is the most accurate classification of this transaction by both the parties? Capital One Pharma One AFinancing activity. Financing activity BFinancing activity. Investing activity COperating activity. Financing activity

row c

Howard Inc. (a manufacturing concern) uses U.S. GAAP to report its financial statements. Which of the following is most likely to be classified as an investing activity by this firm?

sale of securities classified as available for sale

A company's balance sheet indicates that it has sufficient cash and short‐term investments. However, its payables turnover ratio remains low. This most likelysuggests that:

the company's suppliers offers it lenient credit terms