Finance 381 Final Exam Review
Shareholder A sold 500 shares of ABC stock on the New York Stock Exchange. This transaction:
Was facilitated in the secondary market
Net Capital Spending
ending net fixed assets - beginning net fixed assets + depreciation
Average Tax Rate
total taxes paid divided by total income
Given the tax rates as shown, what is the average tax rate for a firm with a taxable income of $289,740? Taxable Income Tax Rate 0 - 50,000 15% 50,001 - 75,000 25% 75,001 - 100,000 34% 100,001 - 335,000 39%
33.22 percent
High Mountain Foods has an equity multiplier of 1.72, a total asset turnover of 1.16, and a profit margin of 4.5 percent. What is the return on equity?
8.98 percent
Bill's has a 5 percent profit margin and a dividend payout ratio of 20 percent. The total asset turnover is 1.6 and the debt-equity ratio is .4. What is the sustainable rate of growth?
9.84 percent
EAR
= (1 + r / m) ^m - 1
Quick Ratio
= (Current Assets - Inventory) / Current Liabilities *Note Current Assets include inventory which is then subtracted back out
Internal Growth Rate
= (ROA * b) / (1 - ROA *b) b = plowback (retention ratio) b = 1 - dividend payout ratio
Sustainable Rate of Growth
= (ROE * b) / (1 - ROE * b) ROE = PM * TAT * (1 + L / E) b = 1 - Dividend Payout Ratio
Days' Sales in Receivables
= 365 / Receivables Turnover
Equity Multiplier
= Assets / Equity = 1 + Liabilities / Equity
Book value of shareholders' equity
= Current BS Value + Net Working Capital - Long-term Debt
D1
= D0 (1 + g)
P1
= D2 / (r - g)
Free Cash Flow
= EBIT + Depreciation - Tax - (End Net Fixed Assets - Begin Net Fixed Assets + Depreciation) - (End NWC - Begin NWC) = EBIT - Tax- Change in NFA - Change in NWC NWC = Current Assets - Current Liabilities
Debt - Equity Ratio
= EM - 1 EM = ROA / (PM * TAT)
How many dollars of sales are being generated from every dollar of net fixed assets?
= Net Sales / Net Fixed Assets
Return on Asset
= PM * TAT
Future Value
= PV * (1 + r/m) ^n*m
Net Income
= ROE * Total Equity ROE = EM * ROA EM = 1 + Debt/Equity Ratio
Receivables Turnover
= Sales / Accounts Receivable
Net Present Value
= Sum PV
Debt - Equity Ratio
= Total Debt / Total Equity
Net Income
= Total Revenue - Cost - Expenses - Depreciation * (1-Tax Rate) = Gross Income - Expenses
Gross Income
= Total Revenue - Cost of Goods Sold
Cash Flow to Creditors
= interest expense - net new borrowing from creditors = interest paid - (Y2 LTD - Y1 LTD)
PV
= pmt / r
Price-Earnings Ratio
= price per share / earnings per share Price per share = price sales ratio * (Annual Sales / shares outstanding) Earnings per share = (Annual Sales * profit margin) / shares outstanding
APR
= r / m
Return on Equity
=ROA * EM = PM * TAT * EM
FV
MCF : = PV (1 + r) ^t
Your firm has total assets of $4,900, fixed assets of $3,200, long-term debt of $2,900, and short-term debt of $1,400. What is the amount of net working capital?
$300
Nielsen Auto parts had beginning net fixed assets of $218,470 and ending net fixed assets of $209,411. During the year, assets with a combined book value of $6,943 were sold. Depreciation for the year was $42,822. What is the amount of net capital spending?
$33,763
Four years ago, Ship Express purchased a mailing machine at a cost of $218,000. This equipment is currently valued at $97,400 on today's balance sheet but could actually be sold for $92,900. This is the only fixed asset the firm owns. Net working capital is $41,300 and long-term debt is $102,800. What is the book value of shareholders' equity?
$35,900
Andre's Bakery has sales of $613,000 with costs of $479,000. Interest expense is $26,000 and depreciation is $42,000. The tax rate is 25 percent. What is net income?
$49,500
Best-Ever Chicken has a debt-equity ratio of .94. Return on assets is 8.5 percent, and total equity is $520,000. What is the net income?
$85,748
Lancaster Toys has a profit margin of 5.1 percent, a total asset turnover of 1.84, and a return on equity of 16.2 percent. What is the debt-equity ratio?
.73
The Two Sisters has a 9 percent return on assets and a 75 percent dividend payout ratio. What is internal growth rate?
2.30 percent
Net Working Capital
NWC = Current Assets - Current Liabilities Current Assets = Total Assets - Fixed Assets Current Liabilities = Short-term debt
Lassiter Industries has annual sales of $328,000 with 8,000 shares of stock outstanding. The firm has a profit margin of 4.5 percent and a price-sales ratio of 1.20. What is the firm's price-earnings ratio?
26.7
Which of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers?
Agency Problem
Which one of these is a working capital management decision?
Determining the minimum level of cash to be kept in a checking account
Future Value
Excel = FV(rate, nper, pmt, pv, type)
IRR
Excel = IRR ( All Cash Flows)
Present Value
Excel = PV(rate, nper, pmt, fv, type)
Rate
Excel = Rate (nper, pmt, -pv, fv, type) *only use with annuities NEVER USE WITH MIXED CASH FLOWS!
Which of the following individuals have unlimited liability based on their ownership interest?
General Partner and Sole Proprietor
PV
MCF: FV (FV / (1 + r) ^t
Decisions made by financial managers should primarily focus on increasing which one of the following?
Market value per share of outstanding stock
Which one of the following terms can be defined as the net income that a firm reinvests on itself?
Retention Ratio
Which one of the following parties has ultimate control of a corporation?
Shareholders
