Corporate Finance

Which one of the following situations is most apt to create an agency conflict?

Basing management bonuses on the length of employment

Lester's Fried Chick'n purchased its building 11 years ago at a cost of $189,000. The building is currently valued at $209,000. The firm has other fixed assets that cost $56,000 and are currently valued at $32,000. To date, the firm has recorded a total of $49,000 in depreciation on the various assets it currently owns. Current liabilities are $36,600 and net working capital is $18,400. What is the total book value of the firm's assets?

Book value = $189,000 + 56,000 -49,000 + 18,400 + 36,600 = $251,000

The balance sheet of a firm shows beginning fixed assets of $348,200 and ending net fixed assets of $371,920. The depreciation expense for the year is $46,080 and the interest expense is $11,460. What is the amount of the net capital spending?

Ending FA ($371,920) - Beginning FA ($348,200) + depreciation ($46,080)= $69,800

capital structure decision

Establishing the preferred debt-equity level

Maria is the sole proprietor of an antique store that is located in a rented warehouse. The store has an outstanding loan with the local bank but no other debt obligations. There are no specific assets pledged as security for the loan. Due to a sudden and unexpected downturn in the economy, the store is unable to generate sufficient funds to pay the loan payments due to the bank. Which of the following options does the bank have to collect the money it is owed? I. Sell the inventory and apply the proceeds to the debt II. Sell the lighting fixtures from the building and apply the proceeds to the debt III. Withdraw funds from Maria's personal account at the bank to pay the store's debt IV. Sell any assets Maria personally owns and apply the proceeds to the store's debt

I, III and IV only

Which one of the following best describes the primary intent of the sarbanes-oxley act of 2002

Increase the protections against corporate fraud

Which one of the following is an advantage of being a limited partner

Losses limited to capital invested

Sarbanes-Oxley Act of 2002

Made officers of publicly traded firms responsible for the firms financial statements

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

Maximize the market value of the equity

Plenti-Good Foods has ending net fixed assets of $98,700 and beginning net fixed assets of $84,900. During the year, the firm sold assets with a total book value of $13,200 and also recorded $9,800 in depreciation expense. How much did the company spend to buy new fixed assets?

New fixed asset purchases = $98,700 + 9,800 + 13,200-84,900 = $36,800

Mahalo Tours currently has $10,500 in cash. The company owes $26,900 to suppliers for merchandise and $47,500 to the bank for a long-term loan. Customers owe the company $33,000 for their purchases. The inventory has a book value of $62,400 and an estimated market value of $65,600. If the store compiled a balance sheet as of today, what would be the book value of the current assets?

O $100,700 O $79,500 O $85,700 O $105,900*** O $117,500 Current assets = $10,500 + 33,000 + 62,400 - $105,900

Probably the least effective means of aligning management goals with shareholder interests is:

automatically increasing management salaries on an annual basis.

Limited Liability Company (LLC)

prefers its profits be taxed as personal income to its owners.

Limited liability companies are primarily designed to:

provide limited liability while avoiding double taxation.

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

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

Operating cash flow is defined as

the cash that a firm generates from its normal business activities.

An agency issue is most apt to develop when:

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

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 Change in net working capital = ($82,600 -85,100) - ($67,200 -71,100) = $1,400

Donegal's has compiled the following information: what is the net operating cash flow for the year?

$114,700

Six months ago, benders gym purchased $140,000 of its common stock. The company pays regular dividend totaling $18500 per quarter. What is the amount of cash flow to stockholders for the past year if 1,200 new shares were issued and sold for $38 a share

$168,400

Joie's Fashions has current liabilities of $45,600 and accounts receivable of $59,700. The firm has total assets of $275,000 and net fixed assets of $205,500. The owners' equity has a book value of $107,500. What is the amount of the net working capital?

$23,900

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 equipments 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

Marenelle Construction has beginning retained earnings of $284,300. For the year, the company earned net income of $13,700 and paid dividends of $9,000. The company also issued $25,000 worth of new stock. What is the value of the retained earnings account at the end of the year?

$289,000

A balance sheet shows beginning values of $56,300 for current liabilities and $289,200 for long-term debt. The ending values are $61,900 and $318,400, respectively. The income statement shows interest paid of $29,700 and dividends of $19,000. What is the amount of net new borrowing?

$29,200

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** O $42,500 O $25,000 O $21,500 Net new equity = $142,430 - 55,000 - 11,200 - ($48,420 + 26,310 - 32,500) = $34,000

Andersen's Nursery has sales of $318,400, costs of $199,400, depreciation expense of $28,600, interest expense of $1,100, and a tax rate of 34 percent. The firm paid out $23,400 in dividends. What is the addition to retained earnings?

$34,645

The plaza cafe has an operating cash flow of $83,770, depreciation expense of $43,514, and taxes paid of $21,590. What is the amount of cash flow from assets?

$47,949

Donner United has total owners' equity of $18,800. The firm has current assets of $23,100, current liabilities of $12,200, and total assets of $36,400. What is the value of the long-term debt?

$5,400 Long-term debt = $36,400 -18,800 -12,200 = $5,400

For 2016, the cash flow from assets is _____ and the cash flow to stockholders is _____

$5600, $300

For the year, Uptowne Furniture had sales of $818,790, costs of $748,330, and interest paid of $24,450. The depreciation expense was $56,100 and the tax rate was 34 percent. At the beginning of the year, the firm had retained earnings of $172,270 and common stock of $260,000. At the end of the year, retained earnings was $158,713 and common stock was $280,000. Any tax losses can be used. What is the amount of the dividends paid for the year?

$6,898

Bleu Berri Farms had equity of $58,900 at the beginning of the year. During the year, the company earned net income of $8,200 and paid $2,500 in dividends. Also during the year, the company repurchased $3,500 of stock from one of its shareholders. What is the value of the owners' equity at year end?

$61,100

Cornerstone Markets has beginning long-term debt of $64,500, which is the principal balance of a loan payable to Centre Bank. During the year, the company paid a total of $16,300 to the bank, including $4,100 of interest. The company also borrowed $11,000. What is the value of the ending long-term debt?

$63,300 Ending long-term debt = $64,500 -16,300 + 4,100 + 11,000 = $63,300

National importers paid $38,600 in dividends and $24,615 in interest over the past year while net working capital increased from $15,506 to $17,411. The company purchased $38,700 in net new fixed assets and had depreciation expenses of $14,784. During the year, the firm issued $20,000 in net new equity and paid off $23,800 in long-term debt. What is the amount of the cash flow from assets?

$67,015 Cash flow from assets = ($24,615 + 23,800) + ($38,600-20,000) = $67,015

Outdoor sports paid $12,500 in dividends and $9,310 in interest over the past year. Sales totaled $361,820 with costs of 267,940. The depreciation expense was $16,500 and the tax rate was 35 percent. What was the amount of operating cash flow

$70,056

The financial statements of blue fin marina reflect depreciation expenses of $41,600 and interest expenses of $27,900 for the year. The current assets increased by $31,800 and the net fixed assets increased by $28,600. What is the amount of net capital spending for the year?

$70,200 Net capital spending = $28,600 + 41,600 = $70,200

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 Current assets = $51,900 + 313,900 + 417,600 = $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 Net income = ($509,600 -448,150 -36,100 -12,400)(1 -.28) = $9,324

A firm has earnings before interest and taxes of $27,130, net income of $16,220, and taxes of $5,450 for the year. While the firm paid out $31,600 to pay off existing debt it then later borrowed $42,000. What is the amount of the cash flow to creditors?

-$4,940

For the past year, LP Gas, Inc., had cash flow from assets of $38,100 of which $21,500 flowed to the firm's stockholders. The interest paid was $2,300. What is the amount of the net new borrowing?

A. -$14,300 Cash flow to creditors = $38,100 - $21,500 = $16,600; Net new borrowing = $2,300 - $16,600 = -$14,300

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

ABC company

Paid-in surplus is classified as:

owner's equity

Which one of the following should be assigned to the corporate treasurer rather than to the controller

Cash management

Which one of the following is the most apt to align management's priorities with shareholder's interests?

Compensating managers with shares of stock that must be held for a minimum of three years

Working capital management includes which of the following

Determining which customers will be granted credit

An increase in which one of the following will increase operating cash flow for a profitable, tax paying firm

depreciation

Lew's Auto Repair has cash of $18,600, accounts receivable of $34,500, accounts payable of $28,900, inventory of $97,800, long-term debt of $142,000, and net fixed assets of $363,800. The firm estimates that if it wanted to cease operations today it could sell the inventory for $85,000 and the fixed assets for $349,000. The firm could collect 100 percent of its receivables as they are secured. What is the market value of the firm's assets?

O $332,800 O $458,200 O $374,200 O $495,500 -..> O $487,100 Market value = $18,600 + 34,500 + 85,000 + 349,000 = $487,100

Which of the following statements correctly applies to a sole proprietorship

Obtaining additional equity is dependent on the owner's personal finances.

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

Tressler Industries opted to repurchase 5,000 shares of stock last year in lieu of paying a dividend. The cash flow statement for last year must have which one of the following assuming that no new shares were issued?

Positive cash flow to stockholders

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

Primary market

Which one of the following is contained in the corporate bylaws?

Procedures for electing corporate directors

Capital budgeting includes the evaluation of which of the following?

Size, timing, and risk of future cash flows

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

The controller reports directly to the chief financial officer

Which of the following statements is correct?

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

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

There must be at least one general partner.

Theo's BBQ has $48,000 in current assets and $39,000 in current liabilities. Decisions related to these accounts are referred to as:

Working capital management

Net working capital decreases when

a dividend is paid to current shareholders.

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

dividends exceed net income for a period.

The financial statement that summarizes a firms accounting value as of a particular date is called the

balance sheet

Security dealers:

buy and sell from their own inventory

Which one of the following functions is generally a responsibility assigned to the corporate treasurer?

capital expenditures

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 of the following is an intangible asset

copyright

Matt and Alicia created a firm that is a separate legal entity and will share ownership of that firm on a 75/25 basis. Which type of entity did they create if they have no personal liability for the firm's debts?

corporation

The goal of financial management is to increase the:

current market value per share.

Net capital spending is equal to

ending net fixed assets minus beginning net fixed assets plus depreciation.

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

frequently use accounting information.

Will and Bill both enjoy sunshine, water, and surfboards. Thus, the two friends decided to create a business together renting surfboards, paddle boats, and inflatable devices in California. Will and Bill will equally share in the decision making and in the business profits or losses. Which type of business did they create if they both have full personal liability for the firm's debts?

general partnership

The accounting statement that measures the revenues, expenses, and net income of a firm over a period of time is called the:

income statement

Cash flow to creditors is defined as:

interest paid minus net new borrowing

If you accept a job as a domestic security analyst for a brokerage firm, you are most likely working in which one of the following financial areas?

investments

Which one of the following forms of business organization offers liability protection to some of its owners but not to all of its owners

limited partnership

The primary goal of financial management is most associated with increasing the

market value of the firm