Finance 350

which of the following items are used to compute current ratio? - accounts payable -Earnings - Equipment - Cash

-Accounts Payable - cash

If net income is 77 million dollars, depreciation is 13 million dollars, and deferred taxes are 2 million dollars, what is the cash flow from operating activities

92 million

How many tax brackets are their for forms of business other than corporations

>1

What is depreciation?

A systematic expensing of an asset based on the asset's estimated life

EBITDA

EBITDA/sales

Depreciation is the accountants estimate of the cost of _____ used up in the production process

Equipment

Asset Turnover

Sales/Total Assets

Balance Sheet

an accountant snapshot of a firms accounting value on a particular date, as though the firm stood momentarily still

Accounts receivable

are amounts not yet collected from eh customers for goods and services sold to them.

Fixed assets

are the least liquid kind of assets

current assets

are the most liquid and include cash and assets that will be turned into cash within a year from the date of the balance sheet

The cash flow identity states that cash flows from _____ should equal cash flows to creditors and equity investors.

assets

On the balance sheet, assets are listed at their ______ value

book

it is difficult to manipulate _______

cash-flow statement

The cash flows from financing activities include changes in?

common stock; long-term debt

cash flow analysis is popular because?

it is harder to spin and mislead

Changes in capital spending can be negative when the acquisition of fixed assets is ____ the sale of fixed assets

less than

EPS

net income/shares outstanding

Taxes

one of the largest cash outflows a firm experiences

Operating cash flow reflects on what

tax payments

Quick Ratio (Acid Test)

(Current Assets - Inventory) / Current Liabilities

what is the debt equity ratio for a company with $3.5 million in total assets and $1.4 million in equity?

1. 3.5-1.4=2.1 2. 2.1/1.4= 1.50 equation= assets-equity/equity

Rock corporation has current assets of $45 million, total liabilities and equity of $67 million. how would current assets be expressed on a common-size balance sheet

45/67= 67%

Which of the following are included in cash flow from investing activities? -Acquisition of fixed assets -Sales of fixed assets - Depreciation -Retirement of long-term debt

Acquisition of fixed assets; sales of fixed assets

Cash Ratio

Cash / Current Liabilities

Which of the following calculates cash flow from the operations

EBIT + Depreciation - Taxes

Times Interest Earned

EBIT/ interest expense

Enterprise Value Multiples

EV/EBITDA

Enterprise Value

Market Capitalization + Debt - Cash

if the acquisition of fixed assets is $10,000,000 and the sales of fixed assets is $15,000,000, capital spending will be:

Negative

Return on Equity

Net Income/Total Equity

int eh U.S., taxes on proprietorships and partnerships follow which type of system after passage of the Tax Cuts and Jobs Act of 2017

Progressive

Common-size statements are best used for comparing firms with differing ________

Sizes

An official accounting statement that helps to explain the change in cash and cash equivalents is called the ______.

Statements of Cash flow

Assets equal

liabilities + stockholders equity

Market to Book Ratio

market value per share/book value per share

Income Statement

measures performance over a specific period

Return on Assets

net income/average total assets

profit margin

net income/net sales

Liquidity

the ease with which an asset can be converted into the economy's medium of exchange

Market Value

the price at which willing buyers and sellers would trade the assets

a common size balance sheet expresses accounts as a percentage of ________

total assets

Financial managers use a common-size income statement to determine ________

which cost are rising or falling as a percentage of sales

Alpha Manufacturing has interest expense of $12 million, total assets of $184 million, sales of $176 million, long-term debt of $16.4 million, and net income of $15 million. How will interest expense be recorded in the common-size income statement?

$12 million / $176 million = 6.52 %

Cash Coverage Ratio

(EBIT + Depreciation) / Interest

Total Debt Ratio

(Total Assets - Total Equity) / Total Assets

which of the following are traditional financial ratio categories? - Turnover ratio - Real options ratios - Liquidity ratios - Employee ratios - Financial leverage ratios

- Turnover ratios - Liquidity ratios - financial leverage ratios

which of the following will change fixed assets? - Buying a new machine -issuing new bonds - Selling a plant - Amortizing goodwill

Buying a new machine; selling a plant

Changes in notes payable are included in the _____ section of the accounting statement of cash flow?

Financing

Receivables Turnover

Sales / Accounts Receivable

What is treasury stock?

Stock the firm has repurchased

intangible assets

assets that do not have physical existence but can be very valuable Example. Trade mark or the value of a patent

Inventory Turnover Ratio

cost of goods sold/average inventory

the cash flow identity states that cash flow from assets equal cash flows to

creditors and stockholders

the current ratio computes the relationship between _________

current assets and current liabilities

Current Ratio

current assets divided by current liabilities

Principle of GAAP:

dictates that revenue be matched with expenses

deferred taxes

difference between accounting income and true taxable income

Selling a firms plant and equipment results in a change in _______

fixed assets

Statement of Cash Flows

helps explain the change in accounting cash and equivalents

Tangible fixed assets

include property, plant, and equipment

when a firm pays out fewer dividend, it_______ the accounting value of its retained earnings

increases

Inventory

is composed of raw materials to be used in production, work in process, and finished goods.

which of the following are examples of financial activities ? -Federal tax payments - Net payments to owners - net payments to creditors -Interest expense to payments

net payments to owners; net payments to creditors

Net capital spending is equal to ending net fixed assets minus beginning net fixed assets_______

plus depreciation

Market Capitalization

price per share x shares outstanding

PE Ratio

price per share/earnings per share

revenue

recognized on an income statement when the earning process is virtually completed and an exchange of Goods and Services has occurred

Depreciation

reflects the accountant's estimate of the cost of equipment used up in the production process

income equals

revenue- Expenses

Cash flow from operations is calculated by adding depreciation to EBIT and ______ current taxes

subtracting

what is the most important item that can be extracted from financial statements?

the firms actual cash flow

Who owns treasury stock?

the issuer of the stock

Short Run vs. Long Run Costs

the period in which certain equipment, resources, and commitments of the firm are fixed. But the time is long enough for the firm to vary its output by using more labor and raw materials. For the other all cost are variable

net capital spending is equal to the change in net fixed assets plus:

Depreciation

a one-time profit from an asset sale makes it________ to compare financial statement.

Difficult