Finance

What is the amount of free cash flow generated by Cold Weather Sports in 2003? a. $100 b. $2,100 c. $2,300 d. none of the above

$2,300

A firm reports net income of $500,000 for 2004. The most recent balance sheet for the reports retained earnings of $2,000,000. The firm will pay out 25% of net income as dividends. What will the new balance be for retained earnings? a. $1,875,000 b. $2,125,000 c. $2,375,000 d. $2,500,000

$2,375,000

Refer to Tax Table. First Watch, Inc. has a pretax income of $3,755,250. What is the company's tax liability? a. $1,276,785 b. $1,390,571 c. $1,464,548 d. $563,288

$1,276,785

A company has an average collection period of 52 days and accounts receivables of $250,000. What are the company's annual sales? $2,234,756 b. $1,754,808 c. $1,543,823 d. $250,000

$1,754,808

What was the dollar amount of fixed assets purchased during the year for Cold Weather Sports? a. $600 b. $1,200 c. $1,800 d. none of the above

$1,800

FactorMax is currently selling for $75 per share. If it is selling at a P/E ratio of 50, calculate FactorMax's recent earnings per share. a. $.15 b. $.67 c. $1.50 d. none of the above

$1.50

Refer to Tax Table. Bavarian Sausage, Inc. has a pretax income of $325,000. What is the company's tax liability? a. $126,750 b. $110,000 c. $81,250 d. $325,000

$110,000

Company X had sales of $120 with a cost of goods sold equal to 25% of sales. In addition, X had total other operating expenses of $50 with an interest expense of $20. If X pays a flat 40% of its pre-tax income in income taxes, what is X's net income? a. $20 b. $27 c. $12 d. none of the above

$12

Wunder Boy Bat Co. has an average age of inventory equal to 121.67 days. If its end of year inventory level is $4,000, then what does that imply for the cost of goods sold during the year? (round to the nearest dollar) a. $1,333 b. $3,000 c. $12,000 d. $16,000

$12,000

Edison Bagels had operating cash flow equal to $850 for 2004. If its earnings before interest and taxes was $1,000 while its tax bill was $300, what was Edison's depreciation expense for the year? a. $150 b. $550 c. $1,550 d. not enough information to calculate

$150

Refer to Exhibit 2-1. Pale Rider Corporation reports taxable income of $500,000 in 2004. What was their tax liability for the year? a. $56,100 b. $91,650 c. $170,000 d. $200,000

$170,000

You have the following information about a firm: total asset = $350,000; common stock equity = $175,000; ROE = 12.5%. What is the firm's earnings available for common stockholders? a. $43,750 b. $21,875 c. $50,000 d. $47,632

$21,875

What is Bavarian Sausage, Inc.'s operating cash flow? a. $394,000 b. $191,000 c. $226,000 d. $359,000

$226,000

A company has a total asset turnover of 2 and sales of $500,000. What is the company's total assets? a. $1,000,000 b. $250,000 c. $750,000 d. $500,000

$250,000

The average age of the inventory for a firm is 10 days old. If the current dollar amount of inventory is $1,000, what is a good estimate for the cost of goods sold over the last year? a. $16,500 b. $26,500 c. $32,500 d. $36,500

$36,500

The asset to equity ratio for a firm is 1.5, and the firm has total assets of $3,000,000. Last year, net income for the firm was $250,000, and the earnings per share for the firm was reported as $0.50. What is the current book value per share for the firm? a. $2 b. $4 c. $6 d. $8

$4

What is Cold Weather Sports' operating cash flow for 2003? a. $2,400 b. $2,800 c. $4,000 d. none of the above

$4,000

If the return on equity is 20%, what was Net Income for 2004? a. $25,000 b. $40,000 c. $50,000 d. $65,000

$40,000

28. In a given year a company decreased its inventory by $250,000, purchased $350,000 worth of fixed assets and took on a new $500,000 loan. What is the net change of the company's cash as a result of these transactions? a. $100,000 b. -$100,000 c. $400,000 d. -$400,000

$400,000

A company has sales of $1,250,000, cost of goods sold of $750,000, depreciation expenses of $250,000 and interest expenses of $55,000. If the company's tax rate is 34% and the income statement is complete, what is this firm's operating cash flow? a. $183,700 b. $433,700 c. $165,000 d. $415,000

$433,700

If Bavarian Sausage, Inc. has 100,000 shares outstanding, what is the book value per share? a. $5.00 b. $9.25 c. $3.50 d. $1.50

$5.00

The Park Corp. had earnings before interest and taxes of $500,000 and had a depreciation expense of $200,000 this last year. If the firm was subject to an average tax rate of 30%, what was Park's operating cash flow for the year? If you need to, assume that Park's interest expense was zero for the year. a. $305,000 b. $350,000 c. $450,000 d. $550,000

$550,000

Refer to Exhibit 2-1. Big Diesel Incorporated currently predicts taxable income of $200,000 for the next year. If this is their actual income, what will be the tax liability for Big Diesel? a. $45,250 b. $56,500 c. $61,250 d. $91,650

$61,250

Given the following information, calculate the company's long-term debt. Current assets: $125,000 Current liabilities: $ 85,000 Net fixed assets: $250,000 Total equity: $200,000 a. $375,000 b. $50,000 c. $285,000 d. $90,000

$90,000

What was the free cash flow in 2004 for Stone Cold Incorporated? a. -$55.20 b. -$44.80 c. $145.20 d. $215.00

-$55.20

What is Bavarian Sausage, Inc.'s debt-equity ratio? a. 0.23 b. 0.52 c. 1.25 d. 0.85

0.23

What is Bavarian Sausage, Inc.'s quick ratio? a. 0.5645 b. 1.2903 c. 1.9565 d. 0.8871

0.5645

Last National, Inc. has a net profit margin of 12%, an equity multiplier of 2, sales of $575,000 and a ROE of 14.5%. What is Last National's total asset turnover? a. 1.6042 b. 0.6042 c. 2 d. Not enough information.

0.6042

Refer to Stone Cold. For 2004, what was the debt-to-equity ratio? a. 0.81 b. 0.84 c. 0.98 d. 1.19

0.81

Calculate Bavarian Sausage, Inc.'s inventory turnover. a. 1.05 b. 0.96 c. 0.76 d. 1.51

0.96

The asset to equity ratio for a firm is 1.5, and the firm has total assets of $6,000,000. Last year, net income for the firm was $250,000, and the earnings per share for the firm was reported as $0.50. If the current price-to-earnings ratio is 20, what is the current market-to-book ratio for the firm? a. 0.60 b. 0.80 c. 1.00 d. 1.25

1.25

You have the following information about a company: quick ratio = 0.85, inventory = $125,000 and current assets = $375,000. What is the company's current ratio? a. 0.85 b. 1.05 c. 2.56 d. 1.28

1.28

Refer to Stone Cold. For 2004, what was the total asset turnover for 2004? a. 0.80 b. 1.20 c. 1.40 d. 1.60

1.60

rian Sausage, Inc. has 100,000 shares of common stock outstanding, but no preferred stock. The current price of Bavarian's common stock is $15. What is the company's P/E-ratio? a. 119.00 b. 1.26 c. 11.90 d. 12.60

11.90

Calculate Bavarian Sausage, Inc.'s return on assets. a. 25.20% b. 16.35% c. 13.62% d. 8.47%

13.62%

What is the current P/E ratio for the Titans? a. 8.00 b. 10.00 c. 15.50 d. 16.67

16.67

If a company's net profit margin is 5% and its total asset turnover is 3.5, what is its ROA? a. 17.50% b. 1.43% c. 70.00% d. 12.53%

17.50%

Granny's Jug Herbal Shop has total current liabilities of $2,000 and an inventory of $1,000. If its current ratio is 2.5, then what is its quick ratio? a. 2.0 b. 2.5 c. 3.0 d. 3.5

2.0

Straw Corp has an operating profit of $1,200 produced from $20,000 in total assets. If Straw has no interest expense and currently pays 35% of its operating profits in taxes and $200 per year in preferred dividends, then what is Straw's net profit margin? a. 2.90% b. 3.90% c. 5.0% d. none of the above

2.90%

Refer to Stone Cold. For 2004, what was the return on common equity? a. 9.36% b. 12.40% c. 20.44% d. 20.90%

20.44%

80. A firm reports a current ratio of 2 and a quick ratio of 1.2. The firm has total current assets of $4,000. If the firm reports cost of goods sold at $25,000 for the given year, what is the average age of their inventory? a. 12.35 days b. 15.63 days c. 18.24 days d. 23.36 days

23.36 days

What is Bavarian Sausage, Inc.'s net profit margin? a. 40% b. 47% c. 15% d. 24%

24%

15. Calculate Bavarian Sausage, Inc.'s return on equity. a. 24.00% b. 13.62% c. 15.74% d. 25.20%

25.20%

The firm that you work for had credit sales of $3,500,000 last year and on average had $33,000 in its accounts receivable during the year. What is its average collection period? a. 3 days b. 3.44 days c. 3.5 days d. none of the above

3 days

Devil Inc. has total liabilities equal to $3,500 and total assets equal to $5,000. What is Devil's asset-to-equity ratio? a. 1.43 b. 2.33 c. 3.33 d. none of the above

3.33

What is Import Inc.'s return on assets? a. 14% b. 7% c. 3.5% d. none of the above

3.5%

Refer to Exhibit 2-1. Big Diesel Incorporated reports taxable income of $200,000 in 2004. What was the average tax rate they paid for the year? a. 25.00% b. 29.40% c. 30.63% d. 34.00%

30.63%

What is the total asset turnover for the firm in 2004? a. 16.67% b. 25.00% c. 33.33% d. 40.00%

33.33%

Refer to Tax Table. Bavarian Sausage, Inc. has a pretax income of $325,000. What is the company's average tax rate? a. 39.00% b. 29.55% c. 26.75% d. 33.85%

33.85%

Refer to Tax Table. First Watch, Inc. has a pretax income of $3,755,250. What is the company's average tax rate? a. 25% b. 15% c. 39% d. 34%

34%

Refer to Exhibit 2-1. Pale Rider Corporation reports taxable income of $500,000 in 2004. What was the average tax rate they paid for the year? a. 23.25% b. 25.00% c. 29.40% d. 34.00%

34.00%

Refer to Tax Table. Bavarian Sausage, Inc. has a pretax income of $325,000. What is the company's marginal tax rate? a. 34% b. 39% c. 35% d. 25%

39%

Refer to Stone Cold. For 2004, what was the times interest earned ratio for 2004? a. 2.13 b. 2.77 c. 3.55 d. 4.55

4.55

Refer to Stone Cold. For 2004, what was the average collection period for the firm in 2004? a. 6.84 days b. 8.77 days c. 42.77 days d. 51.22 days

42.77 days

52. Straw Corp has an operating profit of $1,200 produced from $9,800 in sales. If Straw has no interest expense and currently pays 35% of its operating profits in taxes and $200 per year in preferred dividends, then what is Straw's net profit margin? a. 5.92% b. 7.96% c. 7.96% d. 10.20%

5.92%

Use the following information to determine Bill's Solvency Ratio. Total net worth: $150,000 Cash surplus: $15,000 Income after taxes: 105,000 Total assets: $300,000 a. 14.29% b. 50% c. 2 d. None of the above

50%

What is Import Inc.'s return on common equity? a. 7.0% b. 8.75% c. 17.5% d. none of the above

7.0%

What is Bavarian Sausage, Inc.'s times interest earned ratio? a. 3.60 b. 7.00 c. 15.00 d. 6.00

7.00

What is Bavarian Sausage, Inc.'s average collection period? a. 14.39 days b. 4.20 days c. 122.56 days d. 86.90 days

86.90 days

58. Refer to Stone Cold. For 2004, what was the return on assets? a. 9.16% b. 12.40% c. 15.60% d. 20.00%

9.16%

88. Which of the following represents an inflow of cash? a. A decrease in any liability b. Dividends paid c. repurchase or retirement of stock d. an increase in any asset e. A decrease in any asset

A decrease in any asset

91. Which of the following statements is false? a. A firm's creditors are primarily interested in a firm's Activity Ratios. b. Norms exist for all financial ratios that can be applied across all industries. c. Current and future stockholders are most interested in a firm's short-term liquidity ratios. d. All of the above statements are false.

All of the above statements are false.

The DuPont system: a. breaks the ROA and ROE ratios into component pieces b. requires data from only the balance sheet c. evaluates ROA the product of a firm's profit on its sales and the efficiency of the firm to generate sales from its investment in its assets d. all of the above e. Both (a) and (c)

Both (a) and (c)

The Statement of Cash Flows is helpful to financial managers in that: a. It calls attention to unusual changes in either the major categories of cash flow or specific items so that the financial manager can pinpoint problems the firm may be having b. It calls attention to the expenses deducted to determine net income. c. Financial managers can create pro forma statements to determine whether or not the firm will need additional external financing. d. All of the above e. Both (a) and (c)

Both (a) and (c)

What ratio measures the ability of the firm to satisfy its short term obligations as they come due? a. Activity ratio b. Times interest earned ratio c. Current ratio d. Inventory turnover ratio

Current ratio

What was the effect on free cash flow for the firm this past year? a. Increase of $100 b. Increase of $150 c. Decrease of $50 d. Decrease of $100

Decrease of $50

How is depreciation accounted for on the Statement of Cash Flows? a. Depreciation is irrelevant for cash flow purposes and has no place on the Statement of Cash Flows. b. Depreciation expense is included in the operating activities section of the statement. c. As depreciation is deducted to determine Net Income there is no need to include it on the statement. d. none of the above

Depreciation expense is included in the operating activities section of the statement.

How do we calculate a company's operating cash flow? a. EBIT - taxes + depreciation b. EBIT - taxes - depreciation c. EBIT + taxes + depreciation d. EBIT - Sales

EBIT - taxes + depreciation

Which of the following statements is true? a. Financial professionals prefer the accrual-based approach as it focuses more attention on cash inflows and outflows b. Financial managers do not need to make any adjustments to financial statements for decision-making c. Financial managers must convert cash-based financial statements to accrual-based ones before they can begin analyzing a firm d. Financial professionals prefer the cash-based approach as it focuses more attention on cash inflows and outflows

Financial professionals prefer the cash-based approach as it focuses more attention on cash inflows and outflows

Which of the following statements is true? a. Net working capital is a firm's current assets divided by its current liabilities. b. Net working capital is a firm's current assets minus its current liabilities. c. Net working capital measures a firm's ability to meet its short-term obligations. d. All of the above statements are false.

Net working capital is a firm's current assets minus its current liabilities.

What is the financial ratio that measures the price per share of stock divided by earnings per share? a. Return on assets b. Return on equity c. Debt-equity ratio d. Price-earnings ratio

Price-earnings ratio

Which of the following is a liquidity ratio? a. Quick ratio b. P/E- ratio c. Inventory turnover d. Equity multiplier

Quick ratio

Which financial ratio measures the effectiveness of management in generating returns to common stockholders with its available assets? a. Gross profit margin b. Return on equity c. Return on assets d. Current ratio

Return on assets

86. Which of the following statements is false? a. The Notes to Financial Statements provide little information that is relevant to professional security analysts. b. The Notes to Financial Statements provide additional information about a firm, including employee compensation plans, revenue recognition practices and leases. c. The Notes to Financial Statements provide detailed explanatory information that is keyed to various accounts on the financial statements. d. all of the above statements are true e. both (a) and (c) are false

The Notes to Financial Statements provide little information that is relevant to professional security analysts.

Titans Electronics is applying for a new line of credit from their banking partner. To issue the credit, the bank requires the following cutoffs for certain financial ratios: TIE ratio of 4.25 Current Ratio of 1.50 ROA of 5%. What is a likely response from the bank to the application? a. The bank will have reservations, as the TIE ratio does not meet requirements. b. The bank will have concerns, as the current ratio does not meet requirements. c. The bank will have concerns, as the ROA is not high enough. d. The bank will have concerns, as two or more of the requirements are not met.

The bank will have concerns, as the current ratio does not meet requirements.

Holding all other things constant, which of the following represents a cash outflow? a. The company sells a machine. b. The company acquires inventory. c. The company receives a bank loan. d. The company increases accounts payable.

The company acquires inventory.

77. When is the return on assets equal to the return on equity? a. When the current ratio of the firm equals 1. b. When the firm issues equal amounts of long term debt and common stock. c. When the firm issues no dividends for a given time period. d. When the firm only issues equity to finance its borrowing.

When the firm only issues equity to finance its borrowing.

Which of the following statements is false? a. On the balance sheet a firm's assets are listed in ascending order of liquidity. b. In a common size balance sheet, all assets are expressed as a percentage of sales. c. Net property, plant and equipment represents the original value of all real property, structures and long-lived equipment owned by the corporation. d. all of the above statements are false

all of the above statements are false

46. The effect of an increase in a firm's accounts payable during the year, assuming that the current asset portion of the balance sheet remains the same, is a. an outflow of cash. b. an inflow of cash. c. neither an inflow nor an outflow of cash. d. a decrease in the equity of the firm.

an inflow of cash.

Accountants: a. generally construct financial statements using the cash-based approach b. generally construct financial statements using the accrual-based approach c. must apply Generally Accepted Accounting Principles to fairly portray how the firm has performed in the past d. must apply Generally Accepted Accounting Principles to fairly portray how the firm will perform in the future e. both (b) and (c)

both (b) and (c)

Which of the following is not a classification of a firm's cash flows: a. investment flows b. financial flows c. operating flows d. capital flows

capital flows

Financial professionals prefer to focus on an accounting approach that focuses on a. governmental accounting methods. b. current and prospective cash flows. c. economically based accruals. d. international accrual accounting standards.

current and prospective cash flows.

When calculating the dollar amount of fixed assets purchased during the year what information is required? Assume that no fixed assets were disposed of during the year. a. the current and prior year's gross fixed assets b. the current and prior year's net fixed assets c. the current and prior year's net fixed assets plus the firm's depreciation expense for the year. d. either a or c will suffice

either a or c will suffice

In order to identify the amount of funds that a firm borrowed during the preceding year, what section is the best source within the Statement of Cash Flows? a. operating flows b. investment flows c. financing flows d. total net cash flows

financing flows

When calculating a firm's free cash flow from earnings before interest and taxes we must add back depreciation, amortization and depletion expense and allowances because a. they are non-cash expenditures. b. the accounting method for reporting such expenses may be different from that reported to the taxing authority. c. they approximate the value of fixed asset purchases during the year. d. they are unrelated to the amount of taxes paid during the year.

hey are non-cash expenditures.

If you start with earnings before interest and taxes and then subtract a firm's tax expense while adding back the amount of depreciation expense for the firm during the year, the resulting figure is called a. free cash flow b. operating cash flow c. net cash flow d. gross cash flow

operating cash flow

The Statement of Retained Earnings a. reconciles the net income earned during a given time period and any cash dividends paid with the change in Retained Earnings between the start and end of that period. b. shows a snapshot of the firm's financial position at a specific point in time c. reconciles the net income earned during a given time period and any cash dividends and interest on debt paid with the change in Retained Earnings between the start and end of that period d. shows the impact of Treasury Stock on the firm's Common Equity

reconciles the net income earned during a given time period and any cash dividends paid with the change in Retained Earnings between the start and end of that period.

34. The balance sheet entry that represents the cumulative total of the earnings that a firm has reinvested since its inception is a. common stock. b. paid-in-capital. c. par value. d. retained earnings.

retained earnings.

Which of the following items can be found on an income statement? a. Accounts receivable b. Long-term debt c. Sales d. Inventory

sales

Generally accepted accounting principles are developed by a. the Securities and Exchange Commission. b. the Financial Accounting Standards Board. c. Congress. d. the New York Stock Exchange.

the Financial Accounting Standards Board.

If you are looking to review a firm's sources and uses of cash flows over the year, the easiest place to find that information is a. the Income Statement b. the Statement of Retained Earnings c. the Statement of Cash Flows d. the Balance Sheet

the Statement of Cash Flows

In general, the more debt a firm uses in relation to its total assets a. the less risk there is to the equity holders of the firm. b. the less financial leverage it uses. c. the greater the financial leverage it uses. d. the greater extent to which it uses equity.

the greater the financial leverage it uses.

Which of the following statements is not required by the SEC for publicly traded firms? a. the statement of cost of goods sold b. the statement of retained earnings c. the statement of cash flows d. the balance sheet

the statement of cost of goods sold

If you only knew a company's total assets and total debt, which item could you easily calculate? a. Sales b. Depreciation c. Total equity d. Inventory

total equity