Finance Ch 1, 3,4
For the past year, Momsen Limited had sales of $44,042, interest expense of $2,918, cost of goodssold of $14,559, selling and administrative expense of $10,626, and depreciation of $4,675. If the taxrate was 22 percent, what was the company's net income? A) $17,074 B) $8,786 C) $7,885 D) $11,264 E) $8,144
NI = 44,042 - 2,918 - 14,559 - 10,626 - 4,675 - Taxes NI = 11,264 - (11,264 x .22) NI = 11,264 - 2478 = 8,786 B is the correct choice
The primary goal of financial management is most associated with increasing the: Question 1 options: dollar amount of each sale. traffic flow within the firm's stores. firm's liquidity. fixed costs while lowering the variable costs. market value of the firm.
market value of the firm.
A firm has net working capital of $440, net fixed assets of $2,186, sales of $5,500, and current liabilities of $750. How many dollars worth of sales are generated from every $1 in total assets?A) $1.63B) $2.52C) $2.09D) $1.87E) $1.70
440 + 750 = 1190 1190 + 2186 = 3376 5500/3376 = 1.63 A is the correct choice
Jupiter Explorers has $5,800 in sales. The profit margin is 4 percent. There are 5,000 shares of stockoutstanding, with a price of $1.70 per share. What is the company's price-earnings ratio?A) 7.89 timesB) 18.32 timesC) 21.84 timesD) 11.56 timesE) 36.64 times
Answer: Sales = $5,800 profit margin is 4% profit margin=Net income/ Sales 0.04=Net income/ $5,800 Net income=0.04×$5,800=$232 Number of shares outstanding = 5,000 Earnings per share =Net income / number of shares outstanding =$2325,000=$0.0464 Step 2/2 Earnings per share = $0.0464 market price per share = $1.70 Price−earnings ratio =Market price per share / earnings per share=$1.70$0.0464=36.64 The correct answer is 36.64 times
At the beginning of the year, a firm has current assets of $328 and current liabilities of $232. At theend of the year, the current assets are $493 and the current liabilities are $272. What is the change innet working capital? A) $205 B) −$125 C) $165 D) $0 E) $125
At beginning Working capital = current assets - current liabilities = 328-232 = 96 At end Working capital = 493-272 = 221 Change in working capital = 221 - 96 = 125
You are examining a company's balance sheet and find that it has total assets of $20,280, a cash balance of $2,100, inventory of $4,785, current liabilities of $5,573, and accounts receivable of $2,623. What is the company's net working capital? Question 2 options: $3,935 $850 $14,707 $5,635 $1,835
Cash$ 2,100 Accounts Receivable $ 2,623 Inventories $ 4,785 Total Current Assets $ 9,508 Total Current Liabilities $ 5,573 Working Capital =$9,508 - $5,573 =$3,935 So Option 3,935 is correct
Samuelson's has a debt-equity ratio of 24 percent, sales of $7,000, net income of $1,800, and totaldebt of $9,200. What is the return on equity?A) 2.40%B) 25.71%C) 4.70%D) 3.79%E) 19.57%
Debt-Equity Ratio = 24% $9,200/Equity = 24% Equity = $9,200 / 0.24 = $38,333.33 Return on Equity = Net Income / Equity = $1,800 / $38,333.33 = 0.0470, or 4.70
Last year, Bad Tattoo Company had additions to retained earnings of $4,185 on sales of $93,845. Thecompany had costs of $74,565, dividends of $2,560, and interest expense of $1,480. If the tax ratewas 22 percent, what the depreciation expense? A) $9,550B) $9,153C) $10,501D) $6,745E) $14,518
EBIT = ($4,185 + 2,560) ÷ (1 − .22) + 1,480 = $10,127 Depreciation = $93,845 − 74,565 − 10,127 = $9,153 B is the correct choice
Mariota Industries has sales of $295,380 and costs of $149,190. The company paid $22,790 in interest and $12,250 in dividends. It also increased retained earnings by $62,606 during the year. If the company's depreciation was $14,645, what was its average tax rate? Question 5 options: 32.08% 31.17% 22.96% 45.29% 11.48%
Earnings before taxes = Sales - Costs - Depreciation - Interest = 295,380 - 149,190 - 14,645 - 22,790 = 108755 Net income = Dividends + Increase in retained earnings = 12,250 + 62,606 = 74856 Taxes = Earnings before taxes - Net income = 108755 - 74856 = 33899 Tax rate = Taxes / Earnings before taxes Tax rate = 33899/108755 = .3117 or 31.17%
Samuelson's has a debt-equity ratio of 23 percent, sales of $6,500, net income of $1,500, and total debt of $7,700. What is the return on equity? Question 10 options: 19.48% 23.08% 4.48% 3.64% 2.30%
Equity = 7700/23% = $33,478.26 Given that the debt-equity ratio = 23%, which means that debt = 23% of equity ROE = Net Income / Total Equity = 1500/33,478.26 = 0.0448052 x 100 = 4.48% This means that the company is returning about 4.48% on the equity
Last year, Bad Tattoo Company had additions to retained earnings of $4,440 on sales of $94,580. The company had costs of $75,060, dividends of $2,740, and interest expense of $1,720. If the tax rate was 25 percent, what the depreciation expense? Question 4 options: $14,147 $7,180 $8,227 $9,575 $8,624
Net Income = Dividends+Retained net income Net Income = 2440 + 4440 =$7,180.00 Earnings before Tax = Net Income/(1-Tax rate) Earnings before Tax = 7180/(1-.25) = 7180/.75 EBT = 9,573 EBT = Sales-Costs-Depreciation-Interest 9,573 = 94,580−75,060-Depreciation- 1720 Depreciation = 94,580 − 75,060 - 1720 -9,573 Depreciation = 8,227
Mariota Industries has sales of $341,620 and costs of $181,210. The company paid $27,910 ininterest and $13,450 in dividends. It also increased retained earnings by $66,350 during the year. Ifthe company's depreciation was $17,405, what was its average tax rate?A) 44.23%B) 22.46%C) 10.33%D) 30.67%E) 32.61%
Net income = $13,450 + 66,350 = $79,800 EBT = $341,620 − 181,210 − 17,405 − 27,910 = $115,095 Taxes = $115,095 − 79,800 = $35,295 Average tax rate = $35,295 ÷ $115,095 = .3067, or 30.67% D
Smashed Pumpkins Company paid $208 in dividends and $631 in interest over the past year. Thecompany increased retained earnings by $528 and had accounts payable of $702. Sales for the yearwere $16,580 and depreciation was $756. The tax rate was 21 percent. What was the company'sEBIT?A) $3,482B) $1,299C) $932D) $1,563E) $1,834
Net income = $208 + 528 = $736 EBT = $736 ÷ ( 1 − .21) = $932 EBIT = $932 + 631 = $1,563 D
Lee Sun's has sales of $3,250, total assets of $2,950, and a profit margin of 4 percent. The firm has atotal debt ratio of 40 percent. What is the return on equity?A) 4.41%B) 7.34%C) 13.62%D) 3.25%E) 4.00%
Net income = $3,250 × .04 = $130.00 Total debt ratio = .40 = ($2,950 − Total equity) ÷ $2,950 Total equity = $1,770.00 Return on equity = $130.00 ÷ $1,770.00 = .0734, or 7.34%
You are examining a company's balance sheet and find that it has total assets of $20,864, a cashbalance of $2,316, inventory of $5,041, current liabilities of $6,085, and accounts receivable of$2,831. What is the company's net working capital? A) $14,779 B) $1,787 C) $5,979 D) $938 E) $4,103
Net working capital =Current assets-Current liabilities Net working capital =(2316+5041+2831)-6085 Net working capital =4,103
HUD Company had a beginning retained earnings of $27,875. For the year, the company had netincome of $4,790 and paid dividends of $1,600. The company also issued $3,000 in new stock during the year. What is the ending retained earnings balance? A) $29,475 B) $31,065 C) $34,065 D) $30,875 E) $28,065
Opening balance - 27,875 + Net Income - 4,790 - Dividend paid - (1,600) Closing balance = $31,065 Please note that issuance of new stock will not be included in retained earnings. 27,875 + 4790 - 1600 = 31,065 B is the correct choice
Goshen Pools has total equity of $358,200 and net income of $47,500. The debt-equity ratio is .68and the total asset turnover is 1.2. What is the profit margin?A) 4.82%B) 5.23%C) 5.67%D) 6.58%E) 7.31%
Profit margin = ($47,500 ÷ $358,200) ÷ [1.2 × (1 + .68)] = .0658, or 6.58%
Jupiter Explorers has $10,200 in sales. The profit margin is 4 percent. There are 6,500 shares of stock outstanding, with a price of $2.10 per share. What is the company's price-earnings ratio? Question 9 options: 16.73 times 23.91 times 14.28 times 33.46 times 13.18 times
Profit margin=Net income/Sales Net income=10200*4%=$408 Earnings per share=Net income/Shares of stock outstanding =408/6500=$0.0627692308 Price earnings ratio=Market price/Earnings per share =2.1/0.0627692308 =33.46 times(Approx).
Southwestern Agricultural Cooperative has current liabilities of $162,500, net working capital of$28,560, inventory of $175,800, and sales of $1,941,840. What is the quick ratio?A) .07B) .16C) .09D) 1.08E) 1.18
Quick ratio = ($28,560 + 162,500 − 175,800) ÷ $162,500 = .09
Computer Geeks has sales of $618,900, a profit margin of 13.2 percent, a total asset turnover rate of 1.54, and an equity multiplier of 1.06. What is the return on equity? Question 8 options: 21.55% 22.11% 12.67% 18.91% 18.28%
Return on Equity = Profit Margin * Total Asset turnover rate * equity multiplier Return On Equity= 0.132*1.54*1.06 Return on Equity =0.2155 Return on equity =21.55 percent
A firm has net income of $4,238 and interest expense of $898. The tax rate is 21 percent. What is thefirm's times interest earned ratio?A) 7.33B) 7.26C) 6.97D) 8.26E) 9.33
Times interest earned ratio = {[$4,238 ÷ (1 − .21)] + $898} ÷ $898 = 6.97
A firm has total debt of $1,490 and a debt-equity ratio of .34. What is the value of the total assets? Question 7 options: $1,996.60 $4,382.35 $3,400.00 $5,872.35 $5,066.00
Total Equity = Total Debt / Debt-Equity Ratio Total Equity = $1,490 / 0.34 ≈ $4,382.35 Total Assets = Total Debt + Total Equity Total Assets = $1,490 + $4,382.35 = $5,872.35 So, the value of the total assets for the firm is $5,872.35. The correct option is: $5,872.35
A firm has net working capital of $390, net fixed assets of $2,136, sales of $5,000, and current liabilities of $700. How many dollars worth of sales are generated from every $1 in total assets? Question 6 options: $1.79 $2.34 $1.76 $1.55 $1.98
Working Capital =Current Assets−Current Liabilities Explanation: where, Working capital = 390 Current Liabilities = 700 390 = CA - 700 CA = WC + CL CA = 390 + 700 =1090 Now, the total assets for the firm is as follows: Total Assets = Current Assets + Fixed assets = 1,090 + 2,136 = 3,226 Sales per $ of Assets = Sales/ Assets = 5000/3226 = $1.55 The sales per 1 Dollar of assets is 1.55
Kahlan Opinion Surveys had beginning retained earnings of $24,600. During the year, the company reported sales of $105,700, costs of $78,300, depreciation of $9,000, dividends of $1,200, and interest paid of $635. The tax rate is 21 percent. What is the retained earnings balance at the end of the year? Question 3 options: $37,671.44 $36,082.15 $37,434.35 $35,835.50 $36,121.44
\The formula for calculating the Net Income is : Net Income = [ ( Sales - Costs - Depreciation - Interest paid ) * ( 1 - Tax rate ) ] As per the information given in the question we have Sales = $ 105,700 ; Costs = $ 78,300 ; Depreciation = $ 9,000 ; Dividends = $ 1,200 ; Interest paid = $ 635 ; Tax rate = 21% = .21 Applying the above information in the Net Income formula we have = [ $ 105,700 - $ 78,300 - $ 9,000 - $ 635 ] * ( 1 - .21) = [ $ 105,700 - $ 78,300 - $ 9,000 - $ 635 ] * .79 = $ 17,765 * .79 = $ 14,034.35 Thus Net Income is = $14,034.35 Calculation of retained earnings balance at the end of the year: The formula for calculating the retained earnings balance for the year is = Beginning retained earnings of the year + Net income of the year - dividend paid As per the information available we have Beginning retained earnings of the year = $ 24,600 ; Net income of the year = $14,034.35 ; Dividend paid = $ 1,200 ; Applying the above information in the formula we have the retained earnings balance at the end of the year as : = $ 24,600 + $ 14,034.35 - $ 1,200 =$ 37,434.35 Thus the retained earnings balance at the end of the year = $ 37,434.35