Business Finance Exam 1

The Daily News has projected annual net income of $272,600, which 28 percent will be distributed as dividends. Assume the company will have net sales of $75,000 worth of common stock. What will be the cash flow to stockholders if the tax rate is 21 percent.

$1,328

Lawn Care, Inc., has sales of $367,400, cost of $183,600, depreciation of $84,600, interest of $39,200, and a tax rate of 25 percent. The firm has total assets of $422,100, long-term debt of $102,000, net fixed assets of $264,500, and net working capital of $22,300. What is the return on equity?

38.96 percent

What is the primary disadvantage o the corporate form of organization?

Double taxation

Andre's Bakery has sales of $674,000 with costs of $365,000, interest expense is $15,000 and depreciation is $49,000. The tax rate s 24 percent, What is the net income?

$186,200

Logano Driving School's 2017 balance sheet showed net fixed assets of $3.7 milllio, and the 2028 balance sheet showed net fixed assets of $5.4 million. The company's 2018 income statement showed a depreciation expense of $975,000. What was net capital spending for 2018?

$2,675,000

The Widget Co. purchased all of its fixed assets three years ago for $7.9 million. These assets can be sold today for $4 million. The current balance sheet shows net working capital of $500,00. It all the current assets were liquidated today, the company would receive $1.45 million in cash. The book value of the total assets today is _______ and the market value of those assets is _________.

$6,400,000; $5,450,000

Bonner Automotive has shareholders' equity of $218,700. The firm owes a total of $141,000 of which 40 percent is payable within the next year. The firm has net fixed assets of $209,800. What is the amount of the net working capital?

$93,500

Nielsen's has inventory of $29,406, accounts receivable of $46,215, net working capital of $4,507, and accounts payable of $48,919. What is the quick ratio?

.49

Uptown Men's Wear has accounts payable of $2,214, inventory of $7,950, cash of $1,263, fixed assets of $8,400, accounts receivable of $3,907, and long-term debt of $4,200. What is the value of the net working capital to total assets ratio?

.51

Duke's Garage has cash of $68, accounts receivable of $142, accounts payable of $235, and inventory of $318. What is the value of the quick ratio?

.89

A firm has $160,000 shares of stock outstanding, sales of $1.9 million, net income of $126,400, a price-earnings ratio of 21.3, and a book value per share of $7.92. What is the market-to-book ratio?

2.12

Ridiculousness, Inc., has sales of $49,000, cost of $22,600, depreciation expense of $2,150, and interest expense of $1,900. If the tax rate is 21 percent, what is the opening cash flow, or OCF?

21,707

Based on the following information for Dawn Corp., did cash increase or decrease?

Decreased

Which of the following actions by a financial manager is most apt to create an agency problem?

Increasing current profits when doing so lowers the value of the company's equity

During the year, Al's Tools decreased its accounts receivable by $160, increased its inventory by $115, and decreased its accounts payable by $70. How did these three accounts affect the sources of uses of cash by the firm?

Net use of cash of $25

Which of the following is the DuPont identity for Smolira Golf Corp?

ROE= (.1194)(.88)(1.60)

The Sarbanes-Oxley Act of 2002 is a governmental response to:

management greed and abuses

Capital structure decisions include determining:

how much debt should be assumed to fund a project.

The accounts payable of a company changed from $136,000 to $104,300 over the course year. This change represents a:

use of $31,800 of cash as an operating activity

An example of capital budgeting decision is deciding:

weather or not to purchase new machine for the production line