CH 1234
Running Gear has sales of $316,000, depreciation of $47,200, interest expense of $41,400, costs of $148,200, and taxes of $16,632. The firm has net capital spending of $36,400 and a decrease in net working capital of $14,300. What is the cash flow from assets for the year? -$119,655 -$129,068 -$134,585 -$120,810 -$145,985
$129,068
For the past year, Zhao Events had taxable income of $198,600, beginning common stock of $68,000, beginning retained earnings of $318,750, ending common stock of $71,500, ending retained earnings of $316,940, interest expense of $11,300, and a tax rate of 21 percent. What is the amount of dividends paid during the year? $158,704 $157,280 $153,555 $163,200 $159,935
$158,704
Johnston & Chu started the year with $650,000 in the common stock account and $1,318,407 in the additional paid-in surplus account. The end-of-year balance sheet showed $720,000 and $1,299,310 in the same two accounts, respectively. What is the cash flow to stockholders if the firm paid $68,500 in dividends? $1,500 −$17,597 $68,500 $17,597 Correct −$1,500
$17,597
Agrawal, Incorporated, has common stock of $6,200, paid-in surplus of $9,100, total liabilities of $8,400, current assets of $5,900, and fixed assets of $21,200. What is the total shareholders' equity that the company should report? $23,700 $35,500 $6,900 $15,300 $18,700
$18,700
Garza & Gray Realty has sales of $68,900, dividends of $1,960, and net income of $4,900. The firm is expecting sales to decrease by 3 percent next year while the net profit margin remains constant. The firm wants to increase the dividend payout ratio by a fixed 2.5 percent. What is the projected increase in retained earnings for next year? $3,438 $1,711 $1,867 $1,969 $2,733
$2,733
Echo Point has sales of $2,800, total assets of $1,900, and a debt-equity ratio of .5. Its return on equity is 15 percent. What is the net income? $190 $240 $210 $130 $350
$190
Smith & Thompson is currently operating at only 84 percent of fixed asset capacity. Current sales are $550,000. What is the maximum rate at which sales can grow before any new fixed assets are needed? 19.05% 18.03% 17.47% 18.87% 17.23%
19.05%
Campos Restaurant Supply has a return on assets of 9 percent, a return on equity of 11.3 percent, and a payout ratio of 22 percent. What is its internal growth rate? 8.49% 7.72% 5.08% 7.55% 6.23%
7.55%
Shareholders can replace company management by implementing: -stock options. -promotions. -the Sarbanes-Oxley Act. -an agency play. -a proxy fight.
a proxy fight.
If a firm equates its pro forma sales growth to the rate of sustainable growth, and has positive net income and excess capacity, then the: -debt-equity ratio will increase. -number of common shares outstanding will increase. -retained earnings will increase. -total assets will have to increase at the same rate as sales growth. -maximum capacity level will have to increase at the same rate as sales growth.
retained earnings will increase.
Wood Recovery has sales of $397,000, total assets of $225,000, and total debt of $101,700 million. The net profit margin is 6.2 percent. What is the return on equity? 10.94% 1.32% 32.20% 19.96% 5.99%
19.96%
-Which one of the following is a source of cash? -Decrease in accounts payable -Decrease in common stock -Decrease in inventory -Increase in fixed assets -Increase in accounts receivable
Decrease in inventory
Which one of the following would cause a cash outflow from a corporation? -paying dividends -issuing new securities -receiving a tax refund from the govt -assigning common stock to employees -taking out a loan from a bank
paying dividends
The most acceptable method of evaluating the financial statements is to compare the company's current financial: -statements to the projections that were created based on Tobin's Q. -ratios to the company's historical ratios. -statements to the financial statements of similar companies operating in other countries. -statements to those of larger companies in unrelated industries. -ratios to the average ratios of all companies located within the same geographic area.
ratios to the company's historical ratios.
A common-size income statement is an accounting statement that expresses all of a firm's expenses as a percentage of: -taxable income. -sales. -net income. -total assets. -total equity.
sales
Pavlak Surveyors has beginning current assets of $1,360, beginning current liabilities of $940, ending current assets of $1,720, and ending current liabilities of $1,080. What is the change in net working capital? $1,060 $190 $220 $170 $940
$220
Khadimally, Incorporated, expects sales of $763,500 next year. The net profit margin is 5.3 percent and the firm has a dividend payout ratio of 18 percent. What is the projected increase in retained earnings? $7,283.79 $26,294.75 $40,465.50 $33,181.71 $137,430.00
$33,181.71
Seitz Tooling is currently operating at 82 percent of capacity. All costs and net working capital vary directly with sales. The firm currently has $42,700 of net fixed assets. What is the amount of pro forma net fixed assets for next year if sales are projected to increase by 7 percent? $42,148 $42,700 $38,101 $33,412 $37,968
$42,700
The retention ratio (plowback b) can be computed as: *1 + Dividend payout ratio. *1 − Plowback ratio. *1 − (Cash dividends/Net income). *Change in retained earnings/Cash dividends. *(Change in retained earnings + Cash dividends)/Net income.
1 − (Cash dividends/Net income).
Roller Sport has a net profit margin of 8.3 percent and a payout ratio of 42 percent. The firm has annual sales of $386,400, current liabilities of $37,200, long-term debt of $123,800, net working capital of $16,700, and net fixed assets of $391,500. No external equity financing is possible. What is the internal growth rate? 6.14% 5.91% 4.02% 4.36% 3.44%
4.36%
A partner in a law firm expected to earn taxable income of $80,000. Her actual taxable income exceeded this projection by $25,000. Based on the tax table below, how much additional tax did she owe due to the $25,000 increase in taxable income? $5,889.50 $5,250.00 $4,674.00 $6,000.00 $5,500.00
5,889.50
Which of the following actions could cause a company's change in net working capital to be negative for a given year? -Increase the dividends paid to stockholders -Pay off long-term debt before the due date -Purchase additional inventory with cash -Use long-term debt to buy a building -Borrow money from the bank using a note payable in nine months
Borrow money from the bank using a note payable in nine months
______ are personally responsible for 100 percent of the firm's debts. -Both limited and general partners -All business owners -General partners but not sole proprietors -Sole proprietors but not general partners -Both general partners and sole proprietors
Both general partners and sole proprietors
Which one of the following statements regarding corporations is correct? -Shareholders are protected from all potential losses -Shareholders directly elect the CFO -Corporations can have an unlimited life -Undistributed corporate profits are taxable income to the shareholders -The majority of firms in the US are structured as corporations
Corporations can have an unlimited life
Public offerings of debt and equity must be registered with the: -Federal Reserve -Securities and Exchange Commision (SEC) -NYSE Registration Office -NY Board of Governors -Market Dealers Exchange
Securities and Exchange Commission
Which one of the following statements concerning corporate income taxes is correct? -The federal income tax is applied at a flat rate across all levels of taxable income. -The marginal tax rate will always be lower than the average tax rate. -U.S. corporations are exempt from federal taxation. -The first 25 percent of corporate income is exempt from taxation. -Corporations pay no tax on their first $50,000 of income.
The federal income tax is applied at a flat rate across all levels of taxable income.
Corporate dividends represent: -aftertax income from the corporation which becomes taxable income for the recipient. -tax-free income for the recipient because they are distributions of pretax income. -tax-free income for the recipient because they are distributions of aftertax income. -pretax income from the corporation which becomes taxable income for the recipient. -taxable income for both the corporation and the shareholder, whether or not dividends are paid to shareholders.
aftertax income from the corporation which becomes taxable income for the recipient.
A business that is a legal entity separate from the owners, yet treated as a legal person, is called a(n): -corporation -unlimited liability company -sole proprietorship -limited partnership -general partnership
corporation
Net working capital is defined as: -current assets minus current liabilities. -total assets minus total liabilities. -fixed assets minus long-term liabilities. -current liabilities minus shareholders' equity. -total liabilities minus shareholders' equity.
current assets minus current liabilities.
The maximum rate of growth a corporation can achieve can be increased by: -avoiding new external equity financing. -increasing the sales forecast. -increasing the dividend payout ratio. -increasing the corporate tax rate. -increasing the retention ratio.
increasing the retention ratio.
Decisions made by financial managers should primarily focus on increasing the: -growth of the firm -total sales -market value per share of outstanding stock -gross profit per unit produced -size of the firm
market value per share of outstanding stock
The sustainable growth rate of a firm is best described as the ______ growth rate achievable ______. -maximum; excluding external financing of any kind -maximum; with unlimited debt financing -minimum; if the firm maintains a constant equity multiplier -maximum; excluding any external equity financing, while maintaining a constant debt-equity ratio -minimum; assuming a 100 percent retention ratio
maximum; excluding any external equity financing, while maintaining a constant debt-equity ratio
A firm's ______ is the firm's mix of short-term assets and short-term liabilities. -net working capital -net debt -investment capital -net currency -capital structure
net working capital
Ultimately, the ______ control(s) the corporation. -CFO -shareholders -chair of the board -members of the board of directors -COO
shareholders
During the year, the accounts payable of a company rose from $115,200 to $134,300. This change represents a: -use of $19,100 of cash as investment activity. -source of $19,100 of cash as an operating activity. -source of $19,100 of cash as a financing activity. -source of $$19,100 of cash as an investment activity. -use of $19,100 of cash as an operating activity.
source of $19,100 of cash as an operating activity.
Dominic's Custom Draperies has a fixed asset turnover rate of 1.13 and a total asset turnover rate of .94. Its competitor, Window Fashions, has a fixed asset turnover rate of 1.26 and a total asset turnover rate of .91. Both companies have similar operations. Based on this information, Dominic's must be _____ than Window Fashions. -generating net profit more efficiently -utilizing its total assets more efficiently -utilizing greater financial leverage -utilizing its fixed assets more efficiently -generating net profit less efficiently
utilizing its total assets more efficiently
Kalagara Outfitters neither sold nor repurchased any shares of stock during the year. The firm had annual sales of $7,202, depreciation of $1,196, cost of goods sold of $4,509, interest expense of $318, taxes of $248, beginning-of-year shareholders' equity of $4,808, and end-of-year shareholders' equity of $4,922. What is the amount of dividends paid during the year? $1,009 $515 $709 $817
$817
During the year, Pharr Corporation had sales of $459,000. Costs were $388,000 and depreciation expense was $102,800. In addition, the company had an interest expense of $79,250 and a tax rate of 21 percent. What is the operating cash flow for the year? Ignore any tax loss carry-forward provisions. -$94,321 -$15,071 -$72,733 -$47,679 -$77,768
$94,321
______ are personally responsible for 100 percent of the firm's debts. -General Partners but not sole proprietors -Sole proprietors but not general partners -All business owners -Both limited and general partners -Both general partners and sole proprietors
Both general partners and sole proprietors
Which of the following parties are not considered stakeholders of a firm? -Competitors -Employees -Customers -Government -Suppliers
Competitors
Which one of the following is an unintended result of the Sarbanes-Oxley Act? -More detailed and accurate financial reporting -Increased management awareness of internal controls -Corporations delisting from major exchanges -Increased responsibility for corporate officers -Identification of internal control weaknesses
Corporations delisting from major exchanges
Which one of the following best states the primary goal of financial management? -Maximize current dividends per share -Maximize the current value per share -Avoid financial distress -Maximize profit -Maintain steady growth while increasing current profits
Maximize the current value per share
Which one of the following is a cash flow from a corporation into the financial markets? -Borrowing of long-term debt -Payment of government taxes -Payment of loan interest -Issuance of corporate debt -Sale of common stock
Payment of loan interest
Which one of the following grants an individual the right to vote on behalf of a shareholder? -Proxy -Indenture Agreement -Stock Options -Bylaws -Stock Audit
Proxy
Which one of the following is a primary market transaction? -Sale of currently outstanding stock by a dealer to an individual investor Sale of a new share of stock from a corporation to an individual investor -Transfer of stock ownership from one shareholder to another shareholder -Gift of stock from one shareholder to a previous non-shareholder -Repurchase of stock by a corporation from a shareholder
Sale of a new share of stock from a corporation to an individual investor
A firm that opts to "go dark" in response to the Sarbanes-Oxley Act: -ceases to exist -must continue to provide audited financial statements -can provide less information to its shareholders that it did prior to going dark -can continue publicly trading on the exchange it was previously listed -must continue to provide a detailed list of internal control deficiencies -can provide less information to its shareholders that it did prior to going dark
can provide less information to its shareholders than it did prior to "going dark".
Agency problems are most likely to be associated with: -sole proprietorships. -general partnerships. -limited partnerships. -corporations. -limited liability companies.
corporations.
Both Archer's and Burger Bar have price-earnings ratios of 16.2. However, Archer's has a higher PEG ratio than Burger Bar. It must be true that Archer's ______ than Burger Bar. -is increasing its earnings at a slower rate -has a higher earnings growth rate -has a higher market value per share -has more net income -has a higher market-to-book ratio
is increasing its earnings at a slower rate
When developing a common-size balance sheet to evaluate last year's performance, all accounts are expressed as a percentage of: -last year's sales. -the base year's total equity. -last year's total assets -the base year's total assets -the base year's sales.
last year's total assets.
