Chapter 3 & 4 Finance

Quipe Industries provided the following information for the year ending June 30, 2014. Increase in inventories $ 42 Purchased treasury stock 25 Purchased property and equipment 27 Net income 495 Decrease in accrued income taxes 63 Depreciation and amortization 168 Decrease in accounts payable 15 Increase in accounts receivable 39 Increase in long-term debt 150 What was Quipe Industries' cash flow from financing for the year ending June 30, 2014?

$125

If Kalium Motors has an EBIT of $28 million, interest of $8 million and is taxed at an average rate of 32%, what is its net income?

$13.6 million

Chandler Sporting Goods produces baseball and football equipment and lines of clothing. This year the company had cash and marketable securities worth $335,485, accounts payables worth $1,159,357, inventory of $1,651,599, accounts receivables of $1,488,121, short-term notes payable worth $313,663, and other current assets of $121,427. What is the company's net working capital?

$2,123,612

Finore Manufacturing has the following amounts on its 12/31/14 balance sheet. Cash $150 Other current assets 397 Property, plant, & equipment, net of depreciation 538 Current liabilities 324 Total Liabilities 504 What was Finore Manufacturing's net working capital on December 31, 2014?

$223

Trident Manufacturing Company's treasurer identified the following cash flows during this year as significant. The company repaid existing debt of $425,110, while raising additional debt capital of $750,000. It also repurchased stock in the open markets for a total of $63,250 and paid $233,144 in dividends to its shareholders. What is the net cash provided by (used in) financing activities?

$28,496

Crane Chemicals management identified the following cash flows as significant in its year-end meeting with analysts: During the year Crane had repaid existing debt of $310,200 and raised additional debt capital of $645,300. It also repurchased stock in the open market for a total of $44,410. What is the net cash provided by financing activities?

$290,690

Finore Manufacturing has the following amounts on its 12/31/14 balance sheet. Cash $150 Other current assets 397 Property, plant, & equipment, net of depreciation 538 Current liabilities 324 Total Liabilities 504 What was Finore Manufacturing's equity as on December 31, 2014?

$581

Tre-Bien Bakeries generated net income of $233,412 this year. At year end, the company had accounts receivables of $47,199, inventory of $63,781, and cash of $21,461. It also had accounts payables of $51,369, short-term notes payables of $11,417, and accrued taxes of $6,145. The net working capital of the firm is

$63,510.

The following financial data of Covise Corp. for the past fiscal year is given. Net income $34,000 Increase in accounts payable 14,000 Increase in accrued income taxes 14,000 Increase in accounts receivable 16,000 Depreciation 22,000 Calculate company's cash flow to investors from operating activities?

$68,000

Shane, Inc., has completed its fiscal year and reported Total Assets of $1,000,000 and Total Liabilities of $300,000. Calculate the value of common equity.

$700,000

Contrary Computer Corp. has reported that its net income for 2010 is $2,700,000. The firm has 600,000 shares outstanding and a price-earnings ratio of 15.8 times. What is the firm's share price?

$71.10

Centennial Brewery produced revenues of $1,145,227 in 2008. It has expenses (excluding depreciation) of $812,640, depreciation of $131,335, and interest expense of $81,112. It pays an average tax rate of 34 percent. What is the firm's net income after taxes? Round your final answer to the nearest dollar.

$79,292

Tumbling Haven, a gymnastic equipment manufacturer, provided the following information to its accountant. The company had current assets of $145,332, net fixed assets of $356,190, and other assets of $4,176. The firm had long-term debt of $76,445, common stock of $200,000, and retained earnings of $134,461. What amount of current liabilities did this firm have?

$94,792

During 2008, Towson Recording Company increased its investment in marketable securities by $36,845, funded fixed assets acquisition by $109,455, and had marketable securities of $14,215 mature. What is the net cash provided by (used in) investing activities?

-$132,085

Blossom Systems had net income of $3.774 billion and, at year end, 5.100 billion shares outstanding. Calculate the earnings per share for the company.

.74 per share

The Blossom Company has disclosed the following financial information in its annual reports for the period ending March 31, 2017: sales of $1.452 million, cost of goods sold of $801,000, depreciation expenses of $175,000, and interest expenses of $89,575. Assume that the firm has an average tax rate of 35 percent. Compute the cash flows to investors from operating activity

515,751.25

The Crane Chemical Corporation announced that, for the period ending March 31, 2017, it had earned income after taxes of $2,768,942.25 on revenues of $13,199,000. The company's costs (excluding depreciation and amortization) amounted to 61 percent of sales, and it had interest expenses of $392,168. What is the firm's depreciation and amortization expense if its average tax rate is 34 percent?

560,074.95

Which of the following is the best example of how a market-value balance sheet item differs from the firm's book-value balance sheet item? A firm sold common stock twenty-years ago for $20.00 a share. The firm's common stock is currently selling for $96.50 per share. A firm has $5 million of accrued liabilities on the books. A firm issued preferred stock ten-years ago. These shares of preferred stock currently are selling for par value. A firm issued long-term bonds five-years ago that currently sell for par value.

A firm sold common stock twenty-years ago for $20.00 a share. The firm's common stock is currently selling for $96.50 per share.

Accounting standards prescribed by generally accepted accounting principles (GAAP) are important because they: make the financial statements of all firms standardized. allow one to examine a firm's performance with ease over a period of time. make it possible for management or analysts to compare a firm's performance with that of other competitors. All of these.

All of these

Which of the following sections do annual reports typically contain? Financial summary related to the past year's performance. Information about the company, its products, and its activities. Audited financial statements, including limited historical financial data. All three of the above sections are included in the annual report.

All three of the above sections are included in the annual report.

Interest is a tax-deductible expense. This causes firms to have a preference for financing with:

Bonds

Which of the following best represents cash flows to investors?

Cash flow from operating activity minus cash flow invested in net working capital minus cash flow invested in long-term assets

Which of the following is NOT a cash flow from investing activities?

Cash payments of dividends to shareholders.

Which of the following is NOT a cash flow from operating activities? Cash payments on the principal of long-term debt Payments to purchase raw materials Cash receipts from selling goods and services Payments for utilities and rent

Cash payments on the principal of long-term debt

Which of the following would appear as part of equity on a company's balance sheet?

Common Stock

Petra, Inc., has $400,000 as current assets, $1.225 million as plant and equipment, and $250,000 as goodwill. In preparing the balance sheet, these assets should be listed in which of the following orders?

Current assets, plant and equipment, and goodwill.

What is the difference between FIFO (first in, first out) and LIFO (last in, first out) accounting? FIFO refers to the practice of firms, when making sales, assuming that the inventory that came in first (at a higher price) is being sold first. During a period of rising prices, LIFO implies that a firm is selling the higher cost, newer inventory first, leaving the lower cost, older inventory on the balance sheet. During a period of falling prices, LIFO implies that a firm is selling the higher cost, newer inventory first, leaving the lower cost, older inventory on the balance sheet. LIFO refers to the practice of firms, when making sales, assuming that the inventory that came in last is being sold first (at a higher price).

During a period of rising prices, LIFO implies that a firm is selling the higher cost, newer inventory first, leaving the lower cost, older inventory on the balance sheet.

Carla Vista Jewelers management announced that the company had net earnings of $8,189,000 for this year. The company has 2,981,000 shares outstanding, and the year-end stock price is $43.00. What are Carla Vista's earnings per share and P/E ratio?

Earnings per share: $2.75 P/E Ratio: 15.64 times

Which of the following does NOT belong to an income statement?

Goodwill

Which of the following is a tax-deductible expense for a corporation? Preferred stock dividends paid Loan principal paid Interest paid Common stock dividends paid

Interest Paid

On June 23, 2008, Mikhal Cosmetics sold $250,000 worth of its products to Rynex Corporation, with the payment to be made in 90 days on September 20. The goods were shipped to Rynex on July 2. The firm's accountants should recognize the sale on:

June 23, 2008.

Which of the following equations describes a firm's net cash flow from operating activities?

Net cash flow = Net income − Non-cash revenues + Non-cash expenses

Depreciation and amortization expenses are:

Noncash expenses that cause a firm's after-tax cash flows to exceed its net income.

Which of the following would appear as a liability on a company's balance sheet?

Notes payable

Which of the following assets is an intangible asset? Plant and equipment Delivery truck Land and buildings Patents and copyrights

Patents and copyrights

Trident Corporation had the following cash flows in the current year. Which of the following will be categorized under the financing activities section of the statement of cash flows? Rent on a warehouse amounting to $1.1 million. Purchase of $125,000 worth of five-year bonds issued by Towson Utilities. Preferred dividends of $330,000 paid to shareholders. Lease income received on a piece of land.

Preferred dividends of $330,000 paid to shareholders.

Which of the following ratios is an indicator of market value?

Price Earnings Ratio

Which of the following is a cash flow from investing activities? Purchase of plant and equipment. Cash from sale of products. Rent received from industrial property owned. Cash payment of dividends to shareholders.

Purchase of plant and equipment.

Which of the following is an income statement item?

Selling and Administrative Expense

The generally accepted accounting principles (GAAP) are set by:

The Financial Accounting Standards Board (FASB).

Which of the following presents a summary of the changes in a firm's balance sheet from the beginning of an accounting period to the end of an accounting period?

The statement of cash flows.

Cash raised by issuing common stock is an example of financing activities. T/F

True

The statement of cash flows can be described as: measuring only the company's operating activities. representing only the company's financing activities. having a value equal to the sum of the long-term liabilities and notes plus the depreciation expense. Tying together the income statement with the balance sheets from the beginning of the period and the end.

Tying together the income statement with the balance sheets from the beginning of the period and the end.

The major disadvantages of market-value accounting include: the difficulty in estimating the current value for some assets. the difficulty in applying some of the valuation models used to estimate market values. the resulting numbers are potentially open to abuse. all of the above are disadvantages of market-value accounting.

all of the above are disadvantages of market-value accounting.

The generally accepted accounting principles (GAAP) are rules

and procedures that define how companies are to maintain financial records and prepare financial statements.

Your uncle is planning to sell his second home in Bethany Beach, Delaware in the next few weeks. You are interested in buying this beachside property, so your agent negotiates a price for the house with your uncle's agent. This transaction is an example of the:

assumption of arm's-length transactions

The average tax rate: the tax rate that is paid on the last dollar of income earned. calculated by dividing the total taxes paid by the taxable income. the tax rate on the excess over the base. always higher than the marginal tax rate.

calculated by dividing the total taxes paid by the taxable income

The going concern assumption implies that a firm will:

continue to be in business for the foreseeable future.

When prices are falling, the value of inventory using the LIFO method rather than FIFO gives inventory a:

higher value and net income a higher value.

The cost principle states that an asset should be recognized on the balance sheet at the:

historical cost.

Which of the following balance sheet items generally takes the longest time to convert to cash? Accounts payable Accounts receivable Inventory Treasury bills

inventory

Net cash flow:

is the difference between a firm's actual cash receipts and cash payments in a given period.

The income statement is:

like a video recording of a firm's revenues and expenses during a period of time.

When a firm estimates future taxes, it should consider the:

marginal tax rate.

Common stockholders are:

owners of the firm

Annual reports are prepared by a firm's management to:

provide a broad overview of the firm's financial and operating performance.

According to the realization principle, revenue from a sale of a firm's products are recognized when the:

sale occurs whether or not cash is actually received.

Tyson Corporation bought raw materials on April 23, 2008 and also on July 2, 2008. Products produced during the months of May were sold in July. The firm uses FIFO to value its inventory. According to the matching principle, the firm's accountant should associate: the inventory acquired on July 2 with the products sold. the inventory acquired on April 23 with the products sold. neither of these dates is valid because the products were sold in July. none of these.

the inventory acquired on April 23 with the products sold.

Clarity Music Company has a marginal tax rate of 34 percent and an average tax rate of 32 percent this year. It is planning to construct a new recording studio next year. The appropriate tax rate to be applied on the income generated from the new studio is:

the marginal tax rate.

According to the balance sheet identity, total assets must equal:

total liabilities plus owners' equity.