Corporate Finance Exam 1 - Chapter 2 Quiz
A firm has common stock of $5,000, paid-in surplus of $7,000, retained earnings of $2,000, and total liabilities 10,000. What is the amount of the shareholders' equity?
$14,000
A firm 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 amount of the shareholders' equity?
$18,700 Shareholders' equity = $5,900 + $21,200 - $8,400 = $18,700
Andre's Bakery has sales of $687,000 with costs of $492,000. Interest expense is $26,000 and depreciation is $42,000. The tax rate is 35 percent. What is the net income? (You have to calculate the taxes.)
$82,550 Net income = ($687,000 - $492,000 - $26,000 - $42,000) (1 - .35) = $82,550
Noncash items refer to:
expenses which do not directly affect cash flows.
The percentage of the next dollar you earn that must be paid in taxes is referred to as the _____ tax rate
marginal
Crandall Oil has total sales of $1,349,800 and costs of $903,500. Depreciation is $42,700 and the tax rate is 34 percent. The firm does not have any interest expense. What is the operating cash flow? (You have to calculate the taxes.)
$309,076 Earnings before interest and taxes = $1,349,800 - $903,500 - $42,700 = $403,600 Tax = $403,600 × .34 = $137,224 Operating cash flow = $403,600 + $42,700 - $137,224 = $309,076
Nielsen Auto Parts had beginning net fixed assets of $218,470 and ending net fixed assets of $209,411. During the year, assets with a combined book value of $6,943 were sold. Depreciation for the year was $42,822. What is the amount of net capital spending?
$33,763 Net capital spending = $209,411 - $218,470 + $42,822 = $33,763
Which one of the following accounts is the most liquid? inventory building accounts receivable equipment
accounts receivable
Which of the following is (are) included in the market value of a firm but are excluded from the firm's book value? I. value of management skills II. value of a copyright III. value of the firm's reputation IV. value of employee's experienc
I, III, and IV only
An increase in the depreciation expense will do which of the following? I. increase net income II. decrease net income III. increase the cash flow from assets IV. decrease the cash flow from assets
II and III only