Fin 381-03 Exam 1

Griffin's Goat Farm, Inc., has sales of $654,000, costs of $215,000, depreciation expense of $52,000, interest expense of $22,000, and a tax rate of 24 percent. The firm paid out $115,000 in cash dividends, and has 20,000 shares of common stock outstanding. a.What is the earnings per share, or EPS, figure? -13.87 -14.71 -5.75 -18.87 -19.71 b.What is the dividends per share figure? -5.75 -32.70 -13.87 -5.92 -5.46

A. 13.87 B. 5.75

The 2017 balance sheet of Kerber's Tennis Shop, Inc., showed $2.5 million in long-term debt, $760,000 in the common stock account, and $5.95 million in the additional paid-in surplus account. The 2018 balance sheet showed $3.7 million, $915,000, and $8.55 million in the same three accounts, respectively. The 2018 income statement showed an interest expense of $220,000. The company paid out $580,000 in cash dividends during 2018. If the firm's net capital spending for 2018 was $810,000, and the firm reduced its net working capital investment by $145,000, what was the firm's 2018 operating cash flow, or OCF? A.$-2,490,000 B.$-4,980,000 C.$-3,650,000 D.$3,445,000 E.$-3,155,000

A.$-2,490,000

DTO, Inc., has sales of $42 million, total assets of $22 million, and total debt of $7 million. a.If the profit margin is 8 percent, what is the net income? $1,200,000 $1,760,000 $3,024,000 $3,280,000 $3,360,000 b.What is the ROA? 13.75% 15.27% 22.40% 31.82% 48.00% c.What is the ROE? 20.16% 22.40% 31.82% 48.00%

A.$3,360,000 B.15.27% C.22.40%

SDJ, Inc., has net working capital of $1,570, current liabilities of $4,760, and inventory of $1,945. a.What is the current ratio? -0.33 times -0.83 times -1.24 times -1.33 times -1.66 time b.What is the quick ratio? -0.44 times -0.50 times -0.59 times -0.92 times -1.00 times

A.1.33 times B.0.92 times

Twist Corp. has a current accounts receivable balance of $387,615. Credit sales for the year just ended were $2,940,600. a.What is the receivables turnover? 0.13 times 6.07 times 6.83 times 7.59 times 8.35 times b.What is the days' sales in receivables? 38.49 days 43.30 days 48.11 days 52.92 days 57.73 days

A.7.59 times B.48.11 days

A business created as a distinct legal entity and treated as a legal "person" is called a(n): A.corporation. B.sole proprietorship. C.general partnership. D.limited partnership. E.unlimited liability company.

A.corporation.

If Roten Rooters, Inc., has an equity multiplier of 1.33, total asset turnover of 1.23, and a profit margin of 9.50 percent. What is its ROE? A.13.99% B.15.54% C.17.10% D.-3.86% E.14.92%

B.15.54%

Based only on the following information for Thrice Corp., did cash go up or down? By how much? Classify each event as a source or use of cash. Decrease in inventory $450 Decrease in accounts payable $190 Increase in notes payable $660 Increase in accounts receivable $270 A.Cash decreased by $650 B.Cash increased by $650 C.Cash increased by $1,190 D.Cash decreased by $1,570 E.Cash increased by $1,030

B.Cash increased by $650

Which one of the following best states the primary goal of financial management? A.Maximize current dividends per share B.Maximize the current value per share C.Increase cash flow and avoid financial distress D.Minimize operational costs while maximizing firm efficiency E.Maintain steady growth while increasing current profits

B.Maximize the current value per share

Which one of the following is a working capital management decision? A.What type(s) of equipment is (are) needed to complete a current project? B.Should the firm pay cash for a purchase or use the credit offered by the supplier? C.What amount of long-term debt is required to complete a project? D.How many shares of stock should the firm issue to fund an acquisition? E.Should a project should be accepted?

B.Should the firm pay cash for a purchase or use the credit offered by the supplier?

One disadvantage of the corporate form of business ownership is the: A.limited liability of its shareholders for the firm's debts. B.double taxation of distributed profits. C.firm's greater ability to raise capital than other forms of ownership. D.firm's potential for an unlimited life. E.firm's ability to issue additional shares of stock.

B.double taxation of distributed profits.

The 2017 balance sheet of Kerber's Tennis Shop, Inc., showed $790,000 in the common stock account and $6.8 million in the additional paid-in surplus account. The 2018 balance sheet showed $955,000 and $8 million in the same two accounts, respectively. If the company paid out $630,000 in cash dividends during 2018, what was the cash flow to stockholders for the year? A.$325,000 B.$160,000 C.$-735,000 D.$8,325,000 E.$735,000

C.$-735,000

Griffin's Goat Farm, Inc., has sales of $604,000, costs of $215,000, depreciation expense of $56,000, interest expense of $20,000, and a tax rate of 22 percent. What is the net income for this firm? A.$300,140 B.$264,140 C.$244,140 D.$180,120 E.$320,140

C.$244,140

Which one of the following statements is correct? A.The majority of firms in the U.S. are structured as corporations. B.Corporate profits are taxable income to the shareholders when earned. C.Corporations can have an unlimited life. D.Shareholders are protected from all potential losses. E.Shareholders directly elect the corporate president.

C.Corporations can have an unlimited life.

Which one of the following questions is a working capital management decision? A.Should the company issue new shares of stock or borrow money? B.Should the company update or replace its older equipment? C.How much inventory should be on hand for immediate sale? D.Should the company close one of its current stores? E.How much should the company borrow to buy a new building?

C.How much inventory should be on hand for immediate sale?

The growth of both sole proprietorships and partnerships is frequently limited by the firm's: A.double taxation. B.bylaws. C.inability to raise cash. D.limited liability. E.agency problems.

C.inability to raise cash

A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a: A.general partner. B.sole proprietor. C.limited partner. D.corporate shareholder. E.zero partner.

C.limited partner.

Which one of the following terms is defined as the management of a firm's long-term investments? A.Working capital management B.Financial allocation C.Agency cost analysis D.Capital budgeting E.Capital structure

D.Capital budgeting

Capital structure decisions include determining: A.which one of two projects to accept. B.how to allocate investment funds to multiple projects. C.the amount of funds needed to finance customer purchases of a new product. D.how much debt should be assumed to fund a project.

D.how much debt should be assumed to fund a project.

Financial managers should primarily focus on the interests of: A.stakeholders. B.the vice president of finance. C.their immediate supervisor. D.shareholders. E.the board of directors.

D.shareholders

The 2017 balance sheet of Kerber's Tennis Shop, Inc., showed long-term debt of $2.6 million, and the 2018 balance sheet showed long-term debt of $3.95 million. The 2018 income statement showed an interest expense of $370,000. What was the firm's cash flow to creditors during 2018? A.$1,350,370 B.$-368,650 C.$1,350,000 D.$-371,350 E.$-980,000

E.$-980,000

Logano Driving School's 2017 balance sheet showed net fixed assets of $4.5 million, and the 2018 balance sheet showed net fixed assets of $5.9 million. The company's 2018 income statement showed a depreciation expense of $825,000. What was net capital spending for 2018? A.$1,400,000 B.$-575,000 C.$575,000 D.$-1,400,000 E.$2,225,000

E.$2,225,000

The 2017 balance sheet of Dream, Inc., showed current assets of $1,490 and current liabilities of $860. The 2018 balance sheet showed current assets of $1,740 and current liabilities of $1,040. What was the company's 2018 change in net working capital, or NWC? A.$430 B.$-180 C.$1,970 D.$-430 E.$70

E.$70

Which one of the following terms is defined as the mixture of a firm's debt and equity financing? A.Working capital management B.Cash management C.Cost analysis D.Capital budgeting E.Capital structure

E.Capital structure

The decision to issue additional shares of stock is an example of: A.working capital management. B.a net working capital decision. C.capital budgeting. D.a controller's duties. E.a capital structure decision.

E.a capital structure decision.

The primary advantage of being a limited partner is: A.the receipt of tax-free income. B.the partner's active participation in the firm's activities. C.the lack of any potential financial loss. D.the daily control over the business affairs of the partnership. E.the partner's maximum loss is limited to their capital investment.

E.the partner's maximum loss is limited to their capital investment.

Wims, Inc., has current assets of $3,100, net fixed assets of $22,500, current liabilities of $2,600, and long-term debt of $7,400. a.What is the value of the shareholders' equity account for this firm? -15,600 -14,600 -29,400 -17,160 -7,800 b.How much is net working capital? -500 -(500) -(6,900) -7,900 -6,900

a.15,600 b.500