finance midterm

The Widget Co. purchased new machinery three years ago for $4 million. The machinery can be sold to the Roman Co. today for $2 million. The Widget Co.'s current balance sheet shows net fixed assets of $2,500,000, current liabilities of $1,375,000, and net working capital of $725,000. If all the current assets were liquidated today, the company would receive $1.9 million in cash. The book value of the Widget Co.'s assets today is _____ and the market value of those assets is _____.

$4,600,000; $3,900,000

If a firm has a debt-equity ratio of 1.0, then its total debt ratio must be which one of the following?

.5 Debt = 1 EQ = 1 Assets = 2 TDR = TD/TA = 1/2 = 0.5

DJ, Inc., has net working capital of $3,420, current liabilities of $4,430, and inventory of $4,200. current ratio? quick ratio?

1.77 & .82

At the beginning of the year, a firm has current assets of $328 and current liabilities of $232. At the end of the year, the current assets are $493 and the current liabilities are $272. What is the change in net working capital?

125

If Roten Rooters, Inc., has an equity multiplier of 1.40, total asset turnover of 1.26, and a profit margin of 7.50 percent. What is its ROE?

13.23%

f Roten Rooters, Inc., has an equity multiplier of 1.60, total asset turnover of 2.20, and a profit margin of 4 percent, what is its ROE?

14.08

Your firm has total assets of $4,900, fixed assets of $3,200, long-term debt of $2,900, and short-term debt of $1,400. What is the amount of net working capital?

300

A firm has $680 in inventory, $2,140 in fixed assets, $210 in accounts receivables, $250 in accounts payable, and $80 in cash. What is the amount of the net working capital?

720

Relationships determined from a firm's financial information and used for comparison purposes are known as:

financial ratios

Cash flow from assets is also known as the firm's:

free cash flow

Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time?

income statement

he percentage of the next dollar you earn that must be paid in taxes is referred to as the _____ tax rate.

marginal tax rate

Shareholders' equity:

represents the residual value of the firm

Ratios that measure a firm's liquidity are known as _____ ratios.

short-term solvency

The higher the degree of financial leverage employed by a firm is, the:

Higher is the probability that the firm will encounter financial distress.

An increase in the depreciation expense will do which of the following for a firm with taxable income of $80,000? I. Increase net income. II. Decrease net income. III. Increase the cash flow from assets. IV. Decrease the cash flow from assets.

II & III

Which one of the following statements concerning net working capital is correct?

NWC may be negative

Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as _____ ratios.

Profitability.

A common-size income statement is an accounting statement that expresses all of a firm's expenses as a percentage of:

Sales

Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date?

Balance Sheet

Which one of the following accurately describes the three parts of the DuPont identity?

Equity multiplier, profit margin, and total asset turnover.

Noncash items refer to:

Expenses which do not directly affect cash flows.

The cash flow of a firm that is available for distribution to the firm's creditors and stockholders is called the:

cash flow from assets

Net working capital is defined as:

current assets- current liabilities