FINC 301- QUIZ 1

[Chap 2] 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 Net working capital = $4,900 - $3,200 - $1,400 = $300

[Chap 3] What is the amount of the dividends paid for 2009?

$45,100 Dividends paid = $56,200 - ($131,800 - $120,700) = $45,100

[Chap 2] Jensen Enterprises paid $1,300 in dividends and $920 in interest this past year. Common stock increased by $1,200 and retained earnings decreased by $310. What is the net income for the year?

$990 Net income = $1,300 + (-$310) = $990

[Chap 3] What is the quick ratio for 2009?

0.60 Quick ratio for 2009 = ($268,100 - $186,700)/$134,700 = 0.60

[Chap 3] What is the cash coverage ratio for 2009?

10.53 Cash coverage ratio = ($95,200 + $11,200)/$10,100 = 10.53

[Chap 3] A firm has sales of $68,400, costs of $42,900, interest paid of $2,100, and depreciation of $6,500. The tax rate is 34%. What is the value of the cash coverage ratio?

12.14 Cash coverage ratio = ($68,400 - $42,900)/$2,100 = 12.14

[Chap 3]Al's Sports Store has sales of $897,400, costs of goods sold of 4628,300, inventory of $208,400, and accounts receivable of $74,100. How many days, on average, does it take the firm to sell its inventory assuming that all sales are on credit?

121.07 days Inventory turnover = $628,300/$208,400 = 3.014875 Days in inventory = 365/3.014875 = 121.07 days

[Chap 3]Big Guy Subs has net income of $150,980, a price-earnings ratio of 12.8, and earnings per share of $0.87. How many shares of stock are outstanding?

173,540 Number of shares = $150,980/$0.87 = 173,540

[Chap 3] How many days of sales are in receivables? (Use 2009 values)

32.97 days Accounts receivable turnover for 2009 = $627,800/$56,700 = 11.07 Days' sales in receivables for 2009 = 365/11.07 = 32.97

[Chap 2] Non-cash items refer to:

expenses which do not directly affect cash flows

[Chap 1] A business formed by two or more individuals who each have unlimited liability for all of the firm's business debts is called a:

general partnership

[Chap 2] Which one of the following is included in a firm's market value but yet is excluded from the firm's accounting value?

good reputation of the company

[Chap 1] Which of the following are advantages of the corporate form of business ownership?

limited liability for firm debt, ability to raise capital, and unlimited firm life

[Chap 3] Ratios that measure a firm's financial leverage are known as _____ ratios.

long-term solvency

[Chap 1] Which of the following represents cash outflows from a corporation?

payment of dividends and payment of government taxes

[Chap 3] Activities of a firm which require the spending of cash are known as:

uses of cash

[Chap 3] Which of the following ratios are measures of a firm's liquidity?

interval measure and quick ratio

[Chap 2] Which one of the following represents the most liquid asset?

$100 of inventory that is sold today for $100 cash

[Chap 2] At the beginning of the year, a firm had current assets of $121,306 and current liabilities of $124,509. At the end of the year, the current assets were $122,418 and the current liabilities were $103,718. What is the change in net working capital?

$21,903 Change in net working capital = ($122,418 - $103,718) - ($121,306 - $124,509) = $21,903

[Chap 2] A firm has a net working capital of $640. Long term debt is $4,180, total assets are $6,230, and fixed assets are $3,910. What is the amount of the total liabilities?

$5,860 Current assets = $6,230 - $3,910 = $2,320 Current liabilities = $2,320 - $640 = $1,680 Total liabilities = $1,680 + $4,180 = $5,860

[Chap 2] The book value of a firm is:

based on historical cost

[Chap 1] Which of the following equations are addressed by financial managers? I. How should a product be marketed? II. Should customers be given 30 or 45 days to pay for their credit purchases? III. Should the firm borrow more money? IV. Should the firm acquire new equipment?

II, III, and IV only

[Chap 3] The U.S. government coding system that classifies a firm by the nature of its business operations is known as the:

Standard Industrial Classification code

[Chap 1] Which one of the following is defined as a firm's short-term assets less its short-term liabilities?

Working capital

[Chap 1] Which of the following accounts are included in working capital management?

accounts payable, accounts receivable, and inventory

[Chap 3] An increase in which one of the following will increase a firm's quick ratio without affecting its cash ratio?

accounts receivable

[Chap 3] Which of the following represent problems encountered when comparing the financial statements of two separate entities?

all: I,II,III, andIV Either one, or both, of the firms may be conglomerates and thus have unrelated lines of business. The operations of the two firms may vary geographically. The firms may use differing accounting methods. The two firms may be seasonal in nature and have different fiscal year ends.

[Chap 1] Which of the following should a financial manager consider when analyzing a capital budgeting project?

all: I,II,III,and IV project start up costs, timing of all projected cash flows, dependability of future cash flows, and dollar amount of each project cash flow

[Chap 1] A stakeholder is:

any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of a firm

[Chap 2] The _____ tax rate is equal to total taxes divided by total taxable income.

average

[Chap 1] A business created as a distinct legal entity and treated as a legal "person" is a called a:

corporation

[Chap 1] Which one of the following business types is best suited to raising large amounts of capital?

corporation

[Chap 1] Which one of the following is a capital budgeting decision?

deciding whether or not to purchase a new machine for the production line

[Chap 3] Which one of the following is a use of cash?

decrease in common stock

[Chap 3] Which one of the following is a source of cash?

decrease in inventory

[Chap 2] An increase in the depreciation expense will do which of the following?

decrease net income and increase the cash flow from assets

[Chap 1] Which one of the following is a capital structure decision?

determining how much debt should be assumed to fund a project

[Chap 1] Which of the following is a working capital management decision?

determining whether to pay cash for a purchase or use the credit offered by the supplier

[Chap 3] During the year, Kitchen Supply increased its accounts receivable by $130, decreased its inventory by $75, and decreased its accounts payable by $40. How did these three accounts affect the firm's cash flows for the year?

$95 use of cash Net use of cash = 130 + 40 - 75 = 95

[Chap 3] Jasper United had sales of $21,000 in 2008 and $24,000 in 2009. The firm's current accounts remained constant. Given this information, which one of the following statements must be true?

The net working capital turnover rate increased

[Chap 1] Why should financial managers strive to maximize the current value per share of the existing stock?

because they have been hired to represent the interests of the current shareholders

[Chap 1] Which one of the following statements is correct?

both sole proprietorship and partnership income is taxed as individual income

[Chap 2] Depreciation:

reduces both taxes and net income

[Chap 3] A common-size income statement is an accounting statement that expresses all of a firm's expenses as percentage of:

sales

[Chap 3] It is easier to evaluate a firm using financial statements when the firm:

uses the same accounting procedures as other firms in the industry

[Chap 2] 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