MGMT 31000: Financial Management

Change in Net Working Capital

(Ending Current Assets-Ending Current Liabilities) - (Beginning Current Assets -Beginning Current Liabilities)

Operating Cash Flow

EBIT + Depreciation - Taxes

Net Capital Spending

ending fixed assets - beginning fixed assets + depreciation

Cash Flow to Stockholders

CFFA - Creditors

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

Capital budgeting

Net Income

Change in retained earnings + dividends

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

How much inventory should be on hand for immediate sale?

Which one of the following statements is correct? A general partnership is legally the same as a corporation. Income from both sole proprietorships and partnerships that is taxable is treated as individual income. Partnerships are the most complicated type of business to form. All business organizations have bylaws. Only firms organized as sole proprietorships have limited lives.

Income from both sole proprietorships and partnerships that is taxable is treated as individual income.

Cash Flow to Creditors

Interest Expense - Net new borrowing

Enterprise/EBITDA

Market Value of Equity + Value of Debt - Cash / EBIT + Depreciation

CFFA

Operating Cash Flow - Net Capital Spending - Changes in NWC

Which one of the following is a primary market transaction? Sale of currently outstanding stock by a dealer to an individual investor Sale of a new share of stock to an individual investor Stock ownership transfer from one shareholder to another shareholder Gift of stock from one shareholder to another shareholder Gift of stock by a shareholder to a family member

Sale of a new share of stock to an individual investor

Griffin's Goat Farm, Inc., has sales of $796,000, costs of $327,000, depreciation expense of $42,000, interest expense of $34,000, a tax rate of 21 percent, and paid out $95,000 in cash dividends. The common stock outstanding is 80,000 shares. What is the earnings per share figure? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) What is the dividends per share figure? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Sales $ 796,000 Costs 327,000 Depreciation 42,000 EBIT $ 427,000 Interest 34,000 EBT $ 393,000 Taxes (21%) 82,530 Net income $ 310,470 Earnings Per Share = Sales - Costs - Depreciation Expense - Interest Expense = EBT * 0.79 (1 - Tax Rate) = 310,470/80,000 (Common Stock Outstanding) = 3.88 Dividends Per Share = Dividends / Common Outstanding = $95,000 / 80,000 = 1.19