Chapter 2

Over the past year, a firm decreased its current assets and increased its current liabilities. As a result, the firm's net working capital:

had to decrease

Financial leverage:

increases the potential return to the shareholders

Delivery trucks are classified as:

tangible fixed assets

Which one of the following is an intangible fixed asset?

Copyright

The financial statement that summarizes a firm's accounting value as of a particular date is called the:

balance sheet

Bait and Tackle has taxable income of $411562. How much does it owe in taxes?

$128603.33

The import Store has cash of $34600 and accounts receivable of $54200. The inventory cost $92300 and can be sold today for $146900. The fixed assets were purchased at a cost of $234500 of which $87900 has been depreciated. The fixed assets can be sold today for $199000. What is the total book value of the firm's assets?

$327700

What is the operating cash flow for 2010?

$42100

The Stone Inn earned $167284 in taxable income for the year. How much tax does the company owe on this income?

$48490.76

The Walters Co. has beginning long-term debt of $54500, which is the principal balance of a loan payable to Centre Bank. During the year, the company paid a total of $16300 to the bank, including $4100 of interest. The company also borrowed $11000. What is the value of the ending long-term debt?

$53300

The financial statements of Mark's Auto Repair reflect cash of $4600, accounts receivable of $11500, accounts payable of $22900, inventory of $17800, long-term debt of $4200, and net fixed assets of $63800. The firms estimates that if it wanted to cease operations today it could sell the inventory for $25000 and the fixed assets for $49000. The firm could also collect 100 percent of its receivables. What is the market value of the assets?

$90100

Which one of the following will decrease the liquidity level of a firm?

Cash purchase of inventory

The Corner Store currently has $3600 in cash. The company owes $31800 to suppliers for merchandise and $21500 to the bank for a long-term loan. Customers owe The Corner Store $19000 for their purchases. The inventory has a book value of $53300 and an estimated market value of $71200. If the store compiled a balance sheet as of today, what would be the book value of the current assets?

Current assets = $3600 + $19000 +$53300 = $75900

Last year, The Pizza Joint added $4100 to retained earnings from sales of $93600. The company had costs of $74400, dividends of $2500, and interest paid of $1400. The tax rate was 34 percent. What was the amount of the depreciation expense?

Earnings before interest and taxes = [($4100 +$2500)(1-0.34)] +$1400 = $11400 Depreciation = $93600 - $74400 - $11400 = $7800

All else equal, an increase in which one of the following will decrease owners' equity?

Increase in accounts payable

Frank Town Farms has sales of $481600, cost of $379700, depreciation expense of $32100, and interest paid of $8400. The tax rate is 32. How much net income did the firm earn for the period?

Net income = ($481600 - $379700 - $32100 - $8400)(1-0.32) = $41752

Blasco Printing has net income of $26310 for the year. At the beginning of the year, the firms had common stock of $35000, paid-in surplus of $11200, and retained earnings of $48420. At the end of the year, the firm had total equity of $142430. The firm does not pay dividends. What is the amount of the net new equity raised during the year?

Net new equity = $142430 - $26310 - $35000 - $11200 - $48420 = $21500