fin 226 - quiz 1

Zhang's fixed assets were purchased three years ago for $1.8 million. These assets can be sold to Stewart's today for $1.2 million. Roscoe's current balance sheet shows net fixed assets of $960,000, current liabilities of $348,000, and net working capital of $121,000. If all the current assets were liquidated today, the company would receive $518,000 cash. The book value of the firm's assets today is _____________blank and the market value is _____________blank.

$1,429,000; $1,718,000

Dakota Pride Farms has sales of $509,600, costs of $448,150, depreciation expense of $36,100, and interest paid of $12,400. The tax rate is 21 percent. How much net income did the firm earn for the period?

$10,231

Girabaldi's Preztels, general partnership, has net sales of $821,300 and costs of $698,500. The depreciation expense is $28,400 and the interest paid is $8,400. What is the amount of the firm's operating cash flow if the tax rate is 21 percent?

$104,740

The Milwaukee Printing Company has net income of $26,310 for the year. At the beginning of the year, the firm had common stock of $55,000, paid-in surplus of $11,200, and retained earnings of $48,420. At the end of the year, the firm had total equity of $142,430. The firm paid dividends of $32,500. What is the amount of the net new equity raised during the year?

$34,000

Preston Financial has ending net fixed assets of $98,700 and beginning net fixed assets of $84,900. During the year, the firm sold assets with a total book value of $13,200 and also recorded $9,800 in depreciation expense. How much did the company spend to buy new fixed assets?

$36,800

During the past year, Rend Yard Services paid $36,800 in interest along with $2,000 in dividends. The company issued $3,000 of stock and $16,000 of new debt. The company reduced the balance due on its old debt by $18,400. What is the amount of the cash flow to creditors?

$39,200

Which one of the following situations is most apt to create an agency conflict?

Basing management bonuses on the length of employment

Which one of the following is contained in the corporate bylaws?

Procedures for electing corporate directors

The market value of:

an asset tends to provide a better guide to the actual worth of that asset than does the book value.

Net working capital includes:

an invoice from a supplier.

Probably the least effective means of aligning management goals with shareholder interests is:

automatically increasing management salaries on an annual basis.

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

balance sheet.

Security dealers:

buy and sell from their own inventory.

Firms that compile financial statements according to GAAP:

can still manipulate their earnings to some degree.

Nishaa has been promoted and is now in charge of all external financing. In other words, she is in charge of:

capital structure management.

The passage of the Tax Cuts and Jobs Act of 2017 created a revised progressive tax structure, which applies to all of the following except:

corporations.

The matching principle states that:

costs of producing an item should be recorded when the sale of that item is recorded as revenue.

Net working capital is defined as:

current assets minus current liabilities.

The goal of financial management is to increase the:

current market value per share.

All else held constant, the book value of owners' equity will decrease when:

dividends exceed net income for a period.

Cash flow to stockholders is defined as:

dividends paid minus net new equity raised.

Net capital spending is equal to:

ending net fixed assets minus beginning net fixed assets plus depreciation.

The Sarbanes-Oxley Act of 2002 has:

essentially made officers of publicly traded firms personally responsible for the firm's financial statements.

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.

A sole proprietorship:

has its profits taxed as personal income.

Corporate shareholders:

have the ability to change the corporation's bylaws.

Cash flow to creditors is defined as:

interest paid minus net new borrowing.

A firm's liquidity level decreases when:

inventory is purchased with cash.

Net working capital increases when:

inventory is sold at a profit.

A corporation:

is a legal entity separate from its owners.

The market value of a firm's fixed assets:

is equal to the estimated current cash value of those assets.

Cash flow to creditors increases when:

long-term debt is repaid.

The tax rate that determines the amount of tax that will be due on the next dollar of taxable income earned is called the:

marginal tax rate.

The primary goal of financial management is most associated with increasing the:

market value of the firm.

If a firm has a negative cash flow from assets every year for several years, the firm:

may be continually increasing in size.

Shareholders' equity is equal to:

net fixed assets minus long-term debt plus net working capital.

Paid-in surplus is classified as:

owners' equity.

The issuer of a security must be involved in all _____________blank transactions involving that security.

primary market

A negative cash flow to stockholders indicates a firm:

received more from selling stock than it paid out to shareholders.

An income statement prepared according to GAAP:

records expenses based on the matching principle.

Market values:

reflect expected selling prices given the current economic situation.

Levi had an unexpected surprise when he returned home this morning. He found that a chemical spill from a local manufacturer had spilled over onto his property. The potential claim that he has against this manufacturer is that of a(n):

stakeholder.

An employee has a claim on the cash flows of Westlake Machines. This claim is defined as a claim by one of the firm's:

stakeholders.

An agency issue is most apt to develop when:

the control of a firm is separated from the firm's ownership.

Shareholders' equity is best defined as:

the residual value of a firm.

The Sarbanes-Oxley Act in 2002 was primarily prompted by which one of the following from the 1990s?

Corporate accounting and financial fraud

For Year 2020, Precision Masters had sales of $42,900, cost of goods sold of $26,800, depreciation expense of $1,900, interest expense of $1,300, and dividends paid of $1,000. At the beginning of the year, net fixed assets were $14,300, current assets were $8,700, and current liabilities were $6,600. At the end of the year, net fixed assets were $13,900, current assets were $9,200, and current liabilities were $7,400. The tax rate was 21 percent. What is the cash flow from assets for 2020?

$12,191

Raymonds's sales for the year were $1,678,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $1,141,000, $304,000, and $143,000, respectively. In addition, the company had an interest expense of $74,000 and a tax rate of 21 percent. What is the operating cash flow for the year?

$229,640

Joie's Fashions has current liabilities of $45,600 and accounts receivable of $59,700. The firm has total assets of $275,000 and net fixed assets of $205,500. The owners' equity has a book value of $107,500. What is the amount of the net working capital?

$23,900

A balance sheet shows beginning values of $56,300 for current liabilities and $289,200 for long-term debt. The ending values are $61,900 and $318,400, respectively. The income statement shows interest paid of $29,700 and dividends of $19,000. What is the amount of the net new borrowing?

$29,200

Omar's Market, a sole proprietorship has sales of $43,800, costs of $40,400, depreciation expense of $2,500, and interest expense of $1,100. If the tax rate is 21 percent, what is the operating cash flow, OCF? Assume tax losses can be carried forward and utilized.

$3,442

The Riverside Cafe has an operating cash flow of $83,770, depreciation expense of $43,514, and taxes paid of $21,590. A partial listing of its balance sheet accounts is as follows:

$47,949

Swearingen United has total owners' equity of $18,800. The firm has current assets of $23,100, current liabilities of $12,200, and total assets of $36,400. What is the value of the long-term debt?

$5,400

On December 31, 2020, The Water Street Theatre had net fixed assets of $812,650 while the December 31, 2021 balance sheet showed net fixed assets of $784,900. Depreciation for 2021 was $84,900. What was the firm's net capital spending for 2021?

$57,150

Bolivar Farms had equity of $58,900 at the beginning of the year. During the year, the company earned net income of $8,200 and paid $2,500 in dividends. Also during the year, the company repurchased $3,500 of stock from one of its shareholders. What is the value of the owners' equity at year end?

$61,100

National Importers paid $38,600 in dividends and $24,615 in interest over the past year while net working capital increased from $15,506 to $17,411. The company purchased $38,700 in net new fixed assets and had depreciation expenses of $14,784. During the year, the firm issued $20,000 in net new equity and paid off $23,800 in long-term debt. What is the amount of the cash flow from assets?

$67,015

The balance sheet of a firm shows beginning net fixed assets of $348,200 and ending net fixed assets of $371,920. The depreciation expense for the year is $46,080 and the interest expense is $11,460. What is the amount of the net capital spending?

$69,800

The financial statements of the Santa Domingo Marina reflect depreciation expenses of $41,600 and interest expenses of $27,900 for the year. The current assets increased by $31,800 and the net fixed assets increased by $28,600. What is the amount of the net capital spending for the year?

$70,200

De la Cruz Automotive has net working capital of $22,600, current assets of $56,500, equity of $62,700, and long-term debt of $31,900. What is the amount of the net fixed assets?

$72,000

Outdoor Sports paid $12,500 in dividends and $9,310 in interest over the past year. Sales totaled $361,820 with costs of $267,940. The depreciation expense was $16,500 and the tax rate was 21 percent. What was the amount of the operating cash flow?

$79,585

Pyri Flours, a sole proprietorship, owes $9,741 in taxes on taxable income of $61,509. If the firm earns $100 more in income, it will owe an additional $22 in taxes. What is the average tax rate on income of $61,609?

15.85%

The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict?

Agency

Which one of the following statements is correct?

All over-the-counter sales occur in dealer markets.

Which one of the following applies to a general partnership?

Any one of the partners can be held solely liable for all of the partnership's debt.

Which one of the following statements concerning the balance sheet is correct?

Assets are listed in descending order of liquidity.

Which one of the following has nearly the same meaning as free cash flow?

Cash flow from assets

Which one of the following occupations best fits into the corporate area of finance?

Chief financial officer

Which one of the following is most apt to align management's priorities with shareholders' interests?

Compensating managers with shares of stock that must be held for a minimum of three years

Working capital management includes which one of the following?

Determining which customers will be granted credit

Which one of the following is a capital structure decision?

Establishing the preferred debt-equity level

Silvia is employed as a currency trader in the Japanese yen market. Her job falls into which one of the following areas of finance?

International finance

If you accept a job as a domestic security analyst for a brokerage firm, you are most likely working in which one of the following financial areas?

Investments

Tressler Industries opted to repurchase 5,000 shares of stock last year in lieu of paying a dividend. The cash flow statement for last year must have which one of the following assuming that no new shares were issued?

Positive cash flow to stockholders

Which one of the following statements correctly applies to a sole proprietorship?

Obtaining additional equity is dependent on the owner's personal finances.

Vera opened a used bookstore and is both the 100 percent owner and the store's manager. Which type of business entity does Vera own if she is personally liable for all the store's debts?

Sole proprietorship

Which one of the following correctly defines a common chain of command within a corporation?

The controller reports directly to the chief financial officer.

Which one of the following statements about a limited partnership is correct?

There must be at least one general partner.

Raleigh BBQ has $48,000 in current assets and $39,000 in current liabilities. Decisions related to these accounts are referred to as:

working capital management.

The balance sheet of Koehn, Incorporated, has the following balances:

−$1,800

A firm has earnings before interest and taxes of $27,130, net income of $16,220, and taxes of $5,450 for the year. While the firm paid out $31,600 to pay off existing debt it then later borrowed $42,000. What is the amount of the cash flow to creditors?

−$4,940