FINA 4300 CH. 1
If the company repurchases 10 percent of its shares in the stock market, what will be the new book value of equity if all else remains the same?
JM Case will pay $10 per share for the 50,000 shares (= 0.10 × 500,000) it repurchases. This reduces the book value by $500,000 (= $10 × 50,000). Assuming all else remains the same: New book value per share = ($1,750,000 - $500,000) / (500,000 - 50,000 shares) = $2.78 per share
Stock price per share =
MV/# of shares
A company purchases a new $10 million building financed half with cash and half with a bank loan. How would this transaction affect the company's balance sheet
Net plant and equipment rises $10 million; cash falls $5 million; bank debt rises $5 million
Book value per share =
Ta-TL = * * / # of shares
A company borrows $2,000,000 and uses the money to purchase high technology machinery for its operations. These are examples of
cash flow from financing and cash flow from investing
Which one of the following is a source of cash
increase in accounts payable
Which of the following items does not belong to operating expenses?
interest expenses These do: depreciation expense, selling and marketing expenses, administrative expenses
The book value of a firm is
largely based on historical cost
Treasury stock is
previously outstanding stock that is bought back from stockholders by the issuing company.
Depreciation expense
reduces both taxes and net income.
California Retailing Inc. has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000. What is CaliforniaRetailing's EBIT?
4M-2.5M-600K = $900,000
Which of the following statements is true
A reduction in long-term debt is a use of cash
All of the following statements about balance sheets are true EXCEPT
A0 Assets - Liabilities = Shareholders' Equity. B) assets are reported at historical cost. C) balance sheets show average asset balances over a one-year or quarter period. D) an income statement is the summary of revenues and expenses over a year or a quarter.
A company sells used equipment with a book value of $100,000 for $250,000 cash. How would this transaction affect the company's balance sheet?
Cash rises $250,000; net plant and equipment falls $100,000; equity rises $150,000
Tthe financial statement that summarizes a firm's revenue and expenses over a period of time
Income Statement
Shareholder's Equity =
Total Assets - Total Liabilities