Finance

Cash flow to stockholders is defined as:

Dividend payments less net new equity raised

Net capital spending:

Is equal to zero if the decrease in the net fixed assets is equal to the depreciation expense

Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time?

Income statement

Which one of the following is NOT included in cash flow from assets?

Interest expense

A firm has $680 in inventory, $2,140 in fixed assets, $210 in accounts receivables, $250 in accounts payable, and $80 in cash. What is the amount of the net working capital?

$720: Net working capital = $680 + 210 + 80 - 250 = $720

The book value of a firm is:

Based on historical cost

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

Which term relates to the cash flow that results from a firm's ongoing, normal business activities?

Operating cash flow

Shareholders' equity:

Represents the residual value of a firm

Which one of the following accounts is the most liquid?

Accounts Receivable

Webster World has sales of $13,800, costs of $5,800, depreciation expense of $1,100, and interest expense of $700. What is the operating cash flow if the tax rate is 32 percent?

Earnings before interest and taxes = $13,800 - 5,800 - 1,100 = $6,900 Taxable income = $6,900 - 700 = $6,200 Tax = .32($6,200) = $1,984 Operating cash flow = $6,900 + 1,100 - 1,984 = $6,016

Beach Front Industries has sales of $546,000, costs of $295,000, depreciation expense of $37,000, interest expense of $15,000, and a tax rate of 32 percent. The firm paid $59,000 in cash dividends. What is the addition to retained earnings?

Net income = ($546,000 - 295,000 - 37,000 - 15,000) (1 - .32) = $135,320 Addition to retained earnings = $135,320 - 59,000 = $76,320

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?

Net working capital = $4,900 - 3,200 - 1,400 = $300

Four years ago, Ship Express purchased a mailing machine at a cost of $218,000. This equipment is currently valued at $97,400 on today's balance sheet but could actually be sold for $92,900. This is the only fixed asset the firm owns. Net working capital is $41,300 and long-term debt is $102,800. What is the book value of shareholders' equity?

Book value of shareholders' equity = $97,400 + 41,300 - 102,800 = $35,900

Which one of the following will increase the cash flow from assets, all else equal?

Decrease in the change in net working capital

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

Net working capital is defined as:

Current assets minus current liabilities

The cash flow of a firm that is available for distribution to the firm's creditors and stockholders is called the:

Cash flow from assets

The cash flow related to interest payments less any net new borrowing is called the:

Cash flow to creditors

Global Tours has current assets of $1,360 and current liabilities of $940 as of the beginning of the year. At the end of the year, current assets are $1,720 and current liabilities are $1,080. What was the change in net working capital for the year?

Change in net working capital = ($1,720 - 1,080) - ($1,360 - 940) = $220

Noncash items refer to:

Expenses which do not directly affect cash flows

Cash flow from assets is also known as the firm's:

Free cash flow

Drew owns The What-Not Shop which he is trying to sell so that he can retire and travel. The shop owns the building in which it is located. This building was built at a cost of $647,000 and is currently appraised at $819,000. The counters and fixtures originally cost $148,000 and are currently valued at $65,000. The inventory is valued on the balance sheet at $319,000 and has a retail market value equal to 1.1 times its cost. Jake expects the store to collect 96 percent of the $21,700 in accounts receivable. The firm has $26,800 in cash and has total debt of $414,700. What is the market value of this firm?

Market value of firm = $819,000 + 65,000 + 1.1($319,000) + .96($21,700) + 26,800 - 414,700 = $867,832

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?

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

Which one of the following is classified as a tangible fixed asset?

Production equipment