FINC311 Chapter 2

c.

Cash flow to creditors increases when: a. interest rates on debt decline b. accounts payable decrease c. long term debt is repaid d. current liabilities are repaid e. new long term loans are acquired

has positive net working capital.

A firm has a current ratio of 1.4 and a quick ratio of .9. Given this, you know for certain that the firm: pays cash for its inventory. has more than half its current assets invested in inventory. has more cash than inventory. has more current liabilities than it does current assets. has positive net working capital.

$34,645

Andersons nursery has sales of $318,400, costs of 199,400, depreciation expense of $28,600, interest expense of $1,100 and a tax rate of 35%. The firm paid out $23,400 in dividends. What is the addition to the retained earnings?

d. lowers taxes

Given a profitable firm, depreciation: a. increases net income b. increases net fixed assets c. decreases net working capital d. lowers taxes e. has no effect on net income

$60,000

If blue hen brewery purchased equipment for $75k on 1/1/19, what is the book value as of 12/31/19? assume straight line depreciation over 5 years with no salvage value.

b.

Matt and Alicia created a firm that is a separate legal entity and will share ownership of that firm on a 75/25 basis. Which type of entity did they create if they have no personal liability for the firm's debts? a. Limited partnership b. Corporation c. Sole proprietorship d. General partnership e. Public company

b. an invoice from a supplier (NWC is current assets - current liabilities)

Net working capital includes: a. a land purchase b. an invoice from a supplier c. non-cash expenses d. fixed asset depreciation e. the balance due on a 15 year mortgage

market value of the firm.

The primary goal of financial management is most associated with increasing the: dollar amount of each sale. traffic flow within the firm's stores. the fixed costs while lowering the variable costs. firm's liquidity. market value of the firm.

$29,400

Wes motors has total assets of $98,300 , NWC of 11,300, owners equity of 41,600, and long-term debt of 38,600. What is the value of the current assets?

d.

Which of these is correct? a. depreciation has no effect on taxes b. interest paid is a noncash item c. taxable income must be a positive value d. net income is distributed to either net income or retained earnings e. taxable income = net income x (1 + average tax rate)

e.

an increase in which of the following will increase operating cash flow for a profitable, tax-paying firm? a. fixed expenses b. marginal tax rate c. net capital spending d. inventory e. depreciation

e. inventory is sold at a profit

net working capital increases when: a. fixed assets are purchased for cash b. inventory is purchased on credit c. inventory is sold at cost d. a credit customer pays for his or her purchase e. inventory is sold at a profit