Managerial Finance Mid-Term

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.

Which one of the following will increase the sustainable rate of growth a corporation can achieve?

Decrease in the dividend payout ratio

Mike just purchased a bond which pays $40 every six months in interest. The $40 interest payment is also called the:

coupon

The retention ratio is:

The percentage of net income available to the firm to fund future growth

The sustainable growth rate:

assumes the debt-equity ratio is constant

Which of the following is a use of cash?

***A reduction in Accounts Payable*** A reduction is the Cash Account Dividends paid during the year. A reduction in Treasury Stock

What is the holding period return for the year on a bond with a par value of $1,000 and a coupon rate of 8.5% if its price at the beginning of the year was $1,215 and its price at the end of the year was $1,020? Assume interest is paid annually?

-9.05%

All of Oscar's costs and current asset accounts vary directly with sales. Sales are projected to increase by 10 percent. What is the pro forma accounts receivable balance for next year?

1,034

What was Oscar's increase in retained earnings during 2014?

1,380

Wax Music expects sales of $437,500 next year. The profit margin is 4.8 percent and the firm has a 30 percent dividend payout ratio. What is the projected increase in retained earnings?

14,700

Chester, Inc.'s product of their profit margin and financial structure (assets to equity) is 1.2. If the company experiences an ROA of 20% in a given year their sustainable growth for that year is?

20%

Link's gross margin for 2014 (rounded) is:

24%

Assume a 365-day year for your calculations. Link's collection period in days, based on sales, at the end of 2014 is:

28.8

A company has $100,000 in cash and annual sales of $720,000. Using a 360 day year, how many days' sales in cash is the company currently holding?

50 days

Which one of the following statements is correct concerning the cash balance of a firm?

A cumulative cash deficit on a cash budget indicates the need to acquire additional funds

You constructed a pro forma balance sheet for next year and found that external financing required was negative (i.e., the company projected a financing surplus). Which of the following options, all else equal, would NOT correct the projected imbalance?

An increase in the retention ratio

Which of the following securities has a purely fixed claim against a firm's cash flows?

Bonds

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

Which of the following securities has a purely residual claim against a firm's cash flows?

Common Stock

Ptarmigan Travelers had sales of $420,000 in 2013 and $480,000 in 2014. The firm's current asset accounts remained constant. Given this information, which one of the following statements has to be true of the alternatives considered?

the collection period decreased