Quiz 2 FIN 315

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 NWC= $680+210+80-250 NWC= $720

At the beginning of the year, the long-term debt of a firm was $72,918 and total debt was $138,407. At the end of the year, long-term debt was $68,219 and total debt was $145,838. The interest paid was $6,430. What is the amount of the cash flow to creditors?

$11,129 CFC= $6,430-($68,219-72,918) CFC= $11,129

Non-cash items refer to: a) inventory items purchased using credit. b) fixed expenses. c) sales that are made using store credit. d) expenses that do not directly affect cash flows. e) the ownership of intangible assets such as patents.

d) expenses that do not directly affect cash flows.

Shareholders' Equity: a) includes patents, preferred stock, and common stock. b) is referred to as a firm's financial leverage. c) decreases whenever new shares of stock are issued. d) represents the residual value of a firm. e) is equal to total assets plus total liabilities.

d) represents the residual value of a firm.

Which one of the following accounts is the most liquid? a) Inventory b) Building c) Land d) Equipment e) Accounts Receivable

e) Accounts Receivable

Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date? a) Statement of cash flows b) Dividend statement c) Creditor's statement d) Income statement e) Balance sheet

e) Balance sheet

Which one of the following is included in a firm's market value but yet is excluded from the firm's accounting value? a) An item held by the firm for future sale b) Money due from a customer c) Real estate investment d) Equipment owned by the firm e) Good reputation of the company

e) Good reputation of the company

At the beginning of the year, a firm had current assets of $121,306 and current liabilities of $124,509. At the end of the year, the current assets were $122,418 and the current liabilities were $103,718. What is the change in net working capital?

$21,903 Change in NWC=($122,418−103,718)-($121,306−124,509) Change in NWC = $21,903

The Widget Co. purchased all of its fixed assets three years ago for $4 million. These assets can be sold today for $2 million. The current balance sheet shows net fixed assets of $2,500,000, current liabilities of $1,375,000, and net working capital of $725,000. If all the current assets were liquidated today, the company would receive $1.9 million in cash. The book value of the total assets today is ________ and the market value of those assets is ________.

$4,600,000; $3,900,000 BV=($725,000+1,375,000)+2,500,000 BV=$4,600,000 MV=$1,900,000+2,000,000 MV =$3,900,000

Jensen Enterprises paid $700 in dividends and $320 in interest this past year. Common stock remained constant at $6,800 and retained earnings decreased by $180. What is the net income for the year?

$520 Net Income= $700-180 Net Income= $520

Hayes Bakery has sales of $30,600, costs of $15,350, an addition to retained earnings of $4,221, dividends paid of $469, interest expense of $1,300, and a tax rate of 21 percent. What is the amount of the depreciation expense?

$8,013.29 Net income = $4,221 + 469 Net income = $4,690 EBT=$4,690/(1− .21) EBT= $5,936.71 EBIT=$5,936.71+1,300 EBIT=$7,236.71 Depreciation= $30,600−15,350-7,236.71 Depreciation= $8,013.29

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?

$35,900 Equity BV= $97,400+ 41,300−102,800 Equity BV = $35,900

Which one of the following is a current liability? a) Account payable to a supplier that is due next week b) Amount due from a customer that is past due c) Note payable to a supplier in 13 months d) Loan payable to the bank in 18 months e) Amount due from a customer in two weeks

a) Account payable to a supplier that is due next week

Which one of the following statements concerning net working capital is correct? a) Net working capital excludes inventory. b) Net working capital may be a negative value. c) Net working capital increases when inventory is purchased with cash. d) Total assets must increase if net working capital increases. e) Net working capital is the amount of cash a firm currently has available for spending.

b) Net working capital may be a negative value.

Which of the following is a current asset? a) Notes Payable b) Trademark c) Accounts Receivable d) Equipment e) Accounts Payable

c) Accounts Receivable