Deck 1: The Scope of Corporate Finance and Financial Statement and Cash Flow Analysis

Question 1

-What is Bavarian Sausage, Inc.'s operating cash flow?

A) $394,000
B) $191,000
C) $226,000
D) $359,000

Answer 1

$226,000

Question 2

-What is Bavarian Sausage, Inc.'s quick ratio?

A) 0.5645
B) 1.2903
C) 1.9565
D) 0.8871

Answer 2

0.5645

Question 3

-What is Bavarian Sausage, Inc.'s debt-equity ratio?

A) 0.23
B) 0.52
C) 1.25
D) 0.85

Answer 3

0.23

Question 4

-Calculate Bavarian Sausage, Inc.'s return on assets.

A) 25.20%
B) 16.35%
C) 13.62%
D) 8.47%

Question 5

-If Bavarian Sausage, Inc. has 100,000 shares outstanding, what is the book value per share?

A) $5.00
B) $9.25
C) $3.50
D) $1.50

Question 6

-Calculate Bavarian Sausage, Inc.'s inventory turnover.

A) 1.05
B) 0.96
C) 0.76
D) 1.51

Question 7

-Calculate Bavarian Sausage, Inc.'s return on equity.

A) 24.00%
B) 13.62%
C) 15.74%
D) 25.20%

Question 8

-What is Bavarian Sausage, Inc.'s times interest earned ratio?

A) 3.60
B) 7.00
C) 15.00
D) 6.00

Question 9

If a company's net profit margin is 5% and its total asset turnover is 3.5, what is its ROA?

A) 17.50%
B) 1.43%
C) 70.00%
D) 12.53%

Question 10

You have the following information about a firm: total asset = $350,000; common stock equity = $175,000; ROE = 12.5%. What is the firm's earnings available for common stockholders?

A) $43,750
B) $21,875
C) $50,000
D) $47,632

Question 11

-Refer to Tax Table. First Watch, Inc. has a pretax income of $3,755,250. What is the company's tax liability?

A) $1,276,785
B) $1,390,571
C) $1,464,548
D) $563,288

Question 12

-Refer to Tax Table. Bavarian Sausage, Inc. has a pretax income of $325,000. What is the company's tax liability?

A) $126,750
B) $110,000
C) $81,250
D) $325,000

Question 13

-Refer to Tax Table. Bavarian Sausage, Inc. has a pretax income of $325,000. What is the company's average tax rate?

A) 39.00%
B) 29.55%
C) 26.75%
D) 33.85%

Question 14

A company has an average collection period of 52 days and accounts receivables of $250,000. What are the company's annual sales?

A) $2,234,756
B) $1,754,808
C) $1,543,823
D) $250,000

Question 15

A company has a total asset turnover of 2 and sales of $500,000. What is the company's total assets?

A) $1,000,000
B) $250,000
C) $750,000
D) $500,000

Question 16

You have the following information about a company: quick ratio = 0.85, inventory = $125,000 and current assets = $375,000. What is the company's current ratio?

A) 0.85
B) 1.05
C) 2.56
D) 1.28

Question 17

In a given year a company decreased its inventory by $250,000, purchased $350,000 worth of fixed assets and took on a new $500,000 loan. What is the net change of the company's cash as a result of these transactions?

A) $100,000
B) -$100,000
C) $400,000
D) -$400,000

Question 18

Given the following information, calculate the company's long-term debt.
Current assets: $125,000
Current liabilities: $ 85,000
Net fixed assets: $250,000
Total equity: $200,000

A) $375,000
B) $50,000
C) $285,000
D) $90,000

Question 19

Last National, Inc. has a net profit margin of 12%, an equity multiplier of 2, sales of $575,000 and a ROE of 14.5%. What is Last National's total asset turnover?

A) 1.6042
B) 0.6042
C) 2
D) Not enough information.

Question 20

Granny's Jug Herbal Shop has total current liabilities of $2,000 and an inventory of $1,000. If its current ratio is 2.5, then what is its quick ratio?

A) 2.0
B) 2.5
C) 3.0
D) 3.5

Question 21

Devil Inc. has total liabilities equal to $3,500 and total assets equal to $5,000. What is Devil's asset-to-equity ratio?

A) 1.43
B) 2.33
C) 3.33
D) none of the above

Question 22

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-Refer to Stone Cold. For 2004, what was the return on assets?

A) 9.16%
B) 12.40%
C) 15.60%
D) 20.00%

Question 23

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-Refer to Stone Cold. For 2004, what was the return on common equity?

A) 9.36%
B) 12.40%
C) 20.44%
D) 20.90%

Question 24

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-Refer to Stone Cold. For 2004, what was the debt-to-equity ratio?

A) 0.81
B) 0.84
C) 0.98
D) 1.19

Question 25

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-Refer to Stone Cold. For 2004, what was the total asset turnover for 2004?

A) 0.80
B) 1.20
C) 1.40
D) 1.60

Question 26

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-Refer to Stone Cold. For 2004, what was the times interest earned ratio for 2004?

A) 2.13
B) 2.77
C) 3.55
D) 4.55

Question 27

What was the free cash flow in 2004 for Stone Cold Incorporated?

A) -$55.20
B) -$44.80
C) $145.20
D) $215.00

Question 28

Consider the following financial information for Classic City Ice Cream Corporation: What is the total asset turnover for the firm in 2004?

A) 16.67%
B) 25.00%
C) 33.33%
D) 40.00%

Question 29

Consider the following financial information for Classic City Ice Cream Corporation: If the return on equity is 20%, what was Net Income for 2004?

A) $25,000
B) $40,000
C) $50,000
D) $65,000

Question 30

-What is the current P/E ratio for the Titans?

A) 8.00
B) 10.00
C) 15.50
D) 16.67

Question 31

-Refer to Exhibit 2-1. Pale Rider Corporation reports taxable income of $500,000 in 2004. What was their tax liability for the year?

A) $56,100
B) $91,650
C) $170,000
D) $200,000

Question 32

-Refer to Exhibit 2-1. Pale Rider Corporation reports taxable income of $500,000 in 2004. What was the average tax rate they paid for the year?

A) 23.25%
B) 25.00%
C) 29.40%
D) 34.00%

Question 33

-Refer to Exhibit 2-1. Big Diesel Incorporated reports taxable income of $200,000 in 2004. What was the average tax rate they paid for the year?

A) 25.00%
B) 29.40%
C) 30.63%
D) 34.00%

Question 34

William and Theodore have decided to start a travel business called Excellent Adventures. Since their business primarily involves time-travel their clients may be harmed during a small but significant portion of the travels. Consequently, William and Theodore would like a business form that will shield their personal wealth from any legal claims that the firm might be subject to after one of the travel mishaps. If William and Theodore are the only investors in this U.S. domiciled firm, which legal form of organization would be best for Excellent Adventures to protect both William and Theodore?

A) sole proprietorship
B) partnership
C) limited partnership
D) corporation

Question 35

Which of the following is one of the most expensive methods for the firm to overcome agency costs?

A) let the Securities and Exchange Commission inform the firm of a problem
B) proper design of an executive's compensation contract
C) monitor the executive's work
D) require executives to own a large proportion of their firm's outstanding shares