Deck 2: Financial Statement and Cash Flow Analysis

Question 1

Holding all other things constant,which of the following represents a cash outflow?

A) The company sells a machine.
B) The company acquires inventory.
C) The company receives a bank loan.
D) The company increases accounts payable.

Answer 1

The company acquires inventory.

Question 2

NARRBEGIN: Bavarian Sausage,Inc.
Bavarian Sausage,Inc.
Bavarian Sausage,Inc.posted the following balance sheet and income statement.

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

NARRBEGIN: Bavarian Sausage,Inc.
Bavarian Sausage,Inc.
Bavarian Sausage,Inc.posted the following balance sheet and income statement.

Calculate Bavarian Sausage,Inc.'s inventory turnover.

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

Answer 3

0.96

Question 4

NARRBEGIN: Bavarian Sausage,Inc.
Bavarian Sausage,Inc.
Bavarian Sausage,Inc.posted the following balance sheet and income statement.

What is Bavarian Sausage,Inc.'s net profit margin?

A) 40%
B) 47%
C) 15%
D) 24%

Question 5

NARRBEGIN: Bavarian Sausage,Inc.
Bavarian Sausage,Inc.
Bavarian Sausage,Inc.posted the following balance sheet and income statement.

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

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

Question 6

NARRBEGIN: Tax table
Tax Table

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

A) 25%
B) 15%
C) 39%
D) 34%

Question 7

NARRBEGIN: Bavarian Sausage,Inc.
Bavarian Sausage,Inc.
Bavarian Sausage,Inc.posted the following balance sheet and income statement.

Bavarian Sausage,Inc.has 100,000 shares of common stock outstanding,but no preferred stock.The current price of Bavarian's common stock is $15.What is the company's P/E-ratio?

A) 119.00
B) 1.26
C) 11.90
D) 12.60

Question 8

If you only knew a company's total assets and total debt,which item could you easily calculate?

A) Sales
B) Depreciation
C) Total equity
D) Inventory

Question 9

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 10

How do we calculate a company's operating cash flow?

A) EBIT - taxes + depreciation
B) EBIT - taxes - depreciation
C) EBIT + taxes + depreciation
D) EBIT - Sales

Question 11

Which of the following is a liquidity ratio?

A) Quick ratio
B) P/E- ratio
C) Inventory turnover
D) Equity multiplier

Question 12

NARRBEGIN: Tax table
Tax Table

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 13

NARRBEGIN: Bavarian Sausage,Inc.
Bavarian Sausage,Inc.
Bavarian Sausage,Inc.posted the following balance sheet and income statement.

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

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

Question 14

NARRBEGIN: Bavarian Sausage,Inc.
Bavarian Sausage,Inc.
Bavarian Sausage,Inc.posted the following balance sheet and income statement.

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

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

Question 15

NARRBEGIN: Bavarian Sausage,Inc.
Bavarian Sausage,Inc.
Bavarian Sausage,Inc.posted the following balance sheet and income statement.

What is Bavarian Sausage,Inc.'s average collection period?

A) 14.39 days
B) 4.20 days
C) 122.56 days
D) 86.90 days

Question 16

NARRBEGIN: Bavarian Sausage,Inc.
Bavarian Sausage,Inc.
Bavarian Sausage,Inc.posted the following balance sheet and income statement.

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

A) $394,000
B) $191,000
C) $212,000
D) $359,000

Question 17

NARRBEGIN: Bavarian Sausage,Inc.
Bavarian Sausage,Inc.
Bavarian Sausage,Inc.posted the following balance sheet and income statement.

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 18

Which of the following items can be found on an income statement?

A) Accounts receivable
B) Long-term debt
C) Sales
D) Inventory

Question 19

NARRBEGIN: Bavarian Sausage,Inc.
Bavarian Sausage,Inc.
Bavarian Sausage,Inc.posted the following balance sheet and income statement.

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

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

Question 20

NARRBEGIN: Bavarian Sausage,Inc.
Bavarian Sausage,Inc.
Bavarian Sausage,Inc.posted the following balance sheet and income statement.

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 21

You have the following information about a company: quick ratio = 0.9,inventory = $50,000 and current assets = $200,000.What is the company's current ratio?

A) 3.60
B) 1.80
C) 1.20
D) 1.28

Question 22

Financial professionals prefer to focus on an accounting approach that focuses on

A) governmental accounting methods.
B) current and prospective cash flows.
C) economically based accruals.
D) international accrual accounting standards.

Question 23

A company has sales of $1,000,000,cost of goods sold of $700,000,depreciation expenses of $250,000 and interest expenses of $55,000.If the company's tax rate is 34% and the income statement is complete,what is this firm's operating cash flow?

A) $300,000
B) $246,700
C) $283,000
D) $33,000

Question 24

NARRBEGIN: Tax table
Tax Table

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 25

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 26

NARRBEGIN: Tax table
Tax Table

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 27

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 28

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 29

Your company has an average collection period of 40 days and accounts receivables of $315,000.What are the company's annual sales?

A) $12,600,000
B) $1,754,808
C) $2,874,375
D) $315,000

Question 30

Generally accepted accounting principles are developed by

A) the Securities and Exchange Commission.
B) the Financial Accounting Standards Board.
C) Congress.
D) the New York Stock Exchange.

Question 31

NARRBEGIN: Tax table
Tax Table

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

A) 34%
B) 39%
C) 35%
D) 25%

Question 32

A company has sales of $250,000,cost of goods sold of $50,000,depreciation expenses of $250,000.If the company's tax rate is 34% and the income statement is complete,what is this firm's operating cash flow?

A) -$132,000
B) $118,000
C) $217,000
D) $283,000

Question 33

A company has sales of $1,250,000,cost of goods sold of $750,000,depreciation expenses of $250,000 and interest expenses of $55,000.If the company's tax rate is 34% and the income statement is complete,what is this firm's operating cash flow?

A) $183,700
B) $433,700
C) $165,000
D) $415,000

Question 34

The balance sheet entry that represents the cumulative total of the earnings that a firm has reinvested since its inception is

A) common stock.
B) paid-in-capital.
C) par value.
D) retained earnings.

Question 35

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 36

In a given year a company decreased its inventory by $250,000,increased its accounts receivable by $50,000 and increased its accounts payable by $100,000.What is the net change of the company's cash?

A) $400,000
B) $300,000
C) $200,000
D) $100,000

Question 37

Given the following information,calculate the company's long-term debt.

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

Question 38

Which of the following statements is not required by the SEC for publicly traded firms?

A) the statement of cost of goods sold
B) the statement of retained earnings
C) the statement of cash flows
D) the balance sheet

Question 39

Given the following information,calculate the company's Current Assets.

A) $330,000
B) $230,000
C) $150,000
D) $50,000

Question 40

Company X had sales of $120 with a cost of goods sold equal to 25% of sales.In addition,X had total other operating expenses of $50 with an interest expense of $20.If X pays a flat 40% of its pre-tax income in income taxes,what is X's net income?

A) $20
B) $27
C) $12
D) none of the above

Question 41

The effect of an increase in a firm's accounts payable during the year,assuming that the current asset portion of the balance sheet remains the same,is

A) an outflow of cash.
B) an inflow of cash.
C) neither an inflow nor an outflow of cash.
D) a decrease in the equity of the firm.

Question 42

NARRBEGIN: Cold Weather Sports
Cold Weather Sports,Inc.(CWS)
Cold Weather Sports,Inc.(CWS)just completed its 2012 fiscal year.During the year,CWS had sales of $10,000 and total expenses (no interest expenses were incurred)of $6,000.Assume that CWS pays 30% of its EBIT in taxes and that depreciation expense of $1,200 is included in the total expense number listed above.A list of some balance sheet items for CWS for end of fiscal year 2011 and 2012 is as below.
No fixed assets were disposed of during the year.
What was the dollar amount of fixed assets purchased during the year for Cold Weather Sports?

A) $600
B) $1,200
C) $1,800
D) none of the above

Question 43

Emma Corp.had earnings before interest and taxes of $500,000 and had a depreciation expense of $200,000 this last year.If the firm was subject to an average tax rate of 30%,what was Emma's operating cash flow for the year? If you need to,assume that Emma's interest expense was zero for the year.

A) $175,000
B) $82,500
C) $25,000
D) It lost money

Question 44

BadBanna Co.has an average age of inventory equal to 25 days.If its end of year inventory level is $8,500,then what does that imply for the cost of goods sold during the year? (round to the nearest dollar)

A) $582
B) $4964
C) $21,250
D) $124,100

Question 45

If you are looking to review a firm's sources and uses of cash flows over the year,the easiest place to find that information is

A) the Income Statement
B) the Statement of Retained Earnings
C) the Statement of Cash Flows
D) the Balance Sheet

Question 46

Wunder Boy Bat Co.has an average age of inventory equal to 121.67 days.If its end of year inventory level is $4,000,then what does that imply for the cost of goods sold during the year? (round to the nearest dollar)

A) $1,333
B) $3,000
C) $12,000
D) $16,000

Question 47

Edison Bagels had operating cash flow equal to $850 for 2012.If its earnings before interest and taxes was $1,000 while its tax bill was $300,what was Edison's depreciation expense for the year?

A) $150
B) $550
C) $1,550
D) not enough information to calculate

Question 48

Roxy Corp has an operating profit of $15,000 produced from $12,000 in sales.If Roxy has no interest expense and currently pays 35% of its operating profits in taxes,what is Roxy's net profit margin?

A) 81.25%
B) 12.50%
C) 1.25%
D) 65.00%

Question 49

If you start with earnings before interest and taxes and then subtract a firm's tax expense while adding back the amount of depreciation expense for the firm during the year,the resulting figure is called

A) free cash flow
B) operating cash flow
C) net cash flow
D) gross cash flow

Question 50

The firm that you work for had credit sales of $3,500,000 last year and on average had $33,000 in its accounts receivable during the year.What is its average collection period?

A) 3 days
B) 3.44 days
C) 3.5 days
D) none of the above

Question 51

Roxy Corp.has total current liabilities of $22,000 and an inventory of $7,000.If its current ratio is 1.2,then what is Rocy's quick ratio?

A) .88
B) .75
C) .64
D) .36

Question 52

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 53

Emma Corp.had credit sales of $300,000 last year and on average had $25,000 in its accounts receivable during the year.What is its average collection period?

A) about 30 days
B) about 12 days
C) about 1 day
D) about 3 days

Question 54

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 55

NARRBEGIN: Cold Weather Sports
Cold Weather Sports,Inc.(CWS)
Cold Weather Sports,Inc.(CWS)just completed its 2012 fiscal year.During the year,CWS had sales of $10,000 and total expenses (no interest expenses were incurred)of $6,000.Assume that CWS pays 30% of its EBIT in taxes and that depreciation expense of $1,200 is included in the total expense number listed above.A list of some balance sheet items for CWS for end of fiscal year 2011 and 2012 is as below.
No fixed assets were disposed of during the year.
What is the amount of free cash flow generated by Cold Weather Sports in 2012?

A) $100
B) $2,100
C) $2,300
D) none of the above

Question 56

In general,the more debt a firm uses in relation to its total assets

A) the less risk there is to the equity holders of the firm.
B) the less financial leverage it uses.
C) the greater the financial leverage it uses.
D) the greater extent to which it uses equity.

Question 57

NARRBEGIN: Cold Weather Sports
Cold Weather Sports,Inc.(CWS)
Cold Weather Sports,Inc.(CWS)just completed its 2012 fiscal year.During the year,CWS had sales of $10,000 and total expenses (no interest expenses were incurred)of $6,000.Assume that CWS pays 30% of its EBIT in taxes and that depreciation expense of $1,200 is included in the total expense number listed above.A list of some balance sheet items for CWS for end of fiscal year 2011 and 2012 is as below.
No fixed assets were disposed of during the year.
What is Cold Weather Sports' operating cash flow for 2012?

A) $2,400
B) $2,800
C) $4,000
D) none of the above

Question 58

When calculating a firm's free cash flow from earnings before interest and taxes we must add back depreciation,amortization and depletion expense and allowances because

A) they are non-cash expenditures.
B) the accounting method for reporting such expenses may be different from that reported to the taxing authority.
C) they approximate the value of fixed asset purchases during the year.
D) they are unrelated to the amount of taxes paid during the year.

Question 59

In order to identify the amount of funds that a firm borrowed during the preceding year,what section is the best source within the Statement of Cash Flows?

A) operating flows
B) investment flows
C) financing flows
D) total net cash flows

Question 60

When calculating the dollar amount of fixed assets purchased during the year what information is required? Assume that no fixed assets were disposed of during the year.

A) the current and prior year's gross fixed assets
B) the current and prior year's net fixed assets
C) the current and prior year's net fixed assets plus the firm's depreciation expense for the year.
D) either a or c will suffice

Question 61

NARRBEGIN: Exhibit 2-1
Exhibit 2-1
The tax schedule for corporate income is shown in the table below:

Refer to Exhibit 2-1.Pale Rider Corporation reports taxable income of $500,000 in 2011.What was the average tax rate they paid for the year?

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

Question 62

NARRBEGIN: Stone Cold
Stone Cold Incorporated

Refer to Stone Cold.For 2012,what was the debt-to-equity ratio?

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

Question 63

NARRBEGIN: Stone Cold
Stone Cold Incorporated

Refer to Stone Cold.For 2012,what was the times interest earned ratio for 2012?

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

Question 64

What is Import Inc.'s return on common equity?

A) 7.0%
B) 8.75%
C) 17.5%
D) none of the above

Question 65

FactorMax is currently selling for $75 per share.If it is selling at a P/E ratio of 50,calculate FactorMax's recent earnings per share.

A) $.15
B) $.67
C) $1.50
D) none of the above

Question 66

NARRBEGIN: Stone Cold
Stone Cold Incorporated

Refer to Stone Cold.For 2012,what was the return on common equity?

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

Question 67

NARRBEGIN: Stone Cold
Stone Cold Incorporated

Refer to Stone Cold.For 2012,what was the return on assets?

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

Question 68

NARRBEGIN: Titans Electronics
Titans Electronics
Titans Electronics reports the following data for the past year:

Titans Electronics is applying for a new line of credit from their banking partner.To issue the credit,the bank requires the following cutoffs for certain financial ratios: TIE ratio of 4.25 Current Ratio of 1.50 ROA of 5%.
What is a likely response from the bank to the application?

A) The bank will have reservations,as the TIE ratio does not meet requirements.
B) The bank will have concerns,as the current ratio does not meet requirements.
C) The bank will have concerns,as the ROA is not high enough.
D) The bank will have concerns,as two or more of the requirements are not met.

Question 69

What is Import Inc.'s return on assets?

A) 14%
B) 7%
C) 3.5%
D) none of the above

Question 70

NARRBEGIN: Stone Cold
Stone Cold Incorporated

Refer to Stone Cold.For 2012,what was the average collection period for the firm in 2004?

A) 6.84 days
B) 8.77 days
C) 42.77 days
D) 51.22 days

Question 71

Straw Corp has an operating profit of $1,200 produced from $9,800 in sales.If Straw has no interest expense and currently pays 35% of its operating profits in taxes and $200 per year in preferred dividends,then what is Straw's net profit margin?

A) 5.92%
B) 7.96%
C) 7.96% ..
D) 10.20%

Question 72

NARRBEGIN: Exhibit 2-1
Exhibit 2-1
The tax schedule for corporate income is shown in the table below:

Refer to Exhibit 2-1.Pale Rider Corporation reports taxable income of $500,000 in 2011.What was their tax liability for the year?

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

Question 73

Straw Corp has an operating profit of $1,200 produced from $20,000 in total assets.If Straw has no interest expense and currently pays 35% of its operating profits in taxes and $200 per year in preferred dividends,then what is Straw's net profit margin?

A) 2.90%
B) 3.90%
C) 5.0%
D) none of the above

Question 74

EmmaCor is currently selling for $22 per share.If it is selling at a P/E ratio of 12,calculate EmmaCor's recent earnings per share.

A) $0.45
B) $0.55
C) $1.83
D) $2.20

Question 75

NARRBEGIN: Stone Cold
Stone Cold Incorporated

Refer to Stone Cold.For 2012,what was the total asset turnover for 2012?

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

Question 76

NARRBEGIN: Titans Electronics
Titans Electronics
Titans Electronics reports the following data for the past year:

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

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

Question 77

What is the financial ratio that measures the price per share of stock divided by earnings per share?

A) Return on assets
B) Return on equity
C) Debt-equity ratio
D) Price-earnings ratio

Question 78

What was the free cash flow in 2012 for Stone Cold Incorporated?

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

Question 79

Consider the following financial information for Classic City Ice Cream Corporation: If the return on equity is 20%,what was Net Income for 2012?

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

Question 80

Consider the following financial information for Classic City Ice Cream Corporation: What is the total asset turnover for the firm in 2012?

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