Question 1

Wholesale Grocer's has total assets of $580,000 and total liabilities of $375,000.Net sales for the year are $523,000 and the profit margin is 10.5 percent.What is the return on equity?

Accepted Answer

Return on equity = (.105 × $523,000)/($580,000 - $375,000) = 26.8 percent

Question 2

O'Hara's Market has net income of $1.6 million and 525,000 shares of stock outstanding.What is the amount of the dividends per share if the plowback ratio is 60 percent?

Accepted Answer

Dividends per share = [$1,600,000 × (1 - .60)]/525,000 = $1.22

Question 3

Whole Wheat Farms,Inc.has a net income of $20,000 and a dividend payout ratio of 30 percent.The firm issued $12,000 worth of common stock during the period.The firm has no long-term debt.What is the financing cash flow for the period?

Accepted Answer

Financing cash flow = ($20,000 × .30 × -1) + $12,000 = $6,000

Question 4

Smith's Corner Market had annual sales of $425,300 and total assets of $366,000.What is the return on assets if the profit margin is 11 percent?

Accepted Answer

Return on assets = (.11 × $425,300)/$366,000 = 12.8 percent

Question 5

A firm has a price-cash flow ratio of 12.5 and a price-book value ratio of 7.6.If the cash flow per share is $4.67,what is the book value per share?

Accepted Answer

Price = $4.67 × 12.5 = $58.375BVPS = $58.375/7.6 = $7.68

Question 6

Children's Books,Inc.has net income of $48,000 and a plowback ratio of 85 percent.There are 25,000 shares of stock outstanding at a market price of $18.64 a share.What is the price-earnings ratio?

Accepted Answer

Price-earnings ratio = $18.64/($48,000/25,000) = 9.7

Question 7

Healthy Supplements,Inc.paid $7,300 in interest and $4,300 in dividends for the year.The firm also issued $15,000 worth of new equity securities.What is the amount of the financing cash flow?

Accepted Answer

Financing cash flow = - $7,300 + $15,000 = $10,700

Question 8

A company has a price-earnings ratio of 23 and a price-cash flow ratio of 11.5.If the earnings per share are $1.75,what is the cash flow per share?

Accepted Answer

Price = $1.75 × 23 = $40.25CFPS = $40.25/11.5 = $3.50

Question 9

A firm has earnings per share of $3.50 and cash flow per share of $3.84.The price-earnings ratio is 24.1.What is the price-cash flow ratio?

Accepted Answer

Price = $3.50 × 24.1 = $84.35Price-cash flow ratio = $84.35/$3.84 = 22.0

Question 10

HNW Manufacturing,Inc.has 255,000 shares of stock outstanding.The firm paid out $255,000 in dividends,$195,000 in interest,and added $193,700 to retained earnings for the year.What is the amount of the earnings per share?

Accepted Answer

Earnings per share = ($255,000 + $193,700)/255,000 = $1.76

Question 11

A firm has net sales of $65,000,operating expenses of $21,300,depreciation of $5,000,cost of goods sold of $36,500,and interest expense of $4,500.What is the operating margin?

Accepted Answer

Operating margin = ($65,000 - $21,300 - $5,000 - $36,500)/$65,000 = 3.4 percent

Question 12

For the year,Widgets Manufacturing,Inc.increased its current accounts by $52,000,decreased its current liabilities by $38,000,and decreased its fixed assets by $31,000.What is the investment cash flow for the year?

Accepted Answer

Investment cash flow = $31,000

Question 13

Glassmakers,Inc.purchased $137,600 of new equipment this year and also increased the inventory by $36,800.Thirty-three thousand dollars worth of old equipment was sold.What is the investment cash flow for the year?

Accepted Answer

Investment cash flow = -$137,600 + $33,000 = -$104,600

Question 14

A company has net income of $65,430,a price-earnings ratio of 22.6,and 25,800 shares of stock outstanding.If the price-cash flow ratio is 20.4,what is the cash flow per share?

Accepted Answer

Price = ($65,430/25,800) × 22.6 = $57.3147Cash flow per share = $57.3147/20.4 = $2.81

Question 15

Bay Marina,Inc.has net income of $53,700 and has 30,000 shares of stock outstanding.Similar firms have a price-earnings ratio of 20.Given this,what should the market price of Bay Marina,Inc.stock be per share?

Accepted Answer

Price = ($53,700/30,000) × 20 = $35.80

Question 16

A firm has net income of $22,500 and a book value per share of $3.10.The firm has 30,000 shares of stock outstanding and a price-earnings ratio of 15.9.What is the price-book ratio?

Accepted Answer

Price = ($22,500/30,000) × 15.9 = $11.93Price-book ratio = $11.93/$3.10 = 3.8

Question 17

Green Recycling,Inc.has 150,000 shares of stock outstanding.The firm has total assets of $568,000 and total liabilities of $415,000.The firm's stock is selling for $31 a share.What is the price-book ratio?

Accepted Answer

BVPS = ($568,000 - $415,000)/150,000 = $1.02Price-book ratio = $31/$1.02 = 30.4

Question 18

Marley Enterprises has financing cash flow of -$41,400 and investment cash flow of $28,600 for the year.The beginning cash balance was $65,300 and the ending cash balance was $44,800.What was the operating cash flow for the period?

Accepted Answer

Operating cash flow = ($44,800 - $65,300) - (-$41,400) - $28,600 = -$7,700

Question 19

Handy Man Services,Inc.has net income of $525,000.What is the addition to retained earnings if the dividend payout ratio is 40 percent?

Accepted Answer

Addition to retained earnings = $525,000 × (1 - .40) = $315,000

Question 20

A firm has net sales of $35,000,operating expenses of $6,100,depreciation of $1,700,and cost of goods sold of $18,300.What is the gross margin?

Accepted Answer

Gross margin percentage = ($35,000 - $18,300)/$35,000 = 47.7 percent

Quiz 17: Projecting Cash Flow and Earnings