Question 1

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 2

HNW Manufacturing, Inc. has 270,000 shares of stock outstanding. The firm paid out $270,000 in dividends, $195,000 in interest, and added $175,000 to retained earnings for the year. What is the amount of the earnings per share?

Accepted Answer

The answer of HNW Manufacturing, Inc. has 270,000 shares of...

Question 3

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

The answer of A firm has a price-cash flow ratio...

Question 4

Healthy Supplements, Inc. paid $6,300 in interest and $4,300 in dividends for the year. The firm also issued $12,000 worth of new equity securities. What is the amount of the financing cash flow?

Accepted Answer

The financing cash flow is calculated as the cash inflow from issuing new equity ($12,000) minus the cash outflows for interest ($6,300) and dividends ($4,300), resulting in $12,000 - $6,300 - $4,300 = $1,400. However, the correct calculation should consider only dividends and new equity, leading to $12,000 - $4,300 = $7,700.

Question 5

Bay Marina, Inc. has net income of $50,500 and has 25,000 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

First, we need to calculate the earnings per share (EPS) of Bay Marina, Inc:

EPS = Net Income / Number of shares
EPS = $50,500 / 25,000 shares
EPS = $2.02 per share

Next, we can use the price-earnings ratio (P/E) to calculate the market price of the stock:

Market Price = P/E ratio * EPS
Market Price = 20 * $2.02 per share
Market Price = $40.40 per share

Therefore, the best choice is C, $40.40 per share.

Question 6

Marley Enterprises has financing cash flow of -$38,600 and investment cash flow of $29,700 for the year. The beginning cash balance was $64,300 and the ending cash balance was $45,800. What was the operating cash flow for the period?

Accepted Answer

The answer of Marley Enterprises has financing cash flow of...

Question 7

Wholesale Grocer's has total assets of $580,000 and total liabilities of $375,000. Net sales for the year are $547,000 and the profit margin is 14 percent. What is the return on equity?

Accepted Answer

Return on equity (ROE) is calculated as Net Income divided by Shareholder's Equity. First, calculate Net Income: $547,000 * 14% = $76,580. Then, calculate Shareholder's Equity: $580,000 - $375,000 = $205,000. Finally, ROE = $76,580 / $205,000 = 0.373, or 37.4 percent.

Question 8

A company has a price-earnings ratio of 22 and a price-cash flow ratio of 12.6. If the earnings per share are $1.75, what is the cash flow per share?

Accepted Answer

The price-cash flow ratio is calculated as the price per share divided by the cash flow per share. First, calculate the price per share using the price-earnings ratio: Price per share = P/E ratio * Earnings per share = 22 * $1.75 = $38.50. Then, use the price-cash flow ratio to find the cash flow per share: Cash flow per share = Price per share / Price-cash flow ratio = $38.50 / 12.6 = $3.06.

Question 9

A firm has net sales of $65,000, operating expenses of $21,300, depreciation of $5,000, cost of goods sold of $37,000, and interest expense of $3,500. What is the operating margin?

Accepted Answer

The answer of A firm has net sales of $65,000,...

Question 10

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 11

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

Question 12

Glassmakers, Inc. purchased $125,500 of new equipment this year and also increased the inventory by $36,800. Twenty-seven thousand dollars worth of old equipment was sold. What is the investment cash flow for the year?

Accepted Answer

Investment cash flow is calculated as follows:
Equipment purchased: -$125,500
Increase in inventory: +$36,800
Sale of old equipment: +$27,000
Investment cash flow: -$125,500 + $36,800 + $27,000 = -$61,700
Therefore, the correct answer is option C, -$98,500.

Question 13

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 - 0.40) = $315,000

Question 14

A company has net income of $59,850, a price-earnings ratio of 22.6, and 25,500 shares of stock outstanding. If the price-cash flow ratio is 20.4, what is the cash flow per share?

Accepted Answer

To find the cash flow per share, first calculate the market price per share using the price-earnings ratio: Market Price = (Net Income / Shares Outstanding) * P/E Ratio = ($59,850 / 25,500) * 22.6 = $53.06. Then, use the price-cash flow ratio: Cash Flow per Share = Market Price / Price-Cash Flow Ratio = $53.06 / 20.4 = $2.60.

Question 15

A firm has net income of $18,000 and a book value per share of $2.10. 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

The answer of A firm has net income of $18,000...

Question 16

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

The answer of Green Recycling, Inc. has 150,000 shares of...

Question 17

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 18

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 - 0.60)] / 525,000 = $1.22

Question 19

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 × 0.30 × -1) + $12,000 = $6,000

Question 20

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-earnings ratio = price per share / earnings per share
Thus, price per share = price-earnings ratio x earnings per share = 24.1 x $3.50 = $84.35
Price-cash flow ratio = price per share / cash flow per share = $84.35 / $3.84 = 22.0

Quiz 17: Projecting Cash Flow and Earnings