Question 1

Allen Company bought a new copy machine to be depreciated straight line for three years for use by sales personnel.Where would this purchase be reflected on the Statement of Cash Flows?

Accepted Answer

The purchase of a new copy machine to be depreciated over three years is an addition to property, plant, and equipment, which is an investing activity and would be reflected as such in the Statement of Cash Flows.

Question 2

A firm has EBIT of $29 million,interest expense of $4.5 million,and pays taxes of $8 million.If the firm has 15 million shares outstanding,what is the firm's EPS?

Accepted Answer

The answer of A firm has EBIT of $29 million,interest...

Question 3

Use the table for the question(s)below.
Income Statement for Xenon Manufacturing:
 
-Consider the above Income Statement for Xenon Manufacturing.All values are in millions of dollars.If Xenon Manufacturing has 25 million shares outstanding,what is its EPS in 2015?

Accepted Answer

The answer of Use the table for the question(s)below.
Income Statement...

Question 4

Use the table for the question(s)below.
 
-Refer to the income statement above.Luther's earnings before interest,taxes,depreciation,and amortization (EBITDA)for the year ending December 31,2015 is closest to:

Accepted Answer

EBITDA is calculated by adding back interest, taxes, depreciation, and amortization to net income. Without the specific income statement details, the exact calculation process can't be demonstrated, but the correct answer is chosen based on the information provided in the question.

Question 5

Which of the following is a way that the Operating Activity section of the statement of cash flows adjusts Net Income from the balance sheet?

Accepted Answer

The Operating Activity section of the statement of cash flows adds all non-cash entries related to the firm's operating activities, such as depreciation or amortization expenses, and adjusts Net Income from the balance sheet to show the actual cash flow generated or used by the firm's operations. Option A is incorrect because it only subtracts expenses and costs, not non-cash entries. Option C and E are incorrect because they relate to financing and investing activities, respectively, which are reported in separate sections of the statement of cash flows. Option D is incorrect because it refers to cash flow from investing activities, not operating activities.

Question 6

Use the table for the question(s)below.
 
-Refer to the income statement above.For the year ending December 31,2015 Luther's earnings per share are closest to:

Accepted Answer

To calculate the earnings per share we need to divide the net income attributable to common shareholders by the weighted average number of common shares outstanding. 
Net income attributable to common shareholders for the year ending December 31, 2015 is $4,162 million. 
Weighted average number of common shares outstanding for the year ending December 31, 2015 is 4,008 million. 
Therefore, the earnings per share are: 
Earnings per share = Net income attributable to common shareholders / Weighted average number of common shares outstanding = $4,162 million / 4,008 million = $1.04. 
The closest answer choice is B, $1.04.

Question 7

The firm's statement of cash flows uses the balance sheet and the income statement to determine the amount of cash a firm has generated and how it has used that cash during a given period.

Accepted Answer

This is a correct definition of a statement of cash flows. It shows the sources and uses of cash over a specific period of time, using information from the balance sheet and income statement.

Question 8

A firm has gross profit of $45 million,EBIT of $20 million,and net income of $8.5 million.If the firm has 5 million shares outstanding,what is the firm's EPS?

Accepted Answer

First, we need to calculate the earnings per share (EPS) using the net income and the number of shares outstanding:

EPS = (Net Income) / (Shares Outstanding) 
EPS = $8.5 million / 5 million shares 
EPS = $1.70

So the correct answer is (C) $1.70

Question 9

A firm has gross profit of $142 million,EBIT of $94 million,and net income of $55 million.If the firm has 28 million shares outstanding,what is the firm's EPS?

Accepted Answer

The answer of A firm has gross profit of $142...

Question 10

What will be the effect on the income statement if a firm buys a new processing plant through a new loan?

Accepted Answer

The answer of What will be the effect on the...

Question 11

A printing company prints a brochure for a client,and then bills them for this service.At the time the printing company's financial disclosure statements are prepared,the client has not yet paid the bill for this service.How will this transaction be recorded?

Accepted Answer

The sale will be recorded as revenue on the income statement, increasing Net Income. However, since the cash has not yet been received, it will be deducted in the cash flow from operations section of the statement of cash flows, adjusting the Net Income to reflect actual cash received.

Question 12

A firm has EBIT of $4.5 million,interest expense of $400,000,and pays taxes of $1.2 million.If the firm has 2 million shares outstanding,what is the firm's EPS?

Accepted Answer

To calculate EPS (Earnings Per Share), first, we need to find the net income by subtracting interest expense and taxes from EBIT. Net Income = EBIT - Interest Expense - Taxes = $4.5 million - $0.4 million - $1.2 million = $2.9 million. Then, divide the net income by the number of shares outstanding to find EPS: EPS = $2.9 million / 2 million shares = $1.45 per share.

Question 13

Use the table for the question(s)below.
 
-Refer to the income statement above.Luther has convertible bonds outstanding that would allow bondholders to convert their bonds into 700,000 shares of Luther stock.For the year ending December 31,2015 Luther's diluted earnings per share are closest to:

Accepted Answer

The answer of Use the table for the question(s)below.
 
-Refer...

Question 14

How does a firm select the dates for preparation of its income statement?

Accepted Answer

The answer of How does a firm select the dates...

Question 15

What is a firm's gross profit?

Accepted Answer

Gross profit is the difference between sales revenue and the costs associated with those sales. It does not include taxes, expenses or interest.

Question 16

Price-earnings ratios tend to be high for fast-growing firms.

Accepted Answer

Fast-growing firms are expected to have higher future earnings, which increases their expected stock price, leading to higher price-earnings ratios.

Question 17

A manufacturer of plastic bottles for the medical trade purchases a new compression blow moulder for its bottle production plant.How will the cost to the company of this piece of equipment be recorded?

Accepted Answer

The cost of the new compression blow moulder is a capital expenditure and will be depreciated over time, which is recorded on the income statement. The cost will also be subtracted from cash flows as a capital expenditure on the statement of cash flows. This reflects the fact that the equipment is a long-term asset that will provide benefits to the company over many years, and the cost needs to be allocated over time to match the revenue generated from the equipment.

Question 18

Use the table for the question(s)below.
Income Statement for CharmCorp:
 
-Consider the above Income Statement for CharmCorp.All values are in millions of dollars.If CharmCorp has 6 million shares outstanding,and its managers and employees have stock options for 1 million shares,what is its diluted EPS in 2015?

Accepted Answer

The answer of Use the table for the question(s)below.
Income Statement...

Question 19

Gross profit is calculated as:

Accepted Answer

Gross profit is calculated by subtracting the cost of sales from total sales, which means that only option C provides the correct calculation for gross profit. Selling, general, and administrative expenses (option B) and depreciation and amortization (option A) are not included in the calculation of gross profit. In addition, interest expense (option D) and taxes (option E) are not part of the calculation for gross profit.

Question 20

Use the table for the question(s)below.
 
-Refer to the income statement above.Assuming that Luther has no convertible bonds outstanding,then for the year ending December 31,2015 Luther's diluted earnings per share are closest to:

Accepted Answer

Diluted EPS = Net income / Diluted weighted-average shares outstanding= 10,400,000 / 10,200,000= $1.01

Quiz 2: Introduction to Financial Statement Analysis