Question 1

What is the change in net working capital from 2014 to 2015?

Accepted Answer

The change in net working capital is calculated as the difference between current assets and current liabilities from one year to the next. The correct choice indicates a decrease of $93 in net working capital from 2014 to 2015.

Question 2

What is the cash ﬂow to creditors for 2015 ($ in millions)?

Accepted Answer

Cash flow to creditors is calculated as interest paid minus net new borrowing. From the table provided in the question, interest paid in 2015 is $450 million and net new borrowing is $595 million. Therefore, cash flow to creditors in 2015 is (-$450 million + $595 million) = -$1,045 million, which is option A.

Question 3

What is the cash ﬂow to stockholders for 2015?

Accepted Answer

The answer of What is the cash ﬂow to stockholders...

Question 4

Bill's Mowers has beginning net ﬁxed assets of $1,620 and ending net ﬁxed assets of $1,780. Assets valued at $410 were sold during the year. Depreciation was $45. What is the value of the ﬁxed asset
Purchases for the year?

Accepted Answer

The answer of Bill's Mowers has beginning net ﬁxed assets...

Question 5

All-Rite sold $133,500 in used equipment in 2015 and replaced it with $212,000 of new equipment. Depreciation for 2015 and $12,500. What is the net capital spending for 2015?

Accepted Answer

Net capital spending is calculated by subtracting the depreciation from the capital expenditures: 
$212,000 - $133,500 - $12,500 = $91,000. Therefore, the correct answer is C.

Question 6

Canadian Enterprises had earnings before interest and taxes (EBIT) of $865, depreciation of $120 and taxes of $180. Given this information, calculate OCF.

Accepted Answer

OCF = EBIT + Depreciation - Taxes
OCF = 865 + 120 - 180
OCF = $805

Question 7

What is operating cash ﬂow for 2015?

Accepted Answer

The answer of What is operating cash ﬂow for 2015?
...

Question 8

Brad's Co. has equipment with a book value of $500 that could be sold today at a 50 percent discount. Their inventory is valued at $400 and could be sold to a competitor for that amount. The
ﬁrm has $50 in cash and customers owe them $300. What is the accounting value of their liquid
Assets?

Accepted Answer

The accounting value of liquid assets includes cash and accounts receivable. Cash is $50 and accounts receivable is $300, totaling $350. However, inventory is also considered a liquid asset, adding $400, making the total $750.

Question 9

What is the net working capital for 2015?

Accepted Answer

Net working capital is calculated as current assets minus current liabilities. In 2015, the company's current assets are $1,212 and its current liabilities are $400. Therefore, the net working capital is $1,212 - $400 = $812.

Question 10

Calculate earnings before interest and taxes given the following information: net income = $415; interest paid = $85; taxes = $300; sales = $2,000

Accepted Answer

Earnings Before Interest and Taxes (EBIT) can be calculated by adding net income, interest paid, and taxes. So, EBIT = $415 (net income) + $85 (interest paid) + $300 (taxes) = $800.

Question 11

What is the amount of the non-cash expenses for 2015 ($ in millions)?

Accepted Answer

The answer of What is the amount of the non-cash...

Question 12

Tim's Playhouse paid $155 in dividends and $220 in interest expense. The addition to retained earnings is $325 and net new equity is $50. The tax rate is 25 percent. Sales are $1,600 and
Depreciation is $160. What are the earnings before interest and taxes?

Accepted Answer

Start with the formula for net income:

Net Income = Sales - COGS - Operating Expenses - Depreciation - Interest Expense

Plug in the given information:

Net Income = $1,600 - COGS - Operating Expenses - $160 - $220

We are given that dividends were $155, so that means the addition to retained earnings was $325 - $155 = $170.

We are also given that net new equity is $50, so that means there were no additional shares issued and the $50 came in as some form of additional equity (such as retained earnings).

Using the information above, we can construct the following equation:

Net Income - 0.25(Taxes) - $155 + $170 + $50 = $325

Simplifying, we get:

Net Income - 0.25(Taxes) = $260

We want to solve for earnings before interest and taxes (EBIT), so we need to add back in the interest expense:

EBIT - $220 = Net Income

Substituting in Net Income from the previous equation, we get:

EBIT - $220 = 0.25(Taxes) + $260

Simplifying, we get:

EBIT = 0.25(Taxes) + $480

We don't know the tax rate, so we can't solve for EBIT yet. However, we can use the information given about dividends and net new equity to try and solve for the tax rate.

We know that dividends were $155, so that means:

Dividends = Net Income - (1 - Tax Rate)(Net Income)

Substituting in the Net Income equation from earlier and simplifying:

$155 = 0.75(Tax Rate)($1,965)

Solving for Tax Rate:

Tax Rate = 0.1051

Now we can plug in the tax rate to solve for EBIT:

EBIT = 0.25(0.1051) + $480

EBIT = $502.63

Rounding to the nearest dollar, we get:

EBIT = $503

Therefore, the best choice is C: $860.

Question 13

Calculate beginning net working capital given the following information: cash ﬂow from assets = $24,500; operating cash ﬂow = $8,500; capital spending = ($14,000); ending net working capital =
$8,000.

Accepted Answer

Beginning net working capital = Ending net working capital + Operating cash flow - Capital spending - Cash flow from assets = $8,000 + $8,500 - (-$14,000) - $24,500 = $10,000.

Question 14

What is the amount of non-cash items for 2015?

Accepted Answer

The answer of What is the amount of non-cash items...

Question 15

If net income = $46,750, depreciation expense = $20,000, interest expense = $10,000, and the tax rate = 15%, what is operating cash ﬂow?

Accepted Answer

The answer of If net income = $46,750, depreciation expense...

Question 16

A new ﬁrm issued $500 in common stock. At the end of the ﬁrst year, the ﬁrm had total assets of $1100 and total debt of $400. What was the amount of net income for the ﬁrst year, assuming the
ﬁrm paid no dividends?

Accepted Answer

The net income can be determined by calculating the change in equity. The initial equity was $500 (from common stock). At the end of the year, equity is total assets ($1100) minus total debt ($400), which equals $700. Therefore, the net income is $700 - $500 = $200.

Question 17

What is the amount of the non-cash expenses for 2015 ($ in millions)?

Accepted Answer

The answer of What is the amount of the non-cash...

Question 18

Celeste Video, Inc. reports 2015 taxable income of $200,011. How large is this ﬁrm's tax bill?

Accepted Answer

To determine the tax bill, we need to use the 2015 tax rate schedule provided by the IRS. For taxable income between $100,000 and $335,000, the tax rate is 28%. 
Thus, $200,011 - $100,000 = $100,011 taxable income subjected to the 28% tax rate.
$100,011 * 0.28 = $28,003.08 tax bill rounded to $28,003.
Therefore, the correct option is B) $61,254, which is the closest rounded amount to the tax bill of $28,003.

Question 19

Suppose that a ﬁrm paid dividends of $300 and interest of $611. In addition, the ﬁrm raised cash by selling new debt of $400 and new equity of $911. What is the ﬁrm's cash ﬂow to stockholders?

Accepted Answer

The answer of Suppose that a ﬁrm paid dividends of...

Question 20

A $40,000 asset was purchased and classiﬁed as a Class 10 asset for CCA purposes. If the CCA rate is 30%, calculate CCA for year 3.

Accepted Answer

The answer of A $40,000 asset was purchased and classiﬁed...

Quiz 2: Financial Statements, Taxes, and Cash Flow

What is the change in net working capital from 2014 to 2015?

What is the cash ﬂow to creditors for 2015 ($ in millions) ?

What is the cash ﬂow to stockholders for 2015?

Bill's Mowers has beginning net ﬁxed assets of $1,620 and ending net ﬁxed assets of $1,780. Assets valued at $410 were sold during the year. Depreciation was $45. What is the value of the ﬁxed asset Purchases for the year?

All-Rite sold $133,500 in used equipment in 2015 and replaced it with $212,000 of new equipment. Depreciation for 2015 and $12,500. What is the net capital spending for 2015?

Canadian Enterprises had earnings before interest and taxes (EBIT) of $865, depreciation of $120 and taxes of $180. Given this information, calculate OCF.

What is operating cash ﬂow for 2015?

Brad's Co. has equipment with a book value of $500 that could be sold today at a 50 percent discount. Their inventory is valued at $400 and could be sold to a competitor for that amount. The ﬁrm has $50 in cash and customers owe them $300. What is the accounting value of their liquid Assets?

What is the net working capital for 2015?

Calculate earnings before interest and taxes given the following information: net income = $415; interest paid = $85; taxes = $300; sales = $2,000

What is the amount of the non-cash expenses for 2015 ($ in millions) ?

Tim's Playhouse paid $155 in dividends and $220 in interest expense. The addition to retained earnings is $325 and net new equity is $50. The tax rate is 25 percent. Sales are $1,600 and Depreciation is $160. What are the earnings before interest and taxes?

Calculate beginning net working capital given the following information: cash ﬂow from assets = $24,500; operating cash ﬂow = $8,500; capital spending = ($14,000) ; ending net working capital = $8,000.