Question 1

Calculate net income based on the following information. Sales = $250.00
Cost of goods sold = $160.00
Depreciation = $35.00
Interest paid = $20.00
Tax rate = 34%
A) $23.10.
B) $11.90.
C) $35.00.
D) $46.20.
E) $36.30.

Accepted Answer

Net income is calculated as follows: 1. Gross profit = Sales - Cost of goods sold = $250.00 - $160.00 = $90.002. Operating profit = Gross profit - Depreciation = $90.00 - $35.00 = $55.003. Earnings before tax = Operating profit - Interest paid = $55.00 - $20.00 = $35.004. Tax = Earnings before tax * Tax rate = $35.00 * 34% = $11.905. Net income = Earnings before tax - Tax = $35.00 - $11.90 = $23.10

Question 2

From the following income statement information, calculate Johnson's after tax cash flow from operations. Net sales = $2,500
Cost of goods sold = $1050
Operating expenses = $490
Depreciation = $300
Tax rate = 34%
A) $660.00
B) $990.00
C) $1257.00
D) $735.60
E) $1059.00

Accepted Answer

The answer of From the following income statement information, calculate...

Question 3

Mirotronic Co. has a receivables turnover of 4 times. Sales are $20,000. What is the collection period? (Use 365 days in a year.)
A) 91.25 days
B) 90 days
C) 1.37 days
D) 21.92 days

Accepted Answer

The collection period is calculated as 365 days divided by the receivables turnover rate. With a turnover of 4 times, the collection period is 365 / 4 = 91.25 days.

Question 4

Dividends per share is equal to dividends paid:
A) divided by the par value of common stock.
B) divided by the total number of shares outstanding.
C) divided by total shareholders' equity.
D) multiplied by the par value of the common stock.
E) multiplied by the total number of shares outstanding.

Accepted Answer

Dividends per share is calculated by dividing the total amount of dividends paid by the total number of shares outstanding. It is not related to the par value of the common stock or total shareholders' equity. Therefore, the correct choice is B.

Question 5

Cash flow to shareholder is defined as:
A) total cash flow from the firm plus cash flow to the bondholders.
B) repurchases of equity less cash dividends paid plus new equity sold.
C) cash flow from operations less cash flow to creditors.
D) cash dividends plus repurchases of equity minus new equity sold.

Accepted Answer

Cash flow to shareholders is defined as cash dividends paid to shareholders plus repurchases of equity (which return capital to shareholders) minus any new equity sold (which takes capital from shareholders). This reflects the net cash flow from the company to its shareholders.

Question 6

Donny Dell Inc. had a days in inventory (based on 365 days) of 5. Cost of goods sold were $4,526. Net working capital was $70 and total current assets were $400. What is Donny Dell's quick ratio?
A) 11.315.
B) 1.024.
C) 4.829.
D) 14.00.

Accepted Answer

The quick ratio is calculated as (Current Assets - Inventory) / Current Liabilities. First, find the inventory: Days in Inventory = 365 / Inventory Turnover, where Inventory Turnover = COGS / Inventory. Solving for Inventory gives Inventory = (COGS / (365 / Days in Inventory)) = $62. Then, Quick Ratio = (400 - 62) / (400 - 70) = 1.024.

Question 7

Over the year, the Rigem Co. had cash flow from operations of $938, and had net capital spending of $225. In addition, the firm's Net Working Capital increased by $73. What was Rigem's total cash flow?
A) $1,236.
B) $748.
C) $640.
D) $786.

Accepted Answer

Rigem's total cash flow is calculated as cash flow from operations minus net capital spending and the increase in net working capital: $938 - $225 - $73 = $640.

Question 8

The primary source of the firm's cash flow is usually:
A) net income.
B) tax credits.
C) earnings before interest and depreciation minus taxes.
D) capital spending after taxes.
E) working capital requirements.

Accepted Answer

Earnings before interest and depreciation minus taxes (often referred to as operating cash flow) is a primary source of cash flow as it represents the cash generated from the firm's core business operations.

Question 9

Which of the following is not a use of Net Working Capital?
A) Retirement of long-term debt.
B) Dividends.
C) Sale of equity.
D) Acquisition of fixed assets.

Accepted Answer

Net Working Capital is primarily used for short-term financial management, focusing on managing current assets and liabilities. The sale of equity is a financing activity related to long-term capital structure, not directly related to the management or use of Net Working Capital.

Question 10

Midget Co. has a profit margin on sales of 4% and a ROE of 18%. If Midget's debt-to-equity ratio is .8, what is the total asset turnover ratio?
A) 2.500.
B) 5.625.
C) 2.000.
D) 10.125.

Accepted Answer

The total asset turnover ratio can be calculated using the formula: ROE = Profit Margin * Total Asset Turnover * Equity Multiplier. Given ROE = 18%, Profit Margin = 4%, and Debt-to-Equity ratio = 0.8, the Equity Multiplier is 1 + Debt-to-Equity = 1.8. Solving for Total Asset Turnover: 0.18 = 0.04 * Total Asset Turnover * 1.8, Total Asset Turnover = 2.5.

Question 11

Donny Dell Inc. had a days in inventory of 5 (based on 365 days). The inventory turnover was:
A) 5.
B) 60.
C) 73.
D) cannot be figured without the inventory value.

Accepted Answer

The inventory turnover ratio is calculated as 365 days divided by the days in inventory. Therefore, 365 / 5 = 73.

Question 12

What is the effect on net working capital if the corporation decides to increase their investment in inventory and pay for it with cash?
A) Increase in NWC.
B) Decrease in NWC.
C) Depends on the amount of the investment.
D) No effect.
E) Depends on the amount of cash.

Accepted Answer

The answer of What is the effect on net working...

Question 13

The cash flow of the firm is defined as the cash flow of the assets. This cash flow must be equal to:
A) cash flow to equity minus cash flow to debtholders.
B) cash flow to debtholders minus cash flow to equity.
C) cash flow from changes in working capital plus cash flow to equity.
D) cash flow to equity plus cash flow to debtholders.

Accepted Answer

The cash flow of the firm, or the cash flow of the assets, is the total cash that is generated by the firm's operations. It must be equal to the sum of the cash flow to equity (owners/shareholders) and the cash flow to debtholders (creditors/lenders), as both are claimants on the firm's cash flows.

Question 14

When making financial decisions related to assets, you should:
A) always consider market values.
B) place more emphasis on book values than on market values.
C) rely primarily on the value of assets as shown on the balance sheet.
D) only consider market values if they are less than book values.

Accepted Answer

Market values reflect the current value of assets in the marketplace, providing a more accurate and relevant basis for financial decisions than book values, which may not reflect current market conditions or the true value of an asset.

Question 15

Earnings per share is equal to:
A) net income divided by the total number of shares outstanding.
B) net income divided by the par value of the common stock.
C) gross income multiplied by the par value of the common stock.
D) operating income divided by the par value of the common stock.
E) net income divided by total shareholders' equity.

Accepted Answer

Earnings per share (EPS) is a financial ratio that shows the amount of net income earned by a company per share of its outstanding common stock. The formula for calculating EPS is net income divided by the total number of shares outstanding. Therefore, option A is the correct answer.

Question 16

Tan Co. had total operating revenues of $720 over the past year. During that time, average receivables were $90. What was the average collection period (ACP) given a 365-day year?
A) 8.00 days.
B) 4.56 days.
C) 40.97 days.
D) 45.63 days.

Accepted Answer

The answer of Tan Co. had total operating revenues of...

Question 17

For any individual period the firm cash flows are a circular flow of funds, this means:
A) that cash flows are always invested in fixed assets.
B) that cash flows are always in a spiral away from the firm.
C) that firm cash flows must be borrowed externally to be reinvested in the economy.
D) that all cash flows generated by the firm must equal the cash flows paid to the creditors and shareholders.

Accepted Answer

The circular flow of funds concept implies that the cash generated by a firm through its operations and financing activities is eventually distributed back to the firm's financiers, such as creditors and shareholders, maintaining a balance in cash flows.

Question 18

Net capital spending is equal to:
A) net additions to Net Working Capital.
B) the net change in fixed assets.
C) net income plus depreciation.
D) total cash flow to shareholders less interest and dividends paid.

Accepted Answer

Net capital spending refers to the net change in fixed assets, which includes purchases of new assets and sales of existing ones, adjusted for depreciation. It does not directly relate to net working capital, net income, or cash flows to shareholders in the context of its definition.

Question 19

Dorr Corp. had an ROA of 8%. Dorr's profit margin was 4% on sales of $250. What were total assets?
A) $125.
B) $500.
C) $30.
D) $220.

Accepted Answer

The answer of Dorr Corp. had an ROA of 8%....

Question 20

Donny Dell Inc.'s cost of goods sold were $4,526. They had net working capital of $70 and total current assets were $400. If inventory was 62 what is the current ratio of Donny Dell?
A) 7.3.
B) 5.71.
C) 1.21.
D) 4.71.

Accepted Answer

The current ratio is calculated as Current Assets / Current Liabilities. Given that total current assets are $400 and net working capital (Current Assets - Current Liabilities) is $70, we can find Current Liabilities = Current Assets - Net Working Capital = $400 - $70 = $330. Therefore, the current ratio = $400 / $330 = 1.21.

Quiz 2: Accounting Statements and Cash Flow

Calculate net income based on the following information. Sales = $250.00 Cost of goods sold = $160.00 Depreciation = $35.00 Interest paid = $20.00 Tax rate = 34%

From the following income statement information, calculate Johnson's after tax cash flow from operations. Net sales = $2,500 Cost of goods sold = $1050 Operating expenses = $490 Depreciation = $300 Tax rate = 34%

Mirotronic Co. has a receivables turnover of 4 times. Sales are $20,000. What is the collection period? (Use 365 days in a year.)

Dividends per share is equal to dividends paid:

Cash flow to shareholder is defined as:

Donny Dell Inc. had a days in inventory (based on 365 days) of 5. Cost of goods sold were $4,526. Net working capital was $70 and total current assets were $400. What is Donny Dell's quick ratio?

Over the year, the Rigem Co. had cash flow from operations of $938, and had net capital spending of $225. In addition, the firm's Net Working Capital increased by $73. What was Rigem's total cash flow?

The primary source of the firm's cash flow is usually:

Which of the following is not a use of Net Working Capital?

Midget Co. has a profit margin on sales of 4% and a ROE of 18%. If Midget's debt-to-equity ratio is .8, what is the total asset turnover ratio?

Donny Dell Inc. had a days in inventory of 5 (based on 365 days) . The inventory turnover was:

What is the effect on net working capital if the corporation decides to increase their investment in inventory and pay for it with cash?

The cash flow of the firm is defined as the cash flow of the assets. This cash flow must be equal to:

When making financial decisions related to assets, you should:

Earnings per share is equal to:

Tan Co. had total operating revenues of $720 over the past year. During that time, average receivables were $90. What was the average collection period (ACP) given a 365-day year?

For any individual period the firm cash flows are a circular flow of funds, this means:

Net capital spending is equal to:

Dorr Corp. had an ROA of 8%. Dorr's profit margin was 4% on sales of $250. What were total assets?

Donny Dell Inc.'s cost of goods sold were $4,526. They had net working capital of $70 and total current assets were $400. If inventory was 62 what is the current ratio of Donny Dell?