Question 1

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 2

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 3

HBB Manufacturing,Inc.has 275,000 shares of stock outstanding.The firm paid out $275,000 in dividends,$195,000 in interest,and added $150,000 to retained earnings for the year.What is the amount of the earnings per share?

Accepted Answer

Earnings per share = ($275,000 + $180,000) / 275,000 = $1.55

Question 4

Children's Books,Inc.has net income of $50,000 and a plowback ratio of 80 percent.There are 22,000 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 / ($50,000 / 22,000) = 8.2

Question 5

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 6

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 = $84.35
Price-cash flow ratio = $84.35 / $3.84 = 22.0

Question 7

Sander's Corner Market had annual sales of $426,000 and total assets of $345,000.What is the return on assets if the profit margin is 8 percent?

Accepted Answer

Return on assets = (0.08 × $426,000) / $345,000 = 9.88 percent

Question 8

For the year,Widgets Manufacturing,Inc.increased its current assets accounts by $45,000,decreased its current liabilities by $37,000,and decreased its fixed assets by $48,000.What is the investment cash flow for the year?

Accepted Answer

Investment cash flow = $48,000

Question 9

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 10

A company has net income of $66,000,a price-earnings ratio of 24.1,and 26,000 shares of stock outstanding.If the price-cash flow ratio is 19,what is the cash flow per share?

Accepted Answer

Price = ($66,000 / 26,000) × 24.1 = $61.1769
Cash flow per share = $61.1769 / 19 = $3.22

Question 11

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 12

Marley Enterprises has financing cash flow of -$45,200 and investment cash flow of $24,500 for the year.The beginning cash balance was $64,200 and the ending cash balance was $55,100.What was the operating cash flow for the period?

Accepted Answer

Operating cash flow = ($55,100 - $64,200) - (-$45,200) - $24,500 = $11,600

Question 13

A company has a price-earnings ratio of 21 and a price-cash flow ratio of 12.If the earnings per share are $1.75,what is the cash flow per share?

Accepted Answer

Price = $1.75 × 21 = $36.75
CFPS = $36.75 / 12 = $3.06

Question 14

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 15

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 = $11.93
Price-book ratio = $11.93 / $3.10 = 3.8

Question 16

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 = $58.375
BVPS = $58.375 / 7.6 = $7.68

Question 17

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 18

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 = $1.02
Price-book ratio = $31 / $1.02 = 30.4

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

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 = (0.105 × $523,000) / ($580,000 - $375,000) = 26.8 percent

Quiz 17: Projecting Cash Flow and Earnings