Question 1

Northern Express paid $85 in dividends and $110 in interest expense during a given year.During that same year,the firm issued $40 in new equity shares,issued new debt of $65,and repaid $23 of old debt.What is the cash flow to creditors for that year?

Accepted Answer

Cash flow to creditors is calculated as interest expense minus the change in long-term debt. In this case, cash flow to creditors is $110 - ($65 - $23) = $68.

Question 2

JK Meadows has beginning current liabilities of $14,602 and total liabilities of $35,418.At the end of the year,the current liabilities are $15,311 and the total liabilities are $37,604.During the year,the firm paid $680 in dividends and $1,320 in interest.What is the cash flow to creditors?

Accepted Answer

To calculate the cash flow to creditors, we need to find the change in total liabilities, subtract the interest payments, and add back any increase in current liabilities (assuming these were due to purchases on credit).

Change in total liabilities = $37,604 - $35,418 = $2186

Cash flow to creditors = change in total liabilities - interest payments + increase in current liabilities 
= $2186 - $1320 + ($15,311 - $14,602) 
= $157 (negative indicates an outflow of cash from the firm to the creditors)

Therefore, the correct answer is D) −$157.

Question 3

Lester's Markets has total revenues of $3,811,costs of $2,902,depreciation of $315,interest expense of $168,and taxes of $89.At the beginning of the year,the firm had current assets of $2,150,total assets of $4,908,and total liabilities of $1,964.At the end of the year,the current assets are $2,202,total assets are $5,103,and total liabilities are $1,952.What is the amount of net capital spending for the year?

Accepted Answer

Net capital spending can be calculated using the following formula:
Net capital spending = Ending Net Fixed Assets - Beginning Net Fixed Assets + Depreciation
Beginning Net Fixed Assets = Total Assets - Current Assets - Total Liabilities = $4,908 - $2,150 - $1,964 = $794
Ending Net Fixed Assets = Total Assets - Current Assets - Total Liabilities = $5,103 - $2,202 - $1,952 = $949
Therefore, Net capital spending = $949 - $794 + $315 = $458. 
Therefore, the correct option is (C).

Question 4

JJ's has net sales of $48,920,depreciation of $711,cost of goods sold of $31,890,administrative costs of $11,210,interest expense of $680,dividends paid of $450,and taxes of $974.What is the cash flow from operations as it will appear on the accounting statement of cash flows if the firm spent $274 on net working capital?

Accepted Answer

Net income = Net sales - Cost of goods sold - Depreciation - Administrative costs - Interest expense + Dividends paid + Taxes= $48,920 - $31,890 - $711 - $11,210 - $680 + $450 + $974= $4,066Cash flow from operations = Net income + Depreciation - Net working capital= $4,066 + $711 - $274= $3,892

Question 5

Quick Marts increased its cash by $418 this year.The firm's statement of cash flows shows total cash flow from financing activities of $246 and total cash flow from investing activities of −$184.What is the total cash flow from operations on this accounting statement?

Accepted Answer

The answer of Quick Marts increased its cash by $418...

Question 6

Pete's Boats has beginning long-term debt of $840 and ending long-term debt of $790.The beginning and ending total debt balances are $1,220 and $1,360,respectively.The interest paid is $30.What is the amount of the cash flow to creditors?

Accepted Answer

The answer of Pete's Boats has beginning long-term debt of...

Question 7

At the beginning of this year,Blauser Industries had net fixed assets of $21,506 and total assets of $32,687.At year's end,net fixed assets are $20,492 and total assets are $32,915.The annual depreciation expense is $1,520.What is net capital spending for this year?

Accepted Answer

Net capital spending is calculated as the change in net fixed assets plus depreciation. The change in net fixed assets is $20,492 - $21,506 = -$1,014. Adding the depreciation expense of $1,520 gives a net capital spending of $506.

Question 8

For a given year,Mfg.Corp.had taxable income of $1,630 and a tax rate of 23 percent.The firm neither issued nor repurchased shares of stock but did decrease its retained earnings by $310.What is the cash flow to stockholders?

Accepted Answer

The answer of For a given year,Mfg.Corp.had taxable income of...

Question 9

Last year,Oscar's Dog Treats had a cash flow to creditors of $2,840 and a cash flow to stockholders of $1,630.The firm spent a net of $1,420 on fixed assets and reduced net working capital by $330.What was the operating cash flow?

Accepted Answer

Operating Cash Flow can be calculated using the following formula: 
Operating Cash Flow = Cash Flow to Creditors + Cash Flow to Stockholders + Depreciation - Net Working Capital

Given: 
Cash Flow to Creditors = $2,840 
Cash Flow to Stockholders = $1,630 
Net spending on fixed assets = -$1,420 
Change in Net working capital = -$330

Substituting these values in the formula gives: 
Operating Cash Flow = $2,840 + $1,630 + $1,420 - (-$330) 
Operating Cash Flow = $2,840 + $1,630 + $1,420 + $330 
Operating Cash Flow = $6,220

Therefore, the best choice is B, $5,560 (as it is the closest option to $6,220)

Question 10

The General Store has total revenue of $4,116,depreciation of $319,selling and administrative expenses of $554,interest expense of $162,dividends of $75,cost of goods sold of $2,354,and taxes of $186.What is the operating cash flow?

Accepted Answer

The answer of The General Store has total revenue of...

Question 11

For a given year,Rogers Express paid $318 in interest,$460 in dividends,and $368 in taxes.The firm had a net income of $1,220,depreciation of $1,560,an increase in net working capital of $220,an increase in net fixed assets of $950,and a decrease in long-term debt of $260.There were no changes in the equity accounts other than the change in retained earnings.What is the annual cash flow of the firm?

Accepted Answer

The answer of For a given year,Rogers Express paid $318...

Question 12

Discuss the difference between book values and market values on the balance sheet and explain the best method for determining the value of a firm to its stockholders.

Accepted Answer

The answer of Discuss the difference between book values and...

Question 13

Ledger Properties has the following financial information:  What is the cash flow of the firm for the current year if the tax rate is 22 percent?

Accepted Answer

To calculate the cash flow of the firm, we need to subtract taxes and capital expenditures from the net income. Using the financial information given, we get:
Net income = $7,300
Taxes = 0.22($4,600) = $1,012
Capital expenditures = $2,892
Therefore, Cash flow = Net income - Taxes - Capital expenditures = $7,300 - $1,012 - $2,892 = $3,396
Rounding to the nearest dollar, Cash flow = $3,400
Therefore, the correct answer is D, $2,096.

Question 14

For the year,Jensen's has depreciation of $2,058,dividends paid of $125,interest expense of $382,an addition to retained earnings of $3,408,and an increase in common stock of $2,500.The total tax rate is 21 percent.What is the operating cash flow?

Accepted Answer

Operating cash flow can be calculated as follows:
Operating cash flow = Net income + Depreciation + Interest expense x (1 - Tax rate)
= [Addition to retained earnings - Increase in common stock - Dividends paid] + Depreciation + Interest expense x (1 - Tax rate)
= [3,408 - 2,500 - 125] + 2,058 + 382 x (1 - 0.21)
= $5,973

Question 15

Thompson's Jet Skis has operating cash flow of $11,618.Depreciation is $2,345 and interest paid is $395.A net total of $485 was paid on long-term debt.The firm spent $6,180 on fixed assets and decreased net working capital by $420.What is the cash flow of the firm?

Accepted Answer

The correct answer is A because the cash flow of the firm is calculated by adding the operating cash flow, depreciation, and interest paid, and then subtracting the net total paid on long-term debt, the amount spent on fixed assets, and the decrease in net working capital.

Question 16

For the year,Peggy Grey's Cookies had net income of $8,110.The firm paid out 30 percent of the net income to its shareholders as dividends and also paid $210 in interest.During the year,the company repurchased $500 worth of common stock and borrowed $250.What is the cash flow to stockholders?

Accepted Answer

Cash flow to stockholders = Dividends - Repurchase of common stock= 0.30 * $8,110 - $500= $2,433 - $500= $1,933

Question 17

During the year,Lasko's repaid $12,500 in long-term debt,borrowed $8,400,paid $611 in interest and $740 in dividends,and had an operating cash flow of $16,207.The firm acquired $33,500 in new fixed assets and sold $8,400 of old assets.Net working capital declined by $1,592 during the year.What is the annual cash flow to stockholders?

Accepted Answer

The answer of During the year,Lasko's repaid $12,500 in long-term...

Question 18

Right Way Movers has interest expense of $168,total revenues of $38,411,costs of $28,515,depreciation of $306,and taxes of $1,979.The beginning balance sheet has total assets of $48,354,net fixed assets of $31,202,current liabilities of $14,207,and total liabilities of $29,407.The ending balance sheet shows total assets of $49,305,net fixed assets of $33,406,current liabilities of $17,318,and total liabilities of $30,404.What is the annual cash flow of the firm?

Accepted Answer

Annual cash flow = EBIT + Depreciation - Taxes - Increase in Net Working Capital - Capital Expenditures
EBIT = Total Revenues - Costs - Interest Expense
Increase in Net Working Capital = Current Liabilities(end) - Current Liabilities(beginning) = 17,318 - 14,207 = 3,111
Capital Expenditures = Net Fixed Assets(end) - Net Fixed Assets(beginning) + Depreciation = 33,406 - 31,202 + 306 = 2,510
Plugging in the values:
Annual cash flow = (38,411 - 28,515 - 168) + 306 - 1,979 - 3,111 - 2,510 = $9,771
Therefore, the answer is A.

Question 19

Last year,Webster Farms had annual revenue of $87,200,depreciation of $11,600,cost of goods sold of $54,700,and administrative expenses of $8,300.The firm paid $3,200 in dividends and paid taxes of $2,646.What was the operating cash flow?

Accepted Answer

Operating cash flow can be calculated as:

Operating cash flow = Revenue - Cost of goods sold - Administrative expenses - Taxes + Depreciation

Plugging in the given values, we get:

Operating cash flow = $87,200 - $54,700 - $8,300 - $2,646 + $11,600
Operating cash flow = $33,554

Therefore, the operating cash flow for Webster Farms was $33,554, which is closest to option D ($21,554).

Question 20

Define liquidity and explain what a firm would need to do to ensure all of the current assets displayed on its balance sheet are liquid.

Accepted Answer

The answer of Define liquidity and explain what a firm...

Quiz 2: Financial Statements and Cash Flow