Exam 2: Financial Statements, cash Flow, and Taxes

Assets other than cash are expected to produce cash over time,but the amount of cash they eventually produce could be higher or lower than the values at which these assets are carried on the books.

Total net operating capital is equal to net fixed assets.

Analysts following Armstrong Products recently noted that the company's operating net cash flow increased over the prior year,yet cash as reported on the balance sheet decreased.Which of the following factors could explain this situation?

Below are the year-end balance sheets for Wolken Enterprises: Wolken has never paid a dividend on its common stock,and it issued $2,400,000 of 10-year non-callable,long-term debt in 2012.As of the end of 2013,none of the principal on this debt had been repaid.Assume that the company's sales in 2012 and 2013 were the same.Which of the following statements must be CORRECT?

Its retained earnings is the actual cash that the firm has generated through operations less the cash that has been paid out to stockholders as dividends.Retained earnings are kept in cash or near cash accounts and,thus,these cash accounts,when added together,will always be equal to the firm's total retained earnings.

Tibbs Inc.had the following data for the year ending 12/31/12: Net income = $300; Net operating profit after taxes (NOPAT)= $400; Total assets = $2,500; Short-term investments = $200; Stockholders' equity = $1,800; Total debt = $700; and Total operating capital = $2,300.What was its return on invested capital (ROIC)?

Rao Corporation has the following balance sheet.How much net operating working capital does the firm have?

Net operating working capital is equal to operating current assets minus operating current liabilities.

The fact that 70% of the interest income received by a corporation is excluded from its taxable income encourages firms to use more debt financing than they would in the absence of this tax law provision.

Swinnerton Clothing Company's balance sheet showed total current assets of $2,250,all of which were required in operations.Its current liabilities consisted of $575 of accounts payable,$300 of 6% short-term notes payable to the bank,and $145 of accrued wages and taxes.What was its net operating working capital that was financed by investors?

Danielle's Sushi Shop last year had (1)a negative net cash flow from operations, (2)a negative free cash flow,and (3)an increase in cash as reported on its balance sheet.Which of the following factors could explain this situation?

NNR Inc.'s balance sheet showed total current assets of $1,875,000 plus $4,225,000 of net fixed assets.All of these assets were required in operations.The firm's current liabilities consisted of $475,000 of accounts payable,$375,000 of 6% short-term notes payable to the bank,and $150,000 of accrued wages and taxes.Its remaining capital consisted of long-term debt and common equity.What was NNR's total investor-provided operating capital?

Assume that Congress recently passed a provision that will enable Barton's Rare Books (BRB)to double its depreciation expense for the upcoming year but will have no effect on its sales revenue or tax rate.Prior to the new provision,BRB's net income after taxes was forecasted to be $4 million.Which of the following best describes the impact of the new provision on BRB's financial statements versus the statements without the provision? Assume that the company uses the same depreciation method for tax and stockholder reporting purposes.

Which of the following statements is CORRECT?

Bartling Energy Systems recently reported $9,250 of sales,$5,750 of operating costs other than depreciation,and $700 of depreciation.The company had no amortization charges,it had $3,200 of outstanding bonds that carry a 5% interest rate,and its federal-plus-state income tax rate was 35%.In order to sustain its operations and thus generate sales and cash flows in the future,the firm was required to make $1,250 of capital expenditures on new fixed assets and to invest $300 in net operating working capital.By how much did the firm's net income exceed its free cash flow?

Which of the following statements is CORRECT?

Zumbahlen Inc.has the following balance sheet.How much total operating capital does the firm have?

On its 2012 balance sheet,Barngrover Books showed $510 million of retained earnings,and exactly that same amount was shown the following year in 2013.Assuming that no earnings restatements were issued,which of the following statements is CORRECT?

Which of the following statements is CORRECT?

Which of the following statements is CORRECT?