Exam 2: Financial Statements, cash Flow, and Taxes

Last year Tiemann Technologies reported $10,500 of sales,$6,250 of operating costs other than depreciation,and $1,300 of depreciation.The company had no amortization charges,it had $5,000 of bonds that carry a 6.5% interest rate,and its federal-plus-state income tax rate was 35%.This year's data are expected to remain unchanged except for one item,depreciation,which is expected to increase by $750.By how much will net after-tax income change as a result of the change in depreciation? The company uses the same depreciation calculations for tax and stockholder reporting purposes.

Companies generate income from their "regular" operations and from other sources like interest earned on the securities they hold,which is called non-operating income.Lindley Textiles recently reported $12,500 of sales,$7,250 of operating costs other than depreciation,and $1,000 of depreciation.The company had no amortization charges and no non-operating income.It had $8,000 of bonds outstanding that carry a 7.5% interest rate,and its federal-plus-state income tax rate was 40%.How much was Lindley's operating income,or EBIT?

Aubey Aircraft recently announced that its net income increased sharply from the previous year,yet its net cash flow from operations declined.Which of the following could explain this performance?

TSW Inc.had the following data for last year: Net income = $800; Net operating profit after taxes (NOPAT)= $700; Total assets = $3,000; and Total operating capital = $2,000.Information for the just-completed year is as follows: Net income = $1,000; Net operating profit after taxes (NOPAT)= $925; Total assets = $2,600; and Total operating capital = $2,500.How much free cash flow did the firm generate during the just-completed year?

Edwards Electronics recently reported $11,250 of sales,$5,500 of operating costs other than depreciation,and $1,250 of depreciation.The company had no amortization charges,it had $3,500 of bonds that carry a 6.25% interest rate,and its federal-plus-state income tax rate was 35%.How much was its net cash flow?

The balance sheet is a financial statement that measures the flow of funds into and out of various accounts over time,while the income statement measures the firm's financial position at a point in time.

Consider the balance sheet of Wilkes Industries as shown below.Because Wilkes has $800,000 of retained earnings,the company would be able to pay cash to buy an asset with a cost of $200,000.

Which of the following statements is CORRECT?

Which of the following statements is CORRECT?

Barnes' Brothers has the following data for the year ending 12/31/12: Net income = $600; Net operating profit after taxes (NOPAT)= $700; Total assets = $2,500; Short-term investments = $200; Stockholders' equity = $1,800; Total debt = $700; and Total operating capital = $2,100.Barnes' weighted average cost of capital is 10%.What is its economic value added (EVA)?

Which of the following items cannot be found on a firm's balance sheet under current liabilities?

Which of the following would be most likely to occur in the year after Congress,in an effort to increase tax revenue,passed legislation that forced companies to depreciate equipment over longer lives? Assume that sales,other operating costs,and tax rates are not affected,and assume that the same depreciation method is used for tax and stockholder reporting purposes.

Interest paid by a corporation is a tax deduction for the paying corporation,but dividends paid are not deductible.This treatment,other things held constant,tends to encourage the use of debt financing by corporations.

The annual report contains four basic financial statements: the income statement,balance sheet,statement of cash flows,and statement of stockholders' equity.

Which of the following statements is CORRECT?

EP Enterprises has the following income statement.How much net operating profit after taxes (NOPAT)does the firm have? Sales \ 1,800.00 Costs 1,400.00 \ Depreciation 250.00 EBIT \ 150.00 EBT                                    $\underline {(70.00)}$ Taxes $(40 \%)$                         $80.00                                             $\underline {(32.00)}$ Net income                    $\$ \quad 48.00$

Below is the common equity section (in millions)of Fethe Industries' last two year-end balance sheets: The company has never paid a dividend to its common stockholders.Which of the following statements is CORRECT?