Exam 2: Reviewing Financial Statements

Statement of Cash Flows Paige's Properties Inc. reported 2008 net income of $5 million and depreciation of $1,500,000. The top part Paige's Properties, Inc.'s 2007 and 2008 balance sheets is listed below (in millions of dollars). What is the 2008 net cash flow from operating activities for Paige's Properties, Inc.?

Free Cash Flow The 2010 income statement for Betty's Barstools shows that depreciation expense is $100 million, EBIT is $400 million, and taxes are $120 million. At the end of the year, the balance of gross fixed assets was $510 million. The increase in net operating working capital during the year was $94 million. Betty's free cash flow for the year was $625 million. What was the beginning of year balance for gross fixed assets?

You are considering an investment in Fields and Struthers, Inc. and want to evaluate the firm's free cash flow. From the income statement, you see that Fields and Struthers earned an EBIT of $52 million, paid taxes of $10 million, and its depreciation expense was $5 million. Fields and Struthers' gross fixed assets increased by $38 million from 2010 to 2011. The firm's current assets increased by $20 million and spontaneous current liabilities increased by $12 million. Calculate Fields and Struthers' operating cash flow (OCF), investment in operating capital (IOC) and free cash flow (FCF) for 2011.

When might earnings management become an ethical consideration?

ABC Inc. has $100 in cash on its balance at the end of 2009. During 2010, the firm issued $450 in common stock, reduced its notes payable by $40, purchased fixed assets in the amount of $750 and had cash flows from operating activities of $315. How much cash did ABC Inc. have on its balance sheet at the end of 2010?

Brenda's Bar and Grill has total assets of $17 million of which $5 million are current assets. Cash makes up 12 percent of the current assets and accounts receivable makes up another 40 percent of current assets. Brenda's gross plant and equipment has a cost value of $12 million and other long-term assets have a cost value of $1,000,000. Using this information, what is the balance of inventory and the balance of depreciation on Brenda's Bar and Grill's balance sheet?

Free cash flow is defined as

Which financial statement shows the total revenues that a firm earns and the total expenses the firm incurs to generate those revenues over a specific period of time-generally one year?

What are the costs and benefits of holding liquid securities on a firm's balance sheet?

Free Cash Flow The 2010 income statement for Lou's Shoes shows that depreciation expense is $2 million, EBIT is $5 million, EBT is $3 million, and the tax rate is 40 percent. At the beginning of the year, the balance of gross fixed assets was $16 million and net operating working capital was $6 million. At the end of the year gross fixed assets was $20 million. Lou's free cash flow for the year was $4 million. What is their end of year balance for net operating working capital?

How would you explain to a friend why market value of a firm is more important to an investor than book value of the firm?

An equity-financed firm will

Oakdale Fashions Inc. had $255,000 in 2011 taxable income. If the firm paid $82,100 in taxes, what is the firm's average tax rate?

A firm has sales of $690, EBIT of $300, depreciation of $40 and fixed assets increased by $265. If the firm's tax rate is 40% and there were no increases in net operating working capital, what is the firm's free cash flow?

If a company reports a large amount of net income on its income statement during a year, the firm will have