Exam 2: Reviewing Financial Statements

These are cash inflows and outflows associated with buying and selling of fixed or other long-term assets.

Hair Etc. has total assets of $15 million. Twenty percent of these assets are financed with debt of which $1 million is current liabilities. The firm has no preferred stock but the balance in common stock and paid-in surplus is $8 million. Using this information what is the balance for long-term debt and retained earnings on Hair Etc.'s balance sheet?

A firm had EBIT of $1,000, paid taxes of $225, expensed depreciation at $13, and its gross fixed assets increased by $25. What was the firm's operating cash flow?

You are considering a stock investment in one of two firms (AllDebt, Inc. and AllEquity, Inc.), both of which operate in the same industry and have identical operating income of $600,000. AllDebt, Inc. finances its $1.2 million in assets with $1 million in debt (on which it pays 10 percent interest annually) and $0.2 million in equity. AllEquity, Inc. finances its $1.2 million in assets with no debt and $1.2 million in equity. Both firms pay a tax rate of 30 percent on their taxable income. What are the asset funders' (the debt holders and stockholders) resulting return on assets for the two firms?

Investment in operating capital is:

You have been given the following information for Halle's Holiday Store Corp. for the year 2013: Net sales = $50,000,000; Cost of goods sold = $35,000,000; Addition to retained earnings = $2,000,000; Dividends paid to preferred and common stockholders = $3,000,000; Interest expense = $3,000,000.The firm's tax rate is 30 percent.In 2014, net sales are expected to increase by $5 million, Cost of goods sold is expected to be 65 percent of net sales, Expensed depreciation is expected to be the same as in 2013, Interest expense is expected to be $2,500,000, The tax rate is expected to be 30 percent of EBT, and Dividends paid to preferred and common stockholders will not change.What is the addition to retained earnings expected in 2014?

The Sarbanes-Oxley Act requires public companies to ensure which of the following individuals have considerable experience applying generally accepted accounting principles (GAAP) for financial statements.

A firm has operating income of $1,000, depreciation expense of $185, and its investment in operating capital is $400. The firm is 100 percent equity financed and has a 35 percent tax rate. What is the firm's operating cash flow?

Ed's Tobacco Shop has total assets of $100 million. Fifty percent of these assets are financed with debt of which $37 million is current liabilities. The firm has no preferred stock but the balance in common stock and paid-in surplus is $32 million. Using this information what is the balance for long-term debt and retained earnings on Ed's Tobacco Shop's balance sheet?

Reed's Birdie Shot, Inc.'s 2013 income statement lists the following income and expenses: EBIT = $550,000, interest expense = $43,000, and net income = $300,000. Calculate the 2013 taxes reported on the income statement.

Net operating profit after taxes (NOPAT) is defined as which of the following?

Suppose that in addition to the $300,000 of taxable income from operations, Liam's Burgers, Inc. received $25,000 of interest on state-issued bonds and $50,000 of dividends on common stock it owns in Sodas, Inc.Using the tax schedule in Table 2.3 what is Liam's income tax liability? What are Liam's average and marginal tax rates on total taxable income?

The 2013 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?

Full Moon Productions Inc. has net cash flow from financing activities for the last year of $105 million. The company paid $15 million in dividends last year. During the year, the change in notes payable on the balance sheet was an increase of $40 million, and change in common and preferred stock was an increase of $50 million. The end of year balance for long-term debt was $50 million. What was their beginning of year balance for long-term debt?

TriCycle, Corp. began the year 2013 with $25 million in retained earnings. The firm earned net income of $7 million in 2008 and paid $1 million to its preferred stockholders and $3 million to its common stockholders. What is the year-end 2013 balance in retained earnings for TriCycle?

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

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 2012 to 2013. 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 2013.

You have been given the following information for Kaye's Krumpet Corp.: Net sales = $150,000; Gross profit = $100,000; Addition to retained earnings = $20,000; Dividends paid to preferred and common stockholders = $8,000; Depreciation expense = $50,000.The firm's tax rate is 30 percent. What are the cost of goods sold and the interest expense for Kaye's Krumpet Corp.?

In 2013, Lower Case Productions had cash flows from investing activities of +$50,000 and cash flows from financing activities of +$100,000. The balance in the firm's cash account was $80,000 at the beginning of 2013 and $65,000 at the end of the year. What was Lower Case's cash flow from operations for 2013?

On which of the four major financial statements would you find the common stock and paid-in surplus?