Exam 2: Reviewing Financial Statements

The Carolina Corporation had a 2013 taxable income of $3,000,000 from operations after all operating costs but before: (1) interest charges of $500,000, (2) dividends received of $75,000, (3) dividends paid of $1,000,000, and (4) income taxes.Using the tax schedule in Table 2.3, what is Carolina's income tax liability? What are Carolina's average and marginal tax rates on taxable income from operations?

ABC Inc. has $100 in cash on its balance sheet 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?

Consider a firm with an EBIT of $5,000,000. The firm finances its assets with $20,000,000 debt (costing 5 percent) and 70,000 shares of stock selling at $50.00 per share. To reduce the firm's risk associated with this financial leverage, the firm is considering reducing its debt by $5,000,000 by selling an additional 100,000 shares of stock. The firm is in the 40 percent tax bracket. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain $5,000,000. What is the change in the firm's EPS from this change in capital structure?

Which financial statement reports the amounts of cash that the firm generated and distributed during a particular time period?

Ramakrishnan Inc. reported 2013 net income of $20 million and depreciation of $1,500,000. The top part of Ramakrishnan, Inc.'s 2012 and 2013 balance sheets is listed as follows (in millions of dollars). 2012 2013 Assets Cash and marketable securities securities \ 15 \ 20 Accounts receivable 75 84 Inventory 110 121 Total \ 200 \ 225 2012 2013 Liabilities \& Equity Current liabilities Accrued wages and taxes \ 18 \ 20 Accounts payable 45 50 Notes payable 40 45 Total \ 103 \ 115 Calculate the 2013 net cash flow from operating activities for Ramakrishnan, Inc.

LLV Inc. originally forecasted the following financial data for next year: sales = $1,000, cost of goods sold = $675, and interest expense = $90. The firm believes that COGS will always be 67.5 percent of sales. Due to increased global demand, the firm is now projecting that sales will be 20 percent higher than the original forecast. What is the additional net income (as compared to the original forecast) the firm can expect assuming a 35 percent tax rate?

Is it possible for a firm to have positive net income and yet have cash flow problems?

Which of the following activities result in an increase in a firm's cash?

Which of the following is an example of a capital structure?

Ted's Taco Shop has total assets of $5 million. Forty percent of these assets are financed with debt of which $400,000 is current liabilities. The firm has no preferred stock but the balance in common stock and paid-in surplus is $1 million. Using this information what is the balance for long-term debt and retained earnings on Ted's Taco Shop's balance sheet?

Free cash flow is defined as:

Bullseye, Inc.'s 2013 income statement lists the following income and expenses: EBIT = $900,000, interest expense = $85,000, and net income = $570,000. What are the 2013 taxes reported on the income statement?

Zoe's Dog Biscuits, Inc. has net cash flows from operating activities for the last year of $226 million. The income statement shows that net income is $150 million and depreciation expense is $85 million. During the year, the change in inventory on the balance sheet was an increase of $14 million, change in accrued wages and taxes was an increase of $15 million and change in accounts payable was an increase of $10 million. At the beginning of the year the balance of accounts receivable was $45 million. What was the end of year balance for accounts receivable?

Swimmy, Inc. had $400,000 in 2013 taxable income. Using the tax schedule from Table 2-3, what are the company's 2013 income taxes, average tax rate, and marginal tax rate, respectively? Taxable income Pay this amount on Base income Plus this percentage on anything over the base \ 0-\ 50,000 \ 0 15\% \ 50,001-\ 75,000 \ 7,500 25\% \ 75,001-\ 100,000 \ 13,500 34\% \ 100,001-\ 335,000 \ 22,250 39\% \ 335,000-\ 10,000,000 \ 113,900 34\%

The 2010 income statement for Pete's Pumpkins shows that depreciation expense is $250 million, EBIT is $500 million, EBT is $320 million, and the tax rate is 30 percent. At the beginning of the year, the balance of gross fixed assets was $1,600 million and net operating working capital was $640 million. At the end of the year gross fixed assets was $2,000 million. Pete's free cash flow for the year was $630 million. What is their end of year balance for net operating working capital?