Exam 6: Accounting for Financial Management

Which of the following statements is CORRECT?

On its 2014 balance sheet,Barngrover Books showed $510 million of retained earnings,and exactly that same amount was shown the following year in 2015.Assuming that no earnings restatements were issued,which of the following statements is 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.

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?

JBS Inc.recently reported net income of $4,750 and depreciation of $885.How much was its net cash flow,assuming it had no amortization expense and sold none of its fixed assets?

Other things held constant,which of the following actions would increase the amount of cash on a company's balance sheet?

Frederickson Office Supplies recently reported $12,500 of sales,$7,250 of operating costs other than depreciation,and $1,250 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 the firm's taxable income,or earnings before taxes (EBT)?

Tibbs Inc.had the following data for the year ending 12/31/2015: 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)?

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?

Lucy's Music Emporium opened its doors on January 1,2015,and it was granted permission to use the same depreciation calculations for shareholder reporting and income tax purposes.The company planned to depreciate its fixed assets over 20 years,but in December 2015 management realized that the assets would last for only 15 years.The firm's accountants plan to report the 2015 financial statements based on this new information.How would the new depreciation assumption affect the company's financial statements?

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.

Which of the following statements is CORRECT?

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.

On 12/31/2015,Heaton Industries Inc.reported retained earnings of $675,000 on its balance sheet,and it reported that it had $172,500 of net income during the year.On its previous balance sheet,at 12/31/2014,the company had reported $555,000 of retained earnings.No shares were repurchased during 2015.How much in dividends did Heaton pay during 2015?

On the balance sheet,total assets must always equal total liabilities and equity.

Over the years,Janjigian Corporation's stockholders have provided $15,250 of capital,part when they purchased new issues of stock and part when they allowed management to retain some of the firm's earnings.The firm now has 1,000 shares of common stock outstanding,and it sells at a price of $42.00 per share.How much value has Janjigian's management added to stockholder wealth over the years,i.e.,what is Janjigian's MVA?