Exam 2: Financial Statements, Cash Flow, and Taxes

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?

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?

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?

Which of the following statements is CORRECT?

For managerial purposes,i.e. ,making decisions regarding the firm's operations,the standard financial statements as prepared by accountants under Generally Accepted Accounting Principles (GAAP)are often modified and used to create alternative data and metrics that provide a somewhat different picture of a firm's operations.Related to these modifications,which of the following statements is CORRECT?

Which of the following statements is CORRECT?

Which of the following statements is CORRECT?

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)?

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)?

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.

Hunter Manufacturing Inc.'s December 31,2014 balance sheet showed total common equity of $2,050,000 and 100,000 shares of stock outstanding.During 2015,Hunter had $250,000 of net income,and it paid out $100,000 as dividends.What was the book value per share at 12/31/2015,assuming that Hunter neither issued nor retired any common stock during 2015?

Barnes' Brothers has the following data for the year ending 12/31/2015: 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)?

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.

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

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.

Which of the following statements is CORRECT?

Danielle's Sushi Shop last year had (1)a negative net cash flow from operations, (2)a negative free cash flow,and (3)an increase in cash as reported on its balance sheet.Which of the following factors could explain this situation?

To estimate the cash flow from operations,depreciation must be added back to net income because it is a non-cash charge that has been deducted from revenue.