Exam 6: Accounting for Financial Management

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?

Tucker Electronic System's current balance sheet shows total common equity of $3,125,000. The company has 125,000 shares of stock outstanding, and they sell at a price of $52.50 per share. By how much do the firm's market and book values per share differσ

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

Below are the year-end balance sheets for Wolken Enterprises: Assets: 2015 2014 Cash \ 200,000 \ 170,000 Accounts receivable 864,000 700,000 Inventories 2.000,000 1.400.000 Net fixed assets \ 3,064,000 \ 2270000 Total current assets 6,000,000 5,600,000 Total current assets \ 9,064,000 \ 7,870,000 Liabilities and equity: Accounts payable \ 1,400,000 \ 1,090,000 Notes payable 1,600,000 1,800,000 Total current liabilities \ 3,000,000 \ 2.890,000 Long-term debt 2,400,000 2,400,000 Common stock 3,000,000 2,000,000 Retained earnings 664,000 580,000 Total common equity \ 3,664,000 \ 2,580,000 Total liabilities and equity \ 9,064,000 \ 7870000 Wolken has never paid a dividend on its common stock, and it issued $2,400,000 of 10-year non-callable, long-term debt in 2014. As of the end of 2015, none of the principal on this debt had been repaid. Assume that the company's sales in 2014 and 2015 were the same. Which of the following statements must be CORRECTσ

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?

Analysts following Armstrong Products recently noted that the company's operating net cash flow increased over the prior year, yet cash as reported on the balance sheet decreased. Which of the following factors could explain this situation?

DeYoung Devices Inc., a new high-tech instrumentation firm, is building and equipping a new manufacturing facility. Assume that currently its equipment must be depreciated on a straight-line basis over 10 years, but Congress is considering legislation that would require the firm to depreciate the equipment over 7 years. If the legislation becomes law, which of the following would occur in the year following the change?

The primary reason the annual report is important in finance is that it is used by investors when they form expectations about the firm's future earnings and dividends, and the riskiness of those cash flows.

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

Total net operating capital is equal to net fixed assets.

A security analyst obtained the following information from Prestopino Products' financial statements: Retained earnings at the end of 2014 were $700,000, but retained earnings at the end of 2015 had declined to $320,000. The company does not pay dividends. The company's depreciation expense is its only non-cash expense; it has no amortization charges. The company has no non-cash revenues. The company's net cash flow (NCF) for 2015 was $150,000. On the basis of this information, which of the following statements is CORRECT?

Zumbahlen Inc. has the following balance sheet. How much total operating capital does the firm have? Cash \ 20.00 Accounts payable \ 30.00 Short-term investments 50.00 Accruals 50.00 Accounts receivable 20.00 Notes payable 30.00 Inventory 60.00 Current liabilities \ 110.00 Current assets \ 150.00 Long-term debt 70.00 Gross fixed assets \ 140.00 Common stock 30.00 Accumulated deprec. 40.00 Retained earnings 40.00 Net fixed assets \ 100.00 Total common equity \7 0.00 Total assets \ 250.00 Total liab. \& equity \ 250.00

Net operating profit after taxes (NOPAT) is the amount of net income a company would generate from its operations if it had no interest income or interest expense.

Edwards Electronics recently reported $11,250 of sales, $5,500 of operating costs other than depreciation, and $1,250 of depreciation. The company had no amortization charges, it had $3,500 of bonds that carry a 6.25% interest rate, and its federal-plus-state income tax rate was 35%. How much was its net cash flow?

Which of the following statements is CORRECTσ

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 CORRECTσ

HHH Inc. reported $12,500 of sales and $7,025 of operating costs (including depreciation). The company had $18,750 of investor-supplied operating assets (or capital), the weighted average cost of that capital (the WACC) was 9.5%, and the federal-plus-state income tax rate was 40%. What was HHH's Economic Value Added (EVA), i.e., how much value did management add to stockholders' wealth during the year?

Which of the following factors could explain why Regal Industrial Fixtures had a negative net cash flow last year, even though the cash on its balance sheet increased?

Which of the following statements is CORRECT?