Exam 2: Reviewing Financial Statements

Free Cash Flow 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?

Which of the following is a use of cash?

Income Statement You have been given the following information for Romeo's Rockers Corp.: Net sales = $5,200,000; Cost of goods sold = $2,100,000; Addition to retained earnings = $1,000,000; Dividends paid to preferred and common stockholders = $400,000; Interest expense = $200,000. The firm's tax rate is 30 percent.What is the depreciation expense for Romeo's Rockers Corp.?

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.

Debt versus Equity Financing 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 $400,000.AllDebt,Inc.finances its $800,000 in assets with $600,000 in debt (on which it pays 5 percent interest annually)and $200,000 in equity.AllEquity,Inc.finances its $800,000 in assets with no debt and $800,000 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?

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

Income Statement 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?

Balance Sheet You are evaluating the balance sheet for Campus Corporation.From the balance sheet you find the following balances: cash and marketable securities = $400,000,accounts receivable = $200,000,inventory = $100,000,accrued wages and taxes = $10,000,accounts payable = $300,000,and notes payable = $600,000.What is Campus's net working capital?

When a firm alters its capital structure to include more or less debt (and,in turn,less or more equity),it impacts which of the following?

How would you explain to a friend why market value of a firm is more important to an investor than book value of the firm?

You have been given the following information for Corky's Bedding Corp.: Net sales = $15,250,000; Cost of goods sold = $5,750,000; Addition to retained earnings = $4,000,000; Dividends paid to preferred and common stockholders = $995,000; Interest expense = $1,150,000. The firm's tax rate is 30 percent.Calculate the depreciation expense for Corky's Bedding Corp.

Market Value versus Book Value Acme Bricks balance sheet lists net fixed assets as $40 million.The fixed assets could currently be sold for $50 million.Acme's current balance sheet shows current liabilities of $15 million and net working capital of $12 million.If all the current accounts were liquidated today,the company would receive $77 million cash after paying $15 million in liabilities.What is the book value of Acme's assets today? What is the market value of these assets?

Which financial statement reconciles net income earned during a given period and any cash dividends paid within that period using the change in retained earnings between the beginning and end of the period?

Which financial statement shows the total revenues that a firm earns and the total expenses the firm incurs to generate those revenues over a specific period of time-generally one year?

This is cash flow available for payments to stockholders and debt holders of a firm after the firm has made investments in assets necessary to sustain the ongoing operations of the firm.

Corporate Taxes 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?

Cash flows available to pay the firm's stockholders and debt holders after the firm has made the necessary working capital investments,fixed asset investments,and developed the necessary new products to sustain the firm's ongoing operations is referred to as:

Statement of Cash Flows Paige's Properties Inc.reported 2013 net income of $5 million and depreciation of $1,500,000.The top part Paige's Properties,Inc.'s 2012 and 2013 balance sheets is listed as follows (in millions of dollars). What is the 2013 net cash flow from operating activities for Paige's Properties,Inc.?

All of the following are cash flows from operations EXCEPT:

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