Exam 2: Reviewing Financial Statements

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?

Catering Corp.reported free cash flows for 2018 of $8 million and investment in operating capital of $2 million.Catering listed $1 million in depreciation expense and $2 million in taxes on its 2018 income statement.What was Catering's 2018 EBIT?

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 $3 million.AllDebt,Inc.finances its $6 million in assets with $5 million in debt (on which it pays 5 percent interest annually)and $1 million in equity.AllEquity,Inc.finances its $6 million in assets with no debt and $6 million in equity.Both firms pay a tax rate of 40 percent on their taxable income.What are the asset funders' (the debt holders and stockholders)resulting return on assets for the two firms?

Full Moon Productions Inc.has net cash flow from financing activities for the last year of $105 million.The company paid $15 million in dividends last year.During the year,the change in notes payable on the balance sheet was an increase of $40 million,and change in common and preferred stock was an increase of $50 million.The end of year balance for long-term debt was $50 million.What was their beginning of year balance for long-term debt?

Muffin's Masonry,Inc.'s balance sheet lists net fixed assets as $16 million.The fixed assets could currently be sold for $17 million.Muffin's current balance sheet shows current liabilities of $5.5 million and net working capital of $6.5 million.If all the current accounts were liquidated today,the company would receive $10.25 million cash after paying $5.5 million in liabilities.What is the book value of Muffin's Masonry's assets today? What is the market value of these assets?

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?

Which of the following is NOT a source of cash?

On which of the four major financial statements would you find the increase in inventory?

Crispy Corporation has net cash flow from financing activities for the last year of $20 million.The company paid $5 million in dividends last year.During the year,the change in notes payable on the balance sheet was an increase of $2 million,and change in common and preferred stock was an increase of $3 million.The end of year balance for long-term debt was $45 million.What was their beginning of year balance for long-term debt?

Fina's Faucets,Inc.has net cash flows from operating activities for the last year of $17 million.The income statement shows that net income is $15 million and depreciation expense is $6 million.During the year,the change in inventory on the balance sheet was an increase of $4 million,change in accrued wages and taxes was an increase of $1 million and change in accounts payable was an increase of $1 million.At the beginning of the year the balance of accounts receivable was $5 million.What was the end of year balance for accounts receivable?

The Ohio Corporation had a 2018 taxable income of $50,000,000 from operations after all operating costs but before (1)interest charges of $500,000, (2)dividends received of $45,000, (3)dividends paid of $10,000,000,and (4)income taxes. Using the tax schedule in Table 2.3,what is Ohio's income tax liability? What are Ohio's average and marginal tax rates on taxable income from operations?

Jamaican Ice Cream Corp.started the year with a balance of retained earnings of $100 million.The company reported net income for the year of $45 million,paid dividends of $2 million to the preferred stock holders and $15 million to common stock holders.What is Jamaican Ice Cream's end of year balance in retained earnings?

Investment in operating capital is:

Mr.Husker's Tuxedos,Corp.began the year 2018 with $205 million in retained earnings.The firm earned net income of $30 million in 2018 and paid $5 million to its preferred stockholders and $12 million to its common stockholders.What is the year-end 2018 balance in retained earnings for Mr.Husker's Tuxedos?

Martha's Moving Van 4U,Inc.had free cash flow during 2018 of $1 million,EBIT of $30 million,tax expense of $8 million,and depreciation of $4 million.Using this information,what was Martha's Accounts Payable ending balance in 2018?

For which of the following would one expect the book value of the asset to differ widely from its market value?

You have been given the following information for Halle's Holiday Store Corp.for the year 2017: Net sales = $50,000,000; Cost of goods sold = $35,000,000; Addition to retained earnings = $2,000,000; Dividends paid to preferred and common stockholders = $3,000,000; Interest expense = $3,000,000.The firm's tax rate is 30 percent.In 2018,net sales are expected to increase by $5 million,cost of goods sold is expected to be 65 percent of net sales,expensed depreciation is expected to be the same as in 2017,interest expense is expected to be $2,500,000,the tax rate is expected to be 30 percent of EBT,and dividends paid to preferred and common stockholders will not change.What is the addition to retained earnings expected in 2018?

Bike and Hike,Inc.started the year with a balance of retained earnings of $100 million and ended the year with retained earnings of $128 million.The company paid dividends of $9 million to the preferred stock holders and $22 million to common stock holders.What was Bike and Hike's net income for the year?

Harvey's Hamburger Stand has total assets of $3 million of which $1 million are current assets.Cash makes up 20 percent of the current assets and accounts receivable makes up another 5 percent of current assets.Harvey's gross plant and equipment has a book value of $1.5 million and other long-term assets have a book value of $1 million.Using this information,what is the balance of inventory and the balance of depreciation on Harvey's Hamburger Stand's balance sheet?

School Books,Inc.has total assets of $18 million of which $6 million are current assets.Cash makes up 10 percent of the current assets and accounts receivable makes up another 40 percent of current assets.School Books' gross plant and equipment has an original cost of $13 million and other long-term assets have a cost value of $2 million.Using this information,what are the balance of inventory and the balance of depreciation on School Books' balance sheet?