Exam 7: Analysis of Financial Statements

Determine the increase or decrease in cash for Rinky Supply Company for last year, given the following information.(Assume no other changes occurred during the past year.)

Which of the following statements is correct?

Net fixed assets reflect the historical costs for property, plant, and equipment less accumulated depreciation.

Given the following information, calculate the market price per share of WAM Inc.

The ____ shows the investments made by the firm in the form of assets and the means by which the assets were financed.

Common stockholders' equity is the current market value of all common shares of stock outstanding.

The times-interest-earned ratio is one indication of a firm's ability to meet both long-term and short-term obligations.

Aurillo Equipment Company (AEC) projected that its ROE for next year would be just 6%.However, the financial staff has determined that the firm can increase its ROE by refinancing some high interest bonds currently outstanding.The firm's total debt will remain at $200,000 and the debt ratio will hold constant at 80%, but the interest rate on the refinanced debt will be 10%.The rate on the old debt is 14%.Refinancing will not affect sales which are projected to be $300,000.EBIT will be 11% of sales, and the firm's tax rate is 40%.If AEC refinances its high interest bonds, what will be its projected new ROE?

Determining whether a firm's financial position is improving or deteriorating requires analysis of more than one set of financial statements.Trend analysis is one method of measuring a firm's performance over time.

____ is a residual that represents the amount that stockholders would receive if all of the firm's assets could be sold at their book values and all of their liabilities could be paid at their book values.

The cash flow cycle can be described as the way in which net income flows into or out of the firm (i.e., a gain or a loss) during some specified period.

The Charleston Company is a relatively small, privately owned firm.Last year the company had after-tax income of $15,000, and 10,000 shares were outstanding.The owners were trying to determine the market value for the stock, prior to taking the company public.A similar firm which is publicly traded had a price/earnings ratio of 5.0.Using only the information given, estimate the market value of one share of Charleston's stock.

If a firm borrows money from a bank or reduces its level of inventory, these are both examples of sources of funds.

The financial position of companies whose business is seasonal can be dramatically different depending upon the time of year chosen to construct financial statements.This time sensitivity is especially true with respect to the firm's balance sheet.

Bender Corporation had sales of $250,000 last year.They had operating costs of $100,000, an interest expense of $15,000, and had an average tax 32%.Assuming Bender wants to have a 60% payout ratio and has 1,000 shares outstanding, what is Bender's expected dividend per share?

An increase in an asset account is a source of cash, whereas an increase in a liability account is a use of cash.

On its December 31st balance sheet, LCG Company reported gross fixed assets of $6,500,000 and net fixed assets of $5,000,000.Depreciation for the year was $500,000.Net fixed assets a year earlier on December 31st, had been $4,700,000.What figure for "Cash Flows Associated with Long-Term Investments (Fixed Assets)" should LCG report on its Statement of Cash Flows for the current year?

The degree to which the managers of a firm attempt to magnify the returns to owners' capital through the use of financial leverage is captured in debt management ratios.

If a positive change in gross fixed assets is greater than the change in accumulated depreciation for a particular year, net fixed assets increase and this constitutes a source of funds.

Which of the following statements is correct?