Question 1

What is the operating cash flow,given the following information?

Accepted Answer

A)  $680 
B)  $650 
C)  $780 
D)  $890 
E)  $930

Question 2

Last year,a firm had net income of $62,000 on sales of $595,000.The projected sales for next year are $654,500.Assume the firm uses the percentage of sales method for pro forma statements.What is the projected net income?

Accepted Answer

A)  $59,500 
B)  $65,500 
C)  $68,200 
D)  $71,500 
E)  $71,900

Question 3

What is the financing cash flow,given the following information?

Accepted Answer

A)  -$180 
B)  -$150 
C)  -$110 
D)  -$75 
E)  -$10

Question 4

The management of the Downtown Athletics recently voted to limit any future borrowing or sales of company stock.By taking this action,management has effectively done which one of the following?

Accepted Answer

A)  increased the profit margin 
B)  lowered income taxes 
C)  maximized future dividends 
D)  maximized future retained earnings 
E)  limited future growth

Question 5

Which one of the following is defined as anything a firm owns that has value?

Accepted Answer

A)  equity 
B)  asset 
C)  liability 
D)  cash inflow 
E)  cash outflow

Question 6

Green Recycling,Inc.has 150,000 shares of stock outstanding.The firm has total assets of $568,000 and total liabilities of $415,000.The firm's stock is selling for $31 a share.What is the price-book ratio?

Accepted Answer

A)  22.3 
B)  26.5 
C)  27.5 
D)  30.4 
E)  37.8

Question 7

Baker Jewelry,Inc.has annual sales of $5.2 million and a gross profit margin of 60 percent.The operating expenses are $489,000 and depreciation is $155,000.Interest expense is $70,000 and the tax rate is 35 percent.What is the net income?

Accepted Answer

A)  $1,002,980 
B)  $1,084,818 
C)  $1,227,980 
D)  $1,563,900 
E)  $2,385,000

Question 8

What is the operating cash flow,given the following information?

Accepted Answer

A)  $680 
B)  $650 
C)  $780 
D)  $890 
E)  $930

Question 9

A firm has current sales of $42,000.Projected sales for next year are $44,000.The percentage of sales approach is used for pro forma purposes.All balance sheet accounts,except long-term debt and common stock,change according to that approach.The expected increase in retained earnings is $2,500.What is the projected external financing need given the following current account values?

Accepted Answer

A)  -$3,532 
B)  -$1,969 
C)  -$1,390 
D)  $987 
E)  $1,341

Question 10

Which one of the following is most apt to be constant given the percentage of sales approach to creating pro forma statements?

Accepted Answer

A)  book value per share 
B)  gross margin 
C)  earnings per share 
D)  return on equity 
E)  cash flow per share

Question 11

A company has the following account balances.How much cash does the firm have assuming there are no other accounts?

Accepted Answer

A)  $27,300 
B)  $27,900 
C)  $30,900 
D)  $47,300 
E)  $50,300

Question 12

Which one of the following is an intangible fixed asset?

Accepted Answer

A)  accounts receivable 
B)  patent 
C)  inventory 
D)  equipment 
E)  building

Question 13

Which of the following affect the earnings per share?
I.decrease in interest expense
II.share repurchase
III.increase in tax rates
IV.preferred stock dividend

Accepted Answer

A)  I and III only 
B)  II and IV only 
C)  I, II, and III only 
D)  II, III, and IV only 
E)  I, II, III, and IV

Question 14

Wilson's Clothing has a loan payable to a bank which is due 18 months from now.How is this loan classified on the firm's financial statements?

Accepted Answer

A)  fixed asset 
B)  current liability 
C)  long-term debt 
D)  equity 
E)  expense

Question 15

Which of the following are current assets?
I.inventory
II.goodwill
III.fixed assets
IV.cash

Accepted Answer

A)  III only 
B)  IV only 
C)  II and III only 
D)  I and IV only 
E)  I, II, and IV only

Question 16

Marley Enterprises has financing cash flow of -$45,200 and investment cash flow of $24,500 for the year.The beginning cash balance was $64,200 and the ending cash balance was $55,100.What was the operating cash flow for the period?

Accepted Answer

A)  -$15,500 
B)  -$9,600 
C)  -$7,700 
D)  $8,900 
E)  $11,600

Question 17

Pro forma financial statements are statements based on which one of the following?

Accepted Answer

A)  projected future income, cash flows, and other non-cash items 
B)  historical revenue and expenses 
C)  historical asset and liability values 
D)  current period cash flows 
E)  current period revenues and expenses

Question 18

For the year,Wilson Manufacturing,Inc.increased its current assets by $62,000,decreased its current liabilities by $55,000,and decreased its fixed assets by $19,000.What is the investment cash flow for the year?

Accepted Answer

A)  -$31,000 
B)  -$12,000 
C)  $19,000 
D)  $31,000 
E)  $48,000

Question 19

Your company has pretax income of $52,000 on sales of $506,000.Sales are expected to increase by 6 percent next year and the tax rate is 40 percent.What is the expected net income for next year if your firm uses the percentage of sales approach when compiling pro forma statements?

Accepted Answer

A)  $28,938 
B)  $31,835 
C)  $33,072 
D)  $35,582 
E)  $44,520

Question 20

Which of the following reports are always included in a 10K filing with the SEC?
I.statement of cash flows
II.balance sheet
III.pro-forma statement
IV.income statement

Accepted Answer

A)  I only 
B)  IV only 
C)  II, III, and IV only 
D)  I, II, and IV only 
E)  I, II, III, and IV

Exam 17: Projecting Cash Flow and Earnings

What is the operating cash flow,given the following information?

Last year,a firm had net income of $62,000 on sales of $595,000.The projected sales for next year are $654,500.Assume the firm uses the percentage of sales method for pro forma statements.What is the projected net income?

What is the financing cash flow,given the following information?

The management of the Downtown Athletics recently voted to limit any future borrowing or sales of company stock.By taking this action,management has effectively done which one of the following?

Which one of the following is defined as anything a firm owns that has value?

Green Recycling,Inc.has 150,000 shares of stock outstanding.The firm has total assets of $568,000 and total liabilities of $415,000.The firm's stock is selling for $31 a share.What is the price-book ratio?

Baker Jewelry,Inc.has annual sales of $5.2 million and a gross profit margin of 60 percent.The operating expenses are $489,000 and depreciation is $155,000.Interest expense is $70,000 and the tax rate is 35 percent.What is the net income?

What is the operating cash flow,given the following information?

Which one of the following is most apt to be constant given the percentage of sales approach to creating pro forma statements?

A company has the following account balances.How much cash does the firm have assuming there are no other accounts?

Which one of the following is an intangible fixed asset?

Which of the following affect the earnings per share? I.decrease in interest expense II.share repurchase III.increase in tax rates IV.preferred stock dividend

Wilson's Clothing has a loan payable to a bank which is due 18 months from now.How is this loan classified on the firm's financial statements?

Which of the following are current assets? I.inventory II.goodwill III.fixed assets IV.cash

Marley Enterprises has financing cash flow of -$45,200 and investment cash flow of $24,500 for the year.The beginning cash balance was $64,200 and the ending cash balance was $55,100.What was the operating cash flow for the period?

Pro forma financial statements are statements based on which one of the following?

For the year,Wilson Manufacturing,Inc.increased its current assets by $62,000,decreased its current liabilities by $55,000,and decreased its fixed assets by $19,000.What is the investment cash flow for the year?

Your company has pretax income of $52,000 on sales of $506,000.Sales are expected to increase by 6 percent next year and the tax rate is 40 percent.What is the expected net income for next year if your firm uses the percentage of sales approach when compiling pro forma statements?

Which of the following reports are always included in a 10K filing with the SEC? I.statement of cash flows II.balance sheet III.pro-forma statement IV.income statement