FINA 307 Exam 2 Study Guide – Flashcards

Calculate the average collection period for Dots Inc. if its accounts receivables were $550 at the beginning of a year in which the firm generated $3,000 of sales?

What is the approximate total debt ratio for a firm with a total debt-equity ratio of .65?

Salad Daze maintains an inventory of produce worth $560. Its total bill for produce over the course of the year was $80,000. How old on average is the lettuce it serves its customers?

If a firm has a debt-equity ratio of .45, long-term debt of $500, and equity of $2,000, then: current assets must be $400. retained earnings must be $900. current liabilities must be $400. preferred stock must be $400.

When a firm's long-term debt-equity ratio is .98, the firm: has less long-term debt than equity. has as much in long-term liabilities as in equity. is nearing insolvency. has too much long-term debt in relation to leases.

The only measure of firm performance that accounts for cost of capital is:

Which of the following will occur in a statement of cash flows as a result of paying cash dividends? Cash flows from operations will increase. Cash flows from investments will decrease. Cash balances will not be affected. Cash flows from financing will decrease.

An asset turnover ratio of 1.75 can be interpreted as:

Which one of these changes indicates an improvement in a firm's asset management efficiency? An increase in the inventory turnover rate An increase in the amount of assets per dollar of sales A decrease in the receivables turnover rate An increase in the average days in inventory

If a firm's statement of cash flows shows that cash was used for investments, which of the following would seem most likely? New machines were acquired. The inventory balance increased. Common stock was repurchased. Cash dividends were paid.

Which of these indicates that a firm is efficient? A high inventory turnover A low asset turnover A high day's sales in inventories A high average collection period

Balsco's balance sheet shows total assets of $238,000 and total liabilities of $107,000. The firm has 55,000 shares of stock outstanding that sell for $11 a share. What is amount of market value added?

A total debt ratio of .35: indicates that the firm is financed with 35% long-term debt. indicates that 35 cents of every dollar of capital is in the form of short-term debt. would exist if a firm had liabilities of $700 and assets of $2,000. indicates that 35 cents of every dollar of capital is in the form of long-term debt.

In a statement of cash flows, which category includes depreciation expense as a line item?

Assume a firm generates $2,000 in sales and has a $500 increase in accounts receivable during an accounting period. Based solely on this information, cash flow will increase by: $2,000. $1,500. $2,500. $500.

If a firm's total debt ratio is greater than .5, then: its debt-equity ratio exceeds 1.0. it has more long-term debt than equity. its current liabilities are quite high. it has too few total assets.

Which one of these would not be paid from free cash flow? Repayment of principal on a long-term debt Repurchase of outstanding shares of common stock New equipment purchase Cash dividends

A firm's after-tax operating income was $1,000,000 in 2013. It started the year with a total capitalization of $8,000,000 and ended the year with a total capitalization of $9,000,000. The additional capital raised during 2013 started to affect the operating income in 2014. Which value best represents the return on capital for 2013?

Chik's Chickens has average accounts receivable of $5,933. Sales for the year were $9,400. What is its average collection period?

Which one of the following best explains the combination of a high level of net income combined with a low level of cash flow during an accounting period? High depreciation expense Reduction of inventory levels Increase in accounts payable Acquisition of equipment

A company has total assets of $1,000, current liabilities of $130, and total liabilities of $350. What is the long-term debt ratio?

According to the statement of cash flows, cash flows from financing could be positive if: interest rates were low on outstanding debt. the firm repaid more debt than it added. the firm added more debt than it repaid. the firm sold portions of its plant and equipment.

What is the market price of a share of stock for a firm with 100,000 shares outstanding, a book value of equity of $3,000,000, and a market-to-book ratio of 3?

A corporation declares $25 million in net income, $1 million in preferred stock dividends, and $7 million in common stock dividends. By how much will shareholders' equity increase on the balance sheet?

How would you interpret an inventory turnover ratio of 10.7? Assets are converted into sales every 50 days. The firm has sufficient inventories to maintain sales for 34.1 days. It takes 50 days on average to collect receivables. Inventory is converted into sales every 50 days.

What are the annual sales for a firm with $400,000 in debt, a total debt ratio of .4, and an asset turnover of 3?

What is the residual income for a firm with $1 million in total capital, $300,000 in net income, and a 20% cost of capital?

Which of the following changes in working capital will result in an increase in cash flows? Increase in accounts payable Increase in inventories Increase in accounts receivable Decrease in other current liabilities

Assume a firm's inventory level of $14,000 represents 38 days' sales. What is the inventory turnover ratio?

Which one of these costs accounts for the difference between accounting income and economic value added? Dividends Cost of capital Taxes Depreciation

NEED TO ADD CHAPTER 4 PRACTICE PROBLEMS