Find the net cash provided by or used in investing activitie

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1. For each pair of firms, choose the one that you think would be more sensitive to the business cycle.

a. General Autos or General Pharmaceuticals.
- General Autos
- General Pharmaceuticals

b. Friendly Airlines or Happy Cinemas
- Friendly Airlines
- Happy Cinemas

2. A fine has an ROE of 4.5%. a debt-to-equity ratio of 0.8. a tax rate of 40%. and pays an interest rate of 5% on its debt. What is its operating ROA?

3. The following is cash flow data for Rocket Transport:

Cash dividend $91.00
Purchase of bus $29.00
Interest paid on debt  $25,000
Sales of old equipment  $55.5
Repurchase of stock $92
Cash payments to suppliers $125
Cash collections from customers $410

a. Find the net cash provided by or used in investing activities

b. Find the net cash provided by or used in financing activities.

c. Find the net increase or decrease in cash for the year.

4. _______provides a snapshot of the financial condition of the firm at a particular time.

- The balance sheet
- The income statement
- The statement of cash flows
- All of the options
- None of the options

5. ______is a report of the cash flow generated by the firm's operations. investments and financial activities.

- The balance sheet

- The income statement

- The statement of cash flows

- The auditor's statement of financial condition

- None of the options

6. If the interest rate on debt is higher than ROA. a firm will________by increasing the use of debt in the capital structure.

- increase the ROE
- not change the ROE
- decrease the ROE
- change the ROE in an indeterminable manner

7.

The financial statements of Black Barn Company are given below.

Black Barn Company Income Statement (2009)

 

Sales

$8.000.000

Cost of goods sold

5.260.000

Gross profit

2.740.000

Selling and administrative expenses

1.500.000

Operating profit

1.240.000

Interest expenses

140.000

Income before tax

1.100.000

Tax expense

440.000

Net income

$660.000

Balance Sheet

 

 

 

2009

2008

Cash

3200.000

$50.000

Accounts receivable

1.200.000

950.000

Inventory

1.840.000

1.500.000

Total current assets

3.240.000

2.500.000

Fixed assets

3.200.000

3.000.000

Total assets

36.440.000

35.500.000

Accounts payable

800.000

720.000

Bank loan

600.000

100.000

Total current liabilities

1.400.000

820.000

Bonds payable

900.000

1.000.000

Total liabilities

2.300.000

1.820.000

Common stock(130.000 shares)

300.000

300.000

Retained earnings

3.840.000

3.380.000

Total liabilities & equity

36.440.000

$5.500.000

Note: The common shares are trading in the stock market for $40 each.

 

 

Refer to the financial statements of Black Barn Company. The firm's current ratio for 2009 is

- 2.31.
- 1.87.
- 2.22.
- 2.46.

8.

Balance Sheet

 

 

 

2009

2008

Cash

$200.000

$50.000

Accounts receivable

1.200.000

950.000

Inventory

1.840.000

1.500,000

Total current assets

3.240.000

2.500.0o0

Fixed assets

3,200,000

3.000.000

Total assets

$6.440,000

$5.500.000

Accounts payable

800.000

720.000

Bank loan

600.000

100.000

Total current liabilities

1.400.000

820.000

Bonds payable

900,000

1,000,000

Total liabilities

2.300.000

1.820.000

Common stock(130.000 shares)

300.000

300.000

Retained earnings

3.840.000

3.380.000

Total liabilities R equity

$6.440.000

$5.500.000

Note: The common shares are trading in the stock market for $40 each.

 

 

Refer to the financial statements of Black Barn Company. The firm's leverage ratio for 2009 Is

- 1.65.
- 1.89.
- 2.64.
- 131
- 1.56.

9. A firm has an ROA of 14%. a debt/equity ratio of 0.8. a tax rate of 35% and the interest rate on the debt is 10%. The firm's ROE is

- 11.18%.
- 8.97%
- 11.54%.
- 12.62%.

10.

Midwest Tours

Income Statement (2009)

 

 

Sales

$2,500,000

 

Cost of goods sold

1.260.000

 

Gross profit

1.240.000

 

Selling and administrative expenses

700.000

 

Operating profit

540.000

 

Interest expenses

160.000

 

Income before tax

380.000

 

Tax expense

152.000

 

Net income

$228,000

 

Midwest Tours

 

 

Balance Sheet

 

 

 

2009

2008

Cash

$60,000

$50,000

Accounts receivable

500..000

450..000

Inventory

300..000

270.000

Total current assets

860.000

770.000

Fixed assets

2.180.000

2.000.000

Total assets

$3.040.000

$2.770.000

Accounts payable

200.000

170.000

Bank loan

460.000

440,000

Total current liabilities

660.000

610.000

Bonds payable

860.000

860.000

Total liabilities

1.520.000

1.470.000

Common stock (30.000 shares)

120.000

120.000

Retained earnings

1.400.000

1.300.000

Total liabilities & Equity

$3,040.000

$2.890.000

Note: The common shares are trading in the stock market for $36 each.

 

 

Refer to the financial statements of Midwest Tours. The firm's PrE ratio for 2009 is
- 4.74.
- 6.63.
- 5.21.
- 5.00.

11. Which of the financial statements recognizes only transactions In which cash changes hands?

- Balance sheet
- Income statement
- Statement of cash flows
- Balance sheet and income statement
- All of the options

12. Consider two firms producing smart phones. One uses a highly automated robotics process. whereas the other uses workers on an assembly line and pays overtime when there is heavy production demand.

a-1 Which firm will have higher profits in a recession?

Robotics firm.

Workers firm.

a-2 Which firm will have higher profits in a boom?

Robotics firm.

Workers firm.

b. Which firm's stock will have a higher beta?
Robotics firm.
Workers firm.

13. The most widely used monetary tool is
- altering the discount rate.
- altering the reserve requirements.
- open market operations.
- altering marginal tax rates.
- None of the options

14. If the economy is shrinking. firms with high operating leverage will experience
- higher decreases In profits than firms with low operating leverage.
- similar decreases in profits as firms with low operating leverage.
- smaller decreases in profits than firms with low operating leverage.
- no change In profits.

15. Two firms, A and B, both produce widgets. The price of widgets is $1 each. Firm A has total fixed costs of $500,000 and variable costs of 50¢ per widget. Firm B has total fixed costs of $240,000 and variable costs of 75¢ per widget. The corporate tax rate is 40%. If the economy is strong, each firm will sell 1,200,000 widgets. If the economy enters a recession, each firm will sell 1,100,000 widgets.

Calculate firm A's degree of operating leverage.

- 11.0

- 2.86

- 9.09

- 1.00

Reference no: EM13856205

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