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FIN 571 Week 2 Connect Problems

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FIN 571 Week 2 Connect Problems -

  1. Sankey, Inc., has current assets of $5,000, net fixed assets of $23,000, current liabilities of $3,500, and long-term debt of $7,900. (Do not round intermediate calculations.)

What is the value of the shareholders' equity account for this firm?

Shareholders' equity      $_________

How much is net working capital?

Net working capital                         $_________

 

  1. Which one of these accounts is classified as a current asset on the balance sheet?
  • intangible asset
  • accounts payable
  • preferred stock
  • inventory
  • net plant and equipment

 

  1. It is easier to evaluate a firm using its financial statements when the firm:
  • is a conglomerate.
  • is global in nature.
  • uses the same accounting procedures as other firms in its industry.
  • has a different fiscal year than other firms in its industry.
  • tends to have one-time events such as asset sales and property acquisitions.

 

  1. The cash flow resulting from a firm's ongoing, normal business activities is referred to as the:
  • operating cash flow.
  • net capital spending.
  • additions to net working capital.
  • cash flow to retained earnings.
  • cash flow to investors.

 

  1. Which one of these is a non-cash item?
  • depreciation
  • interest expense
  • current taxes
  • dividends
  • selling expenses

 

  1. Sankey, Inc., has current assets of $5,000, net fixed assets of $23,300, current liabilities of $4,450, and long-term debt of $11,000. (Do not round intermediate calculations.)

What is the value of the shareholders' equity account for this firm?

Shareholders' equity      $_________

How much is net working capital?          

Net working capital                         $_________

 

  1. Shelton, Inc., has sales of $401,000, costs of $189,000, depreciation expense of $54,000, interest expense of $35,000, and a tax rate of 30 percent. (Do not round intermediate calculations.)

What is the net income for the firm?

Net income                        $_________

Suppose the company paid out $44,000 in cash dividends. What is the addition to retained earnings?

Addition to retained earnings     $_________

 

  1. During the year, the Senbet Discount Tire Company had gross sales of $1.17 million. The firm’s cost of goods sold and selling expenses were $536,000 and $226,000, respectively. The firm also had notes payable of $910,000. These notes carried an interest rate of 6 percent. Depreciation was $141,000. The firm’s tax rate was 40 percent.

a. What was the firm’s net income? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.)

Net income                        $_________

b. What was the firm’s operating cash flow? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.)

Operating cash flow                        $_________

 

  1. Use the following information for Ingersoll, Inc., (assume the tax rate is 40 percent):

2014                       2015

Sales                                                     $9,535                   $ 10,109

Depreciation                                     1,295                     1,296

Cost of goods sold                           2,866                     3,230

Other expenses                                               809                         704

Interest                                                                695                         773

Cash                                                      4,279                     5,373

Accounts receivable                       5,609                     6,297

Short-term notes payable           964                         916

Long-term debt                                                15,330                   17,750

Net fixed assets                               36,155                   37,317

Accounts payable                            4,656                     4,355

Inventory                                            9,840                     10,108

Dividends                                           1,126     1,221

Prepare an income statement for this company for 2014 and 2015. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.)

 

 

 

Ingersoll, Inc. Income Statement

2014                       2015

Sales                                                                     $____                   $______

Cost of goods sold                                           _____                   _______

Other expenses                                                               _____                   _______

Depreciation                                                     _____                   _______

EBIT                                                                       $_____%             $______%

Interest                                                                                ______                                _______

EBT                                                                         $_____%             $______%

Taxes                                                                    ______%            _______%

Net income                                                        $_____%             $______%

Dividends                                                           $_____                $______

Additions to RE                                                 ______%            _______%

 

Prepare the balance sheet for this company for 2014 and 2015. (Do not round intermediate calculations. Be sure to list the accounts in order of their liquidity.)

 

Ingersoll, Inc. Balance Sheet as of Dec. 31

2014                       2015

Assets

Cash                                                                      $______              $______

Accounts receivable                                       _______             _______

Inventory                                                            _______             _______

Current assets                                                   $______%          $______

Net fixed assets                                                               _______             _______

Total assets                                                        $______%          $_______%

Liabilities

Accounts payable                                            $______              $______

Notes payable                                                  _______             _______

Current liabilities                                            $______%          $_______%

Long-term debt                                                                _______             _______

Owners' equity                                                 _______%          ________%

Total liabilities & owners' equity                             $______%          $_______%

 

 

  1. The total asset turnover ratio measures the amount of:
  • total assets needed for every $1 of sales.
  • sales generated by every $1 in total assets.
  • fixed assets required for every $1 of sales.
  • net income generated by every $1 in total assets.
  • net income than can be generated by every $1 of fixed assets.

 

  1. The current ratio is measured as:
  • current assets minus current liabilities.
  • current assets divided by current liabilities.
  • current liabilities minus inventory, divided by current assets.
  • cash on hand divided by current liabilities.
  • current liabilities divided by current assets.

 

  1. Which statement expresses all accounts as a percentage of total assets?
  • pro forma balance sheet
  • common-size income statement
  • statement of cash flows
  • pro forma income statement
  • common-size balance sheet

 

  1. Ratios that measure how efficiently a firm's management uses its assets and equity to generate bottom line net income are known as _______ ratios.
  • asset management
  • long-term solvency
  • short-term solvency
  • profitability
  • market value

 

  1. Ratios that measure a firm's ability to pay its bills over the short run without undue stress are known as:
  • asset management ratios.
  • long-term solvency measures.
  • liquidity measures.
  • profitability ratios.
  • market value ratios.

 

  1. Which one of the following sets of ratios would generally be of the most interest to stockholders?
  • return on assets and profit margin
  • quick ratio and times interest earned
  • price-earnings ratio and debt-equity ratio
  • return on equity and price-earnings ratio
  • cash coverage ratio and equity multiplier

 

  1. The receivables turnover ratio is measured as:
  • sales plus accounts receivable.
  • sales divided by accounts receivable.
  • sales minus accounts receivable, divided by sales.
  • accounts receivable times sales.
  • accounts receivable divided by sales.

 

  1. The Purple Martin has annual sales of $4,800, total debt of $1,210, total equity of $2,500, and a profit margin of 7 percent. What is the return on assets?
  • 7.00 percent
  • 9.06 percent
  • 13.44 percent
  • 11.74 percent
  • 27.77 percent

 

  1. A firm has a debt-equity ratio of .38. What is the total debt ratio?
  • .61
  • .39
  • .28
  • 1.63
  • 1.38

 

  1. A firm has total debt of $1,100 and a debt-equity ratio of .31. What is the value of the total assets?
  • $3,100
  • $4,648
  • $1,441
  • $3,420
  • $3,548

 

  1. The inventory turnover ratio is measured as:
  • total sales minus inventory.
  • inventory times total sales.
  • cost of goods sold divided by inventory.
  • inventory divided by cost of goods sold.
  • inventory divided by sales.

 

  1. A firm has a total debt ratio of .47. This means the firm has 47 cents in debt for every:
  • $1 in total equity.
  • $.53 in total assets.
  • $1 in current assets.
  • $.53 in total equity.
  • $1 in fixed assets.

 

  1. The higher the inventory turnover, the:
  • less time inventory items remain on the shelf.
  • higher the inventory as a percentage of total assets.
  • longer it takes a firm to sell its inventory.
  • greater the amount of inventory held by a firm.
  • lesser the amount of inventory held by a firm.

 

  1.  

Galaxy United, Inc. 2009 Income Statement ($ in millions) 

  Net sales                                                           $ 8,500    

  Less: Cost of goods sold                              7,150    

  Less: Depreciation                                        420    

  Earnings before interest and taxes        930    

  Less: Interest paid                                         82    

  Taxable Income                                              848    

  Less: Taxes                                                       297    

  Net income                                                      $ 551    

 

                                Galaxy United, Inc. 2008 and 2009 Balance Sheets ($ in millions) 

                                2008                       2009                                                                       2008                       2009

  Cash                    $ 130     $   160                    Accounts payable            $1,110                  $1,140   

  Accounts rec.   950                         780                         Long-term debt                                980                         1,290   

  Inventory          1,480     1,520                     Common stock                  $3,130                   $2,930   

  Sub-total           $2,560                   $2,460                   Retained earnings           500                         750   

  Net fixed assets 3,160                  3,650                                    

  Total assets      $5,720                   $6,110                   Total liab. & equity         $5,720                   $6,110   

What is the return on equity for 2009?

  • 13 percent
  • 10 percent
  • 15 percent
  • 18 percent
  • 16 percent

 

  1. If Wilkinson, Inc., has an equity multiplier of 1.47, total asset turnover of 1.6, and a profit margin of 5.7 percent, what is its ROE? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

ROE        _________%

 

  1. The financial ratio measured as net income divided by sales is known as the firm's:
  • profit margin.
  • return on assets.
  • return on equity.
  • asset turnover.
  • earnings before interest and taxes.

 

  1. The financial ratio that measures the accounting profit per dollar of book equity is referred to as the:
  • profit margin.
  • price-earnings ratio.
  • return on equity.
  • equity turnover.
  • market profit-to-book ratio.

 

  1. Puffy's Pastries generates five cents of net income for every $1 in equity. Thus, Puffy's has _______ of 5 percent.
  • a return on assets
  • a profit margin
  • a return on equity
  • an EV multiple
  • a price-earnings ratio

 

  1. If stockholders want to know how much profit the firm is making on their entire investment in that firm, the stockholders should refer to the:
  • profit margin.
  • return on assets.
  • return on equity.
  • equity multiplier.
  • earnings per share.

 

  1. The most effective method of directly evaluating the financial performance of a firm is to compare the financial ratios of the firm to:
  • thefirm?s ratios from prior time periods and to the ratios of firms with similar operations.
  • the average ratios of all firms within the same country over a period of time.
  • those of other firms located in the same geographic area that are similarly sized.
  • the average ratios of the firm?s international peer group.
  • those of the largest conglomerate that has operations in the same industry as the firm.

 

  1. Which one of these equations is an accurate expression of the balance sheet?
  • Assets ? Liabilities −Stockholders? equity
  • Stockholders? equity ? Assets + Liabilities
  • Liabilities ? Stockholders? equity −Assets
  • Assets ? Stockholders? equity −Liabilities
  • Stockholders? equity ? Assets –Liabilities

 

  1. The financial statement summarizing a firm's accounting performance over a period of time is the:
  • income statement.
  • balance sheet.
  • statement of cash flows.
  • tax reconciliation statement.
  • statement of equity.

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