Finance Exam #1

• Krueger Industrial Smoothing had sales last year of $8 million with cost of good sold running 55% of sales and other operating costs of $500,000. Their tax rate is 35%, depreciation is $1.2 million and interest expense is $850,000. What was their net income?

  $682,000
• Your firm reported Cash Flow from Assets of $211,000 with Operating Cash Flow of $235,000 and Capital Spending of $122,000. What was your firms Change in Net Working Capital for the year?

  $-98,000
• Boomer, Inc. had sales of $5 million with interest expense of $500,000 and depreciation of $850,000. Their cost of goods sold run 35% of sales and your tax rate is 40%. If they also have other operating costs of $1,500,000, what was their EBIT?

  $900,000
• Bob would like a net income of $500,000 and his tax rate is 22%.  His cost of goods sold run 35% of sales and fixed operating costs are $300,000.  With depreciation of $175,000 and interest expense of $120,000, what sales level will be necessary for him to reach his goal?

  $1,901,578
• What should be the ultimate goal for the manager of a firm?

  Maximize the value of the firm
• The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict?

  agency
• The shareholders of Qiang’s Markets would benefit if the firm were to be acquired by Better Foods. However, Weil’s board of directors rejects the acquisition offer. This is an example of:

  agency conflict
• The issuer of a security must be involved in all _____________blank transactions involving that security.

  primary market
• Bing, Incorporated, has current assets of $2,270, net fixed assets of $10,300, current liabilities of $1,400, and long-term debt of $4,080. What is the value of the shareholders’ equity account for this firm?

  $7,090
• Bing, Incorporated, has current assets of $2,270, net fixed assets of $10,300, current liabilities of $1,400, and long-term debt of $4,080. How much is net working capital?

  $870
• Nataro, Incorporated, has sales of $650,000, costs of $332,000, depreciation expense of $77,000, interest expense of $42,000, and a tax rate of 24 percent. What is the net income for this firm?

  $151,240
• Nataro, Incorporated, has sales of $690,000, costs of $342,000, depreciation expense of $87,000, interest expense of $52,000, and a tax rate of 24 percent. The firm paid out $82,000 in cash dividends. What is the addition to retained earnings?

  $76,340
• Nataro, Incorporated, has sales of $666,000, costs of $336,000, depreciation expense of $81,000, interest expense of $46,000, and a tax rate of 23 percent. The firm paid out $76,000 in cash dividends and has 36,600 shares of common stock outstanding. What is the earnings per share, or EPS, figure?

  $4.27
• Nataro, Incorporated, has sales of $666,000, costs of $336,000, depreciation expense of $81,000, interest expense of $46,000, and a tax rate of 23 percent. The firm paid out $76,000 in cash dividends and has 36,600 shares of common stock outstanding. What is the dividend per share figure?

  $2.08
• Graff, Incorporated, has sales of $44,130, costs of $14,190, depreciation expense of $3,190, and interest expense of $2,330. The tax rate is 21 percent. What is the operating cash flow, or OCF?

  $24,812
• Rottweiler Obedience School’s December 31, 2021, balance sheet showed net fixed assets of $1,745,000, and the December 31, 2022, balance sheet showed net fixed assets of $2,080,000. The company’s 2022 income statement showed a depreciation expense of $325,000. What was the company's net capital spending for 2022?

  $666,000
• The December 31, 2021, balance sheet of Justin’s Golf Shop, Incorporated, showed current assets of $1,105 and current liabilities of $915. The December 31, 2022, balance sheet showed current assets of $1,320 and current liabilities of $995. What was the company's 2022 change in net working capital, or NWC?

  $135
• You are given the following information for Troiano Pizza Company: sales = $82,000; costs = $57,700; addition to retained earnings = $7,500; dividends paid = $3,320; interest expense = $3,030; tax rate = 25 percent. Calculate the depreciation expense for the company.

  $6,843
• Your firm has total sales of $1,400. Costs are $770 and depreciation is $130. The tax rate is 21 percent. The firm does not have interest expenses. What is the operating cash flow?

  $525
• How to get EBT from net income and tax

  EBT = NI / (1-T)
• How to get sales for gross profit and COGS?

  Sales = gross profit / ( 1 - CGS%)
• what is the biggest Non-Cash Expense?

  Depreciation
• CF assets =

  Operating CF - Capital Spending - Chang in Newt Working Capital
• Operating CF =

  EBIT - Taxes + Depreciation
• Capital Spending =


  Ending ( Net Fixed Assets) - Begin ( Net Fixed Assets) + Depreciation
• Change in Net Working Capital =


  Ending ( Current Assets - Current Liabilities) - Begin ( Current Assets - Current Liabilities)
• Percentage Income Statement

  all accounts as percent of Sales
• Percentage Balance Sheet

  all accounts as percent of Total Assets
• Real Vs Financial Assets

  Real - generate cash flows (CFs)

  Fake - allocate CFs ( securities)
• What are the types of markets?

  primary vs secondary

  money vs capital

  spot vs future

  public vs private
• Primary VS Secondary

  primary - "new", issuer to investor, issuer gets the $

  secondary - "used", investor to investor , issuer no $
• Money VS Capital

  money - short-term securities

  capital - long-term (stock and bonds)
• Spot VS Future

  sport - transaction now

  future - agreement for future
• Public VS Private

  public - anyone

  private - limited
• You sold your Tesla stock, define the market

  secondary, money, sport, public
• Risk and Return

  more risk <--> more return

  ( goes both ways)
• Cash Flow vs Income

  cash flow is $

  income is # (number)

  income creates cash flow
• Market Value vs Book Value

  MV is $ (money)

  BV is # ( number)
• Assets = Debt + Equity

  assets are stuff a firm owns

  debt and equity are how a firm pays for stuff

  debt and equity are a financial structure
• Money Today vs Money Tomorrow

  time value of $

  moving money from time to time

  $ in different time values aren't the same