Higgins 13th Edition Study Guide and Exam Review Questions with Detailed Answers and Explanations for Nursing Students

Analysis for Financial b b




Management
13th Editionb b




by Robert Higgins
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CompleteChapterSolutionsManual are
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included (Ch 1 to 9)
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** Immediate Download
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** Swift Response
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** All Chapters included
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** Even-Numbered Problems
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** Cases Recommendations
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** Excel solutions
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,Analysis forFinancial Management,13e
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SUGGESTED ANSWERS TO EVEN-NUMBERED PROBLEMS b b b b




Chapter1 b




2. Management is either foolish or thinks its board is. Earning $100 million on a $5 billion
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equity investment is a return of 2 percent, which is below any reasonable cost of equity. As a
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board member, I would vote to cut management’s compensation, not raise it. I would also
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criticize them for apparently attempting to deceive the board.
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4. a. Cash rises $500,000; plant and equipment falls $300,000; equity rises $200,000.
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b. Net plant and equipment rises $80 million; Cash falls $32 million; Bank debt rises
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$48 million. b




c. Net plant and equipment rises $60 million; cash falls $60 million.
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d. Cash falls $40,000; Accounts payable falls $40,000.
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e. Cash falls $240,000; Owners’ equity falls by $240,000 (via an increase in Treasury
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stock). b




f. Cash rises $80,000; Inventory falls; Accrued taxes, Owners’ equity, and possibly
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other cost categories rise such that the algebraic sum equals $80,000.
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g. Accounts receivable rise $120,000. Other categories change as described in part f.
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h. Cash falls $50,000. Owners’ equity falls by $50,000 (via Retained earnings).
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6. a. R&E Supplies, Inc. Sources and Uses Statement 2018–2021 ($ thousands)
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Sources of cash: b b




Decrease in cash and securities b b b b $259
Increase in accounts payable b b b 2,205
Increase in current portion long-term debt b b b b b 40
Increase in accrued wages b b b 13
Increase in retained earnings b b b 537
Total $3,054
Uses of cash: b b




Increase in accounts receivable b b b $1,543
Increase in inventories b b 1,148
Increase in prepaid expenses b b b 4
Increase in net fixed assets b b b b 159
Decrease in long-term debt b b b 200
Total $3,054




1

,b. Insights:

i. R&E is making extensive use of trade credit to finance a buildup in current assets. The
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increase in accounts payable equals almost three fourths of total sources of cash.
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Increasing accounts receivable and inventories account for almost 90 percent of the uses
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of cash.
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ii. External long-term debt financing is a use of cash for R&E, meaning that it is repaying its
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loans. A restructuring involving less reliance on accounts payable and more bank debt
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appears appropriate.
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8. Accounting income will be the value of the parcels sold, less their original purchase price.
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So if all parcels are sold, the income is 5 × $16 million + 5 × $8 million – $100 million =
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$20 million. Economic income will be the increase in the market value of the land, whether
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sold or not, over the period. At the end of the first year, this will be $20 million. Answers to
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each part of the question appear below.
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Question Accounting Income Economic Income b b




a. $20 million $20 million b b




b. $0 $20 million b




c. –$10 million $20 million b b




d. $30 million $20 million b b




e. Too many companies have tried this. If the market value of a piece of land falls, the owner
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loses whether he sells or not. The market price of the land fell because people thought the
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future income stream to the owners was worth less. Continuing to hold the property
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forces the owner to accept the lower income. Whether the loss is recognized or not
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might affect accounting earnings, but has nothing to do with reality.
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10. The accounting profits from Desmond’s brewery are expected to be $60,000. These
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accounting profits do not include the implicit cost of the entrepreneur’s time. Desmond’s
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time is worth at least $70,000, the current income he will have to forego to manage the
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brewery. When these implicit opportunity costs are included income falls to:
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$250,000 – $190,000 – $70,000 = –$10,000 b b b b b b




This new venture will clearly reduce Desmond’s income, not increase it.
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2

, All Chapters solutions are given in this PDF
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however some extra files are available too
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with solutions set.
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You can copy and paste below link to
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download extra files for solutions
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https://www.mediafire.com/file/
tdgywkewuizpaqa/Extra+Files+-+Analysis
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+for+Financial+Management+13e
+Higgins.rar/file