WGU C214 |PA |pre-assessment |Accurate
|Verified
Pruhart Tech has an innovative app-based trading platform and expects its growth
to boom in the next few years. Before the company goes public, it wants to show a
strong history of profit and is focusing its efforts on improving its bottom line on the
income statement.
What is a potential negative consequence if the firm focuses solely on profit
maximization? - ANS-Unethical behavior and potential scandals
How might a privately held company define shareholder value differently from a
publicly held company? - ANS-Privately held companies may value keeping the
business within the family
What effect does a current devaluation have on a country's international trade? -
ANS-it makes a country's exports cheaper internationally
- devaluation reduces the price of a country's goods and services abroad, making
exports more competitive while potentially increasing the volume of exports
How does global financing integration benefit corporations? - ANS-it provides access
to wider range of funding sources and investment opportunities
What is an auction market in secondary financial markets? - ANS-a market that
operates where prices are determined by the highest bidder
Why are efficient, well-developed financial markets important for stock pricing? -
ANS-they produce more reliable stock prices
Talia is considering purchasing a small, local construction company. When reviewing
the financials, she notices that although the company produced $200,000 in net
income during the last year, the retained earnings increased only by $50,000.
Which scenario would explain why the change in retained earnings from the
previous year did not increase by the total income earned? - ANS-the remaining
earnings were paid out as dividends to shareholders
- change in retained earnings is calculated as net income - dividends. This
relationship indicates that net income is either distributed as dividends or
contributes to a change in the retained earnings of the company
What does retained earnings represent in the equity section of the balance sheet? -
ANS-The cumulative total of earnings not paid out as dividends to stockholders
, - RE: the earnings that the company has accumulated and retained over its entire
history to finance the firms asset based
In the statement of cash flows, why is depreciation expense added back to net
income when calculating cash flows from operations (CFO)? - ANS-because it is a
non-cash expense
- DE is included back in but doesn't represent an actual cash flow
An investor is considering putting money into a start up company. They ask for the
company's projected statement of cash flows for the next period.
How will this help the investor evaluate the start ups projected performance? -
ANS-it will show the cash flows the firm expects from operating, investing and
financing activities.
What can be concluded about the firms cash flows during the year? - ANS-the
company relied heavily on external financing for cash during the year
In the statement of cash flows, when using the indirect method of calculating cash
flow from operations, how is an increase in operating asset accounts (other than
cash) treated? - ANS-it is subtracted from net income
Why is scrubbing the data crucial when comparing a company with its peers
through ratio analysis? - ANS-to adjust for differences in fiscal year-ends and
accounting practices amount companies
Scrubbing: ensures company financial statements are comparable to those of its
peers groups, addressing timing differences due to difference fiscal year ends and
reconciling accounts differences
Which difficulty may arise when performing ratio analysis for seasonal businesses? -
ANS-seasonal variations make it challenging to compare ratios across firms if the
reporting dates of the company's financial statements are difference
what was freedom rock bicycles total asset turnover ratio for the year? - ANS-2.50
Sales/total assets
$20,000/$8000
What is Rusty Robos profit margin for the year? - ANS-40%
Profit margin: net profit / total sales
What information does the return on equity (ROE) ratio provide? - ANS-It indicates
the earnings generated for each dollar of equity invested
ROE: net income / owners equity
- evaluates the return earned on the equity invested by the company shareholders.
addressing the question of how much a shareholder earns for each dollar invested
in the company
|Verified
Pruhart Tech has an innovative app-based trading platform and expects its growth
to boom in the next few years. Before the company goes public, it wants to show a
strong history of profit and is focusing its efforts on improving its bottom line on the
income statement.
What is a potential negative consequence if the firm focuses solely on profit
maximization? - ANS-Unethical behavior and potential scandals
How might a privately held company define shareholder value differently from a
publicly held company? - ANS-Privately held companies may value keeping the
business within the family
What effect does a current devaluation have on a country's international trade? -
ANS-it makes a country's exports cheaper internationally
- devaluation reduces the price of a country's goods and services abroad, making
exports more competitive while potentially increasing the volume of exports
How does global financing integration benefit corporations? - ANS-it provides access
to wider range of funding sources and investment opportunities
What is an auction market in secondary financial markets? - ANS-a market that
operates where prices are determined by the highest bidder
Why are efficient, well-developed financial markets important for stock pricing? -
ANS-they produce more reliable stock prices
Talia is considering purchasing a small, local construction company. When reviewing
the financials, she notices that although the company produced $200,000 in net
income during the last year, the retained earnings increased only by $50,000.
Which scenario would explain why the change in retained earnings from the
previous year did not increase by the total income earned? - ANS-the remaining
earnings were paid out as dividends to shareholders
- change in retained earnings is calculated as net income - dividends. This
relationship indicates that net income is either distributed as dividends or
contributes to a change in the retained earnings of the company
What does retained earnings represent in the equity section of the balance sheet? -
ANS-The cumulative total of earnings not paid out as dividends to stockholders
, - RE: the earnings that the company has accumulated and retained over its entire
history to finance the firms asset based
In the statement of cash flows, why is depreciation expense added back to net
income when calculating cash flows from operations (CFO)? - ANS-because it is a
non-cash expense
- DE is included back in but doesn't represent an actual cash flow
An investor is considering putting money into a start up company. They ask for the
company's projected statement of cash flows for the next period.
How will this help the investor evaluate the start ups projected performance? -
ANS-it will show the cash flows the firm expects from operating, investing and
financing activities.
What can be concluded about the firms cash flows during the year? - ANS-the
company relied heavily on external financing for cash during the year
In the statement of cash flows, when using the indirect method of calculating cash
flow from operations, how is an increase in operating asset accounts (other than
cash) treated? - ANS-it is subtracted from net income
Why is scrubbing the data crucial when comparing a company with its peers
through ratio analysis? - ANS-to adjust for differences in fiscal year-ends and
accounting practices amount companies
Scrubbing: ensures company financial statements are comparable to those of its
peers groups, addressing timing differences due to difference fiscal year ends and
reconciling accounts differences
Which difficulty may arise when performing ratio analysis for seasonal businesses? -
ANS-seasonal variations make it challenging to compare ratios across firms if the
reporting dates of the company's financial statements are difference
what was freedom rock bicycles total asset turnover ratio for the year? - ANS-2.50
Sales/total assets
$20,000/$8000
What is Rusty Robos profit margin for the year? - ANS-40%
Profit margin: net profit / total sales
What information does the return on equity (ROE) ratio provide? - ANS-It indicates
the earnings generated for each dollar of equity invested
ROE: net income / owners equity
- evaluates the return earned on the equity invested by the company shareholders.
addressing the question of how much a shareholder earns for each dollar invested
in the company
