Solutions for Analysis for Financial Management, 13th
@rtg @rtg @rtg @rtg @rtg @rtg
Edition by Robert C. Higgins, Jennifer Koski, Todd
@ r t g @rtg @rtg @rtg @rtg @rtg @rtg @rtg
Mitton
@rtg
TEST BANK!!! @rtg
,Analysis for Financial Management, 13e
SUGGESTED ANSWERS TO EVEN-NUMBERED PROBLEMS
Chapter 1
2. Management is either foolish or thinks its board is. Earning $100 million on a $5 billion
equity investment is a return of 2 percent, which is below any reasonable cost of equity.
As a board member, I would vote to cut management’s compensation, not raise it. I
would also criticize them for apparently attempting to deceive the board.
4. a. Cash rises $500,000; plant and equipment falls $300,000; equity rises $200,000.
b. Net plant and equipment rises $80 million; Cash falls $32 million; Bank debt rises
$48 million.
c. Net plant and equipment rises $60 million; cash falls $60 million.
d. Cash falls $40,000; Accounts payable falls $40,000.
e. Cash falls $240,000; Owners’ equity falls by $240,000 (via an increase in Treasury
stock).
f. Cash rises $80,000; Inventory falls; Accrued taxes, Owners’ equity, and possibly
other cost categories rise such that the algebraic sum equals $80,000.
g. Accounts receivable rise $120,000. Other categories change as described in part f.
h. Cash falls $50,000. Owners’ equity falls by $50,000 (via Retained earnings).
6. a. R&E Supplies, Inc. Sources and Uses Statement 2018–2021 ($ thousands)
Sources of cash:
Decrease in cash and securities $259
Increase in accounts payable 2,205
Increase in current portion long-term debt 40
Increase in accrued wages 13
Increase in retained earnings 537
Total $3,054
Uses of cash:
Increase in accounts receivable $1,543
Increase in inventories 1,148
Increase in prepaid expenses 4
Increase in net fixed assets 159
Decrease in long-term debt 200
Total $3,054
,b. Insights:
i. R&E @rtgis @rtgmaking @rtgextensive @rtguse @rtgof @rtgtrade @rtgcredit @rtgto @rtgfinance @rtga @rtgbuildup @rtgin
@rtgcurrent @rtgassets. @rtgThe @rtgincrease @rtgin @rtgaccounts @rtgpayable @rtgequals @rtgalmost @rtgthree
@rtgfourths @rtgof @rtgtotal @rtgsources @rtgof @rtgcash. @rtgIncreasing @rtgaccounts @rtgreceivable
@rtgand @rtginventories @rtgaccount @rtgfor @rtgalmost @rtg90 @rtgpercent @rtgof @rtgthe @rtguses @rtgof
@rtgcash.
ii. External @rtglong-term @rtgdebt @rtgfinancing @rtgis @rtga @rtguse @rtgof @rtgcash @rtgfor @rtgR&E, @rtgmeaning
@rtgthat @rtgit @rtgis @rtgrepaying @rtgits @rtgloans. @rtgA @rtgrestructuring @rtginvolving @rtgless @rtgreliance
@rtgon @rtgaccounts @rtg payable @rtgand @rtgmore @rtgbank @rtgdebt @rtgappears @rtgappropriate.
8. Accounting @rtgincome @rtgwill @rtgbe @rtgthe @rtgvalue @rtgof @rtgthe @rtgparcels @rtgsold, @rtgless
@rtg
@rtgtheir @rtgoriginal @rtgpurchase @rtgprice. @rtgSo @rtgif @rtgall @rtgparcels @rtgare @rtgsold, @rtgthe
@rtgincome @rtgis @rtg5 @rtg × @rtg$16 @rtgmillion @rtg+ @rtg5 @rtg× @rtg$8 @rtgmillion @rtg– @rtg$100 @rtgmillion
@rtg= @rtg$20 @rtgmillion. @rtgEconomic @rtgincome @rtgwill @rtgbe @rtgthe @rtgincrease @rtgin @rtgthe @rtgmarket
@rtgvalue @rtgof @rtgthe @rtgland, @rtgwhether @rtgsold @rtgor @rtgnot, @rtgover @rtgthe @rtgperiod. @rtgAt @rtgthe
@rtgend @rtgof @rtgthe @rtgfirst @rtgyear, @rtgthis @rtgwill @rtgbe @rtg$20 @rtgmillion. @rtgAnswers @rtgto @rtgeach
@rtgpart @rtgof @rtgthe @rtg question @rtgappear @rtgbelow.
Question Accounting Economic @ r t g Income
@ r t g Income
a. $20 @rtgmillion $20 @rtgmillion
b. $0 $20 @rtgmillion
c. –$10 @rtgmillion $20 @rtgmillion
d. $30 @rtgmillion $20 @rtgmillion
e. @ r t g Too @rtgmany @rtgcompanies @rtghave @rtgtried @rtgthis. @rtgIf @rtgthe @rtgmarket @rtgvalue @rtgof @rtga
@rtgpiece @rtgof @rtgland @rtgfalls, @rtgthe @rtgowner @rtgloses @rtgwhether @rtghe @rtgsells @rtgor @rtgnot. @rtgThe
@rtgmarket @rtgprice @rtgof @rtgthe @rtgland @rtgfell @rtgbecause @rtgpeople @rtgthought @rtgthe @rtgfuture
@rtgincome @rtgstream @rtgto @rtgthe @rtgowners @rtgwas @rtgworth @rtgless. @rtgContinuing @rtgto @rtghold
@rtgthe @rtgproperty @rtgforces @rtgthe @rtgowner @rtgto @rtgaccept @rtgthe @rtglower @rtgincome.
@rtgWhether @rtgthe @rtgloss @rtgis @rtgrecognized @rtgor @rtgnot @rtgmight @rtgaffect @rtgaccounting
@rtgearnings, @rtgbut @rtghas @rtgnothing @rtgto @rtgdo @rtgwith @rtgreality.
10. The @rtgaccounting @rtgprofits @rtgfrom @rtgDesmond’s @rtgbrewery @rtgare @rtgexpected @rtgto @rtgbe
@rtg$60,000. @rtgThese @rtgaccounting @rtgprofits @rtg do @rtgnot @rtginclude @rtgthe @rtgimplicit @rtgcost
@rtgof @rtgthe @rtgentrepreneur’s @rtgtime. @rtgDesmond’s @rtgtime @rtgis @rtgworth @rtgat @rtgleast
@rtg$70,000, @rtgthe @rtgcurrent @rtgincome @rtghe @rtgwill @rtghave @rtgto @rtgforego @rtgto @rtg manage @rtgthe
@rtgbrewery. @rtgWhen @rtgthese @rtgimplicit @rtgopportunity @rtgcosts @rtgare @rtgincluded @rtgincome
@rtgfalls @rtgto:
$250,000 @rtg– @rtg$190,000 @rtg– @rtg$70,000 @rtg= @rtg–$10,000
This @rtgnew @rtgventure @rtgwill @rtgclearly @rtgreduce @rtgDesmond’s @rtgincome, @rtgnot @rtgincrease @rtgit.
, 12. a.
Company A B C
End-of-year
cash @rtgbalance $150 @rtgmillion $30 @rtgmillion $120 @rtgmillion
b. It appears @rtgthat @rtgcompany @rtgC @rtgretired @rtgmore @rtgdebt @rtgthan @rtgit @rtgissued,
@rtg
@rtgrepurchased @rtgmore @rtgstock @rtgthan @rtgit @rtgissued, @rtgor @rtgsome @rtgcombination @rtgof
@rtgthe @rtgtwo.
c. I’d @rtgprefer @rtgto @rtgown @rtgcompany @rtgA. @rtgA @rtgappears @rtgto @rtgbe @rtga @rtggrowing
@rtgcompany @rtgas @rtgevidenced @rtgby @rtgthe @rtgsizable @rtgnet @rtgcash @rtgused @rtgin @rtginvesting
@rtgactivities, @rtgand @rtgits @rtgnegative @rtgnet @rtgcash @rtgflow @rtgfrom @rtgoperations @rtgmay
@rtgwell @rtgbe @rtg due @rtgto @rtgincreasing @rtgaccounts @rtgreceivable @rtgand @rtginventories
@rtgthat @rtgnaturally @rtgaccompany @rtgsales @rtg growth. @rtgCompany @rtgB @rtgappears @rtgnot
@rtgto @rtgbe @rtggrowing, @rtgso @rtgits @rtgnegative @rtgnet @rtgcash @rtgflows @rtgfrom @rtgoperations
@rtgare @rtgprobably @rtgdue @rtgto @rtglosses @rtgor @rtgto @rtgincreasing @rtgreceivables @rtgand
@rtginventories @rtgrelative @rtgto @rtgsales, @rtga @rtgtrend @rtgdenoting @rtgpoor @rtg management
@rtgof @rtgcurrent @rtg assets.
d. I @rtgdon’t @rtgthink @rtgthere @rtgis @rtgnecessarily @rtgany @rtgcause @rtgfor @rtgconcern. @rtgIt
@rtgappears @rtgcompany @rtgC @rtgis @rtga @rtgmature, @rtgslow-growth @rtgcompany @rtgthat @rtgis
@rtgreturning @rtgits @rtgunneeded @rtgoperating @rtgcash @rtgflows @rtgto @rtginvestors @rtgin @rtgthe
@rtgform @rtgof @rtg debt @rtgrepayment, @rtgshare @rtgrepurchase, @rtgdividends, @rtgor @rtgsome
@rtgcombination @rtgof @rtgthese. @rtgThis @rtgis @rtga @rtgperfectly @rtgviable @rtgstrategy @rtgin @rtgthe
@rtgabsence @rtgof @rtgattractive @rtginvestment @rtgopportunities.
14. @rtgSee suggested @ r t g solutions @ r t g to @ r t g Excel @ r t g problems
@ r t g @ r t g at @ r t g McGraw-Hill’s
@ r t g Connect @ r t g or @ r t g at @rtgwww.mhhe.com/Higgins13e.
@rtg @rtg @rtg @rtg @rtg @rtg
Edition by Robert C. Higgins, Jennifer Koski, Todd
@ r t g @rtg @rtg @rtg @rtg @rtg @rtg @rtg
Mitton
@rtg
TEST BANK!!! @rtg
,Analysis for Financial Management, 13e
SUGGESTED ANSWERS TO EVEN-NUMBERED PROBLEMS
Chapter 1
2. Management is either foolish or thinks its board is. Earning $100 million on a $5 billion
equity investment is a return of 2 percent, which is below any reasonable cost of equity.
As a board member, I would vote to cut management’s compensation, not raise it. I
would also criticize them for apparently attempting to deceive the board.
4. a. Cash rises $500,000; plant and equipment falls $300,000; equity rises $200,000.
b. Net plant and equipment rises $80 million; Cash falls $32 million; Bank debt rises
$48 million.
c. Net plant and equipment rises $60 million; cash falls $60 million.
d. Cash falls $40,000; Accounts payable falls $40,000.
e. Cash falls $240,000; Owners’ equity falls by $240,000 (via an increase in Treasury
stock).
f. Cash rises $80,000; Inventory falls; Accrued taxes, Owners’ equity, and possibly
other cost categories rise such that the algebraic sum equals $80,000.
g. Accounts receivable rise $120,000. Other categories change as described in part f.
h. Cash falls $50,000. Owners’ equity falls by $50,000 (via Retained earnings).
6. a. R&E Supplies, Inc. Sources and Uses Statement 2018–2021 ($ thousands)
Sources of cash:
Decrease in cash and securities $259
Increase in accounts payable 2,205
Increase in current portion long-term debt 40
Increase in accrued wages 13
Increase in retained earnings 537
Total $3,054
Uses of cash:
Increase in accounts receivable $1,543
Increase in inventories 1,148
Increase in prepaid expenses 4
Increase in net fixed assets 159
Decrease in long-term debt 200
Total $3,054
,b. Insights:
i. R&E @rtgis @rtgmaking @rtgextensive @rtguse @rtgof @rtgtrade @rtgcredit @rtgto @rtgfinance @rtga @rtgbuildup @rtgin
@rtgcurrent @rtgassets. @rtgThe @rtgincrease @rtgin @rtgaccounts @rtgpayable @rtgequals @rtgalmost @rtgthree
@rtgfourths @rtgof @rtgtotal @rtgsources @rtgof @rtgcash. @rtgIncreasing @rtgaccounts @rtgreceivable
@rtgand @rtginventories @rtgaccount @rtgfor @rtgalmost @rtg90 @rtgpercent @rtgof @rtgthe @rtguses @rtgof
@rtgcash.
ii. External @rtglong-term @rtgdebt @rtgfinancing @rtgis @rtga @rtguse @rtgof @rtgcash @rtgfor @rtgR&E, @rtgmeaning
@rtgthat @rtgit @rtgis @rtgrepaying @rtgits @rtgloans. @rtgA @rtgrestructuring @rtginvolving @rtgless @rtgreliance
@rtgon @rtgaccounts @rtg payable @rtgand @rtgmore @rtgbank @rtgdebt @rtgappears @rtgappropriate.
8. Accounting @rtgincome @rtgwill @rtgbe @rtgthe @rtgvalue @rtgof @rtgthe @rtgparcels @rtgsold, @rtgless
@rtg
@rtgtheir @rtgoriginal @rtgpurchase @rtgprice. @rtgSo @rtgif @rtgall @rtgparcels @rtgare @rtgsold, @rtgthe
@rtgincome @rtgis @rtg5 @rtg × @rtg$16 @rtgmillion @rtg+ @rtg5 @rtg× @rtg$8 @rtgmillion @rtg– @rtg$100 @rtgmillion
@rtg= @rtg$20 @rtgmillion. @rtgEconomic @rtgincome @rtgwill @rtgbe @rtgthe @rtgincrease @rtgin @rtgthe @rtgmarket
@rtgvalue @rtgof @rtgthe @rtgland, @rtgwhether @rtgsold @rtgor @rtgnot, @rtgover @rtgthe @rtgperiod. @rtgAt @rtgthe
@rtgend @rtgof @rtgthe @rtgfirst @rtgyear, @rtgthis @rtgwill @rtgbe @rtg$20 @rtgmillion. @rtgAnswers @rtgto @rtgeach
@rtgpart @rtgof @rtgthe @rtg question @rtgappear @rtgbelow.
Question Accounting Economic @ r t g Income
@ r t g Income
a. $20 @rtgmillion $20 @rtgmillion
b. $0 $20 @rtgmillion
c. –$10 @rtgmillion $20 @rtgmillion
d. $30 @rtgmillion $20 @rtgmillion
e. @ r t g Too @rtgmany @rtgcompanies @rtghave @rtgtried @rtgthis. @rtgIf @rtgthe @rtgmarket @rtgvalue @rtgof @rtga
@rtgpiece @rtgof @rtgland @rtgfalls, @rtgthe @rtgowner @rtgloses @rtgwhether @rtghe @rtgsells @rtgor @rtgnot. @rtgThe
@rtgmarket @rtgprice @rtgof @rtgthe @rtgland @rtgfell @rtgbecause @rtgpeople @rtgthought @rtgthe @rtgfuture
@rtgincome @rtgstream @rtgto @rtgthe @rtgowners @rtgwas @rtgworth @rtgless. @rtgContinuing @rtgto @rtghold
@rtgthe @rtgproperty @rtgforces @rtgthe @rtgowner @rtgto @rtgaccept @rtgthe @rtglower @rtgincome.
@rtgWhether @rtgthe @rtgloss @rtgis @rtgrecognized @rtgor @rtgnot @rtgmight @rtgaffect @rtgaccounting
@rtgearnings, @rtgbut @rtghas @rtgnothing @rtgto @rtgdo @rtgwith @rtgreality.
10. The @rtgaccounting @rtgprofits @rtgfrom @rtgDesmond’s @rtgbrewery @rtgare @rtgexpected @rtgto @rtgbe
@rtg$60,000. @rtgThese @rtgaccounting @rtgprofits @rtg do @rtgnot @rtginclude @rtgthe @rtgimplicit @rtgcost
@rtgof @rtgthe @rtgentrepreneur’s @rtgtime. @rtgDesmond’s @rtgtime @rtgis @rtgworth @rtgat @rtgleast
@rtg$70,000, @rtgthe @rtgcurrent @rtgincome @rtghe @rtgwill @rtghave @rtgto @rtgforego @rtgto @rtg manage @rtgthe
@rtgbrewery. @rtgWhen @rtgthese @rtgimplicit @rtgopportunity @rtgcosts @rtgare @rtgincluded @rtgincome
@rtgfalls @rtgto:
$250,000 @rtg– @rtg$190,000 @rtg– @rtg$70,000 @rtg= @rtg–$10,000
This @rtgnew @rtgventure @rtgwill @rtgclearly @rtgreduce @rtgDesmond’s @rtgincome, @rtgnot @rtgincrease @rtgit.
, 12. a.
Company A B C
End-of-year
cash @rtgbalance $150 @rtgmillion $30 @rtgmillion $120 @rtgmillion
b. It appears @rtgthat @rtgcompany @rtgC @rtgretired @rtgmore @rtgdebt @rtgthan @rtgit @rtgissued,
@rtg
@rtgrepurchased @rtgmore @rtgstock @rtgthan @rtgit @rtgissued, @rtgor @rtgsome @rtgcombination @rtgof
@rtgthe @rtgtwo.
c. I’d @rtgprefer @rtgto @rtgown @rtgcompany @rtgA. @rtgA @rtgappears @rtgto @rtgbe @rtga @rtggrowing
@rtgcompany @rtgas @rtgevidenced @rtgby @rtgthe @rtgsizable @rtgnet @rtgcash @rtgused @rtgin @rtginvesting
@rtgactivities, @rtgand @rtgits @rtgnegative @rtgnet @rtgcash @rtgflow @rtgfrom @rtgoperations @rtgmay
@rtgwell @rtgbe @rtg due @rtgto @rtgincreasing @rtgaccounts @rtgreceivable @rtgand @rtginventories
@rtgthat @rtgnaturally @rtgaccompany @rtgsales @rtg growth. @rtgCompany @rtgB @rtgappears @rtgnot
@rtgto @rtgbe @rtggrowing, @rtgso @rtgits @rtgnegative @rtgnet @rtgcash @rtgflows @rtgfrom @rtgoperations
@rtgare @rtgprobably @rtgdue @rtgto @rtglosses @rtgor @rtgto @rtgincreasing @rtgreceivables @rtgand
@rtginventories @rtgrelative @rtgto @rtgsales, @rtga @rtgtrend @rtgdenoting @rtgpoor @rtg management
@rtgof @rtgcurrent @rtg assets.
d. I @rtgdon’t @rtgthink @rtgthere @rtgis @rtgnecessarily @rtgany @rtgcause @rtgfor @rtgconcern. @rtgIt
@rtgappears @rtgcompany @rtgC @rtgis @rtga @rtgmature, @rtgslow-growth @rtgcompany @rtgthat @rtgis
@rtgreturning @rtgits @rtgunneeded @rtgoperating @rtgcash @rtgflows @rtgto @rtginvestors @rtgin @rtgthe
@rtgform @rtgof @rtg debt @rtgrepayment, @rtgshare @rtgrepurchase, @rtgdividends, @rtgor @rtgsome
@rtgcombination @rtgof @rtgthese. @rtgThis @rtgis @rtga @rtgperfectly @rtgviable @rtgstrategy @rtgin @rtgthe
@rtgabsence @rtgof @rtgattractive @rtginvestment @rtgopportunities.
14. @rtgSee suggested @ r t g solutions @ r t g to @ r t g Excel @ r t g problems
@ r t g @ r t g at @ r t g McGraw-Hill’s
@ r t g Connect @ r t g or @ r t g at @rtgwww.mhhe.com/Higgins13e.
