FIN 300 EXAM QUESTIONS WITH
CORRECT DETAILED ANSWERS
The Pretzel Factory has net sales of $821,300 and costs of $698,500. The depreciation
expense is $28,400 and the interest paid is $8,400. What is the amount of the firm's
operating cash flow if the tax rate is 34 percent?
$87,620
$89,540
$91,220
$93,560
$95,240 - Answer- $93,560
EBIT = $821,300 -698,500 -28,400 = $94,400
Tax = ($94,400 -8,400) ×.34 = $29,240
OCF = $94,400 + 28,400 -29,240 = $93,560
During the past year, Yard Services paid $36,800 in interest along with $2,000 in
dividends. The company issued $3,000 of stock and $16,000 of new debt. The company
reduced the balance due on its old debt by $18,400. What is the amount of the cash
flow to creditors?
$8,200
$55,200
$2,400
$39,200
$15,800 - Answer- $39,200
Cash flow to creditors = $36,800 -16,000 + 18,400 = $39,200
A balance sheet shows beginning values of $56,300 for current liabilities and$289,200
for long-term debt. The ending values are $61,900 and $318,400, respectively. The
income statement shows interest paid of $29,700 and dividends of $19,000. What is the
amount of the net new borrowing?
$29,200
$40,450
$34,800
$70,150
$58,900 - Answer- $29,200
,Net new borrowing = $318,400-289,200 = $29,200
Six months ago, Benders Gym repurchased $140,000 of its common stock. The
company pays regular dividends totaling $18,500 per quarter. What is the amount of the
cash flow to stockholders for the past year if 1,200 new shares were issued and sold for
$38 a share?
-$10,000
-$20,400
$28,500
$74,000
$168,400 - Answer- $168,400
Cash flow to stockholders = ($18,500 ×4) -[(1,200 × $38) - $140,000] = $168,400
The Underground Cafe has an operating cash flow of $187,000 and a cash flow to
creditors of $71,400 for the past year. The firm reduced its net working capital by
$28,000 and incurred net capital spending of $47,900. What is the amount of the cash
flow to stockholders for the last year?
-$171,500
-$86,700
$21,200
$95,700
$39,700 - Answer- $95,700
Cash flow to stockholders = [$187,000 - 47,900 -(-$28,000)]- $71,400 = $95,700
Roscoe's fixed assets were purchased three years ago for $1.8 million. These assets
can be sold to Stewart's today for $1.2 million. Roscoe's current balance sheet shows
net fixed assets of $960,000, current liabilities of $348,000, and net working capital of
$121,000. If all the current assets were liquidated today, the company would receive
$518,000 cash. The book value of the firm's assets today is _____ and the market value
is ____.
$1,081,000; $1,308,000
$1,081,000; $1,718,000
$1,307,000; $1,429,000
$1,429,000; $1,308,000
$1,429,000; $1,718,000 - Answer- $1,429,000; $1,718,000
Book value = $121,000 + 348,000 + 960,000 = $1,429,000
Market value = $518,000 + 1,200,000 = $1,718,000
, Dixie's sales for the year were $1,678,000. Cost of goods sold, administrative and
selling expenses, and depreciation expenses were $1,141,000, $304,000, and
$143,000, respectively. In addition, the company had an interest expense of $74,000
and a tax rate of 34 percent. What is the operating cash flow for the year?
$227,560
$271,420
$223,330
$285,400
$217,700 - Answer- $227,560
EBIT = [($1,678,000 -1,141,000 -304,000 -143,000 = $90,000
Tax = ($90,000 -74,000) ×.34 = $5,440
OCF = $90,000 + 143,000 -5,440 = $227,560
Common-size financial statements present all balance sheet account values as a
percentage of:
the forecasted budget.
sales.
total equity.
total assets.
last year's account value. - Answer- total assets.
The sustainable growth rate is defined as the maximum rate at which a firm can grow
given which of the following conditions?
No new external financing of any kind
No new debt but additional external equity equal to the increase in retained earnings
New debt and external equity in equal proportions
New debt and external equity, provided the debt-equity ratio remains constant
No new external equity and a constant debt-equity ratio - Answer- No new external
equity and a constant debt-equity ratio
If a firm has an inventory turnover of 15, the firm:
sells its entire inventory every 15 days.
stocks its inventory only once every 15 days.
delivers inventory to its customers every 15 days.
sells its inventory by granting customers 15 days' of free credit.
sells its entire inventory an average of 15 times each year. - Answer- sells its entire
inventory an average of 15 times each year.
The Wood Shop generates $.97 in sales for every $1 invested in total assets. Which
one of the following ratios would reflect this relationship?
CORRECT DETAILED ANSWERS
The Pretzel Factory has net sales of $821,300 and costs of $698,500. The depreciation
expense is $28,400 and the interest paid is $8,400. What is the amount of the firm's
operating cash flow if the tax rate is 34 percent?
$87,620
$89,540
$91,220
$93,560
$95,240 - Answer- $93,560
EBIT = $821,300 -698,500 -28,400 = $94,400
Tax = ($94,400 -8,400) ×.34 = $29,240
OCF = $94,400 + 28,400 -29,240 = $93,560
During the past year, Yard Services paid $36,800 in interest along with $2,000 in
dividends. The company issued $3,000 of stock and $16,000 of new debt. The company
reduced the balance due on its old debt by $18,400. What is the amount of the cash
flow to creditors?
$8,200
$55,200
$2,400
$39,200
$15,800 - Answer- $39,200
Cash flow to creditors = $36,800 -16,000 + 18,400 = $39,200
A balance sheet shows beginning values of $56,300 for current liabilities and$289,200
for long-term debt. The ending values are $61,900 and $318,400, respectively. The
income statement shows interest paid of $29,700 and dividends of $19,000. What is the
amount of the net new borrowing?
$29,200
$40,450
$34,800
$70,150
$58,900 - Answer- $29,200
,Net new borrowing = $318,400-289,200 = $29,200
Six months ago, Benders Gym repurchased $140,000 of its common stock. The
company pays regular dividends totaling $18,500 per quarter. What is the amount of the
cash flow to stockholders for the past year if 1,200 new shares were issued and sold for
$38 a share?
-$10,000
-$20,400
$28,500
$74,000
$168,400 - Answer- $168,400
Cash flow to stockholders = ($18,500 ×4) -[(1,200 × $38) - $140,000] = $168,400
The Underground Cafe has an operating cash flow of $187,000 and a cash flow to
creditors of $71,400 for the past year. The firm reduced its net working capital by
$28,000 and incurred net capital spending of $47,900. What is the amount of the cash
flow to stockholders for the last year?
-$171,500
-$86,700
$21,200
$95,700
$39,700 - Answer- $95,700
Cash flow to stockholders = [$187,000 - 47,900 -(-$28,000)]- $71,400 = $95,700
Roscoe's fixed assets were purchased three years ago for $1.8 million. These assets
can be sold to Stewart's today for $1.2 million. Roscoe's current balance sheet shows
net fixed assets of $960,000, current liabilities of $348,000, and net working capital of
$121,000. If all the current assets were liquidated today, the company would receive
$518,000 cash. The book value of the firm's assets today is _____ and the market value
is ____.
$1,081,000; $1,308,000
$1,081,000; $1,718,000
$1,307,000; $1,429,000
$1,429,000; $1,308,000
$1,429,000; $1,718,000 - Answer- $1,429,000; $1,718,000
Book value = $121,000 + 348,000 + 960,000 = $1,429,000
Market value = $518,000 + 1,200,000 = $1,718,000
, Dixie's sales for the year were $1,678,000. Cost of goods sold, administrative and
selling expenses, and depreciation expenses were $1,141,000, $304,000, and
$143,000, respectively. In addition, the company had an interest expense of $74,000
and a tax rate of 34 percent. What is the operating cash flow for the year?
$227,560
$271,420
$223,330
$285,400
$217,700 - Answer- $227,560
EBIT = [($1,678,000 -1,141,000 -304,000 -143,000 = $90,000
Tax = ($90,000 -74,000) ×.34 = $5,440
OCF = $90,000 + 143,000 -5,440 = $227,560
Common-size financial statements present all balance sheet account values as a
percentage of:
the forecasted budget.
sales.
total equity.
total assets.
last year's account value. - Answer- total assets.
The sustainable growth rate is defined as the maximum rate at which a firm can grow
given which of the following conditions?
No new external financing of any kind
No new debt but additional external equity equal to the increase in retained earnings
New debt and external equity in equal proportions
New debt and external equity, provided the debt-equity ratio remains constant
No new external equity and a constant debt-equity ratio - Answer- No new external
equity and a constant debt-equity ratio
If a firm has an inventory turnover of 15, the firm:
sells its entire inventory every 15 days.
stocks its inventory only once every 15 days.
delivers inventory to its customers every 15 days.
sells its inventory by granting customers 15 days' of free credit.
sells its entire inventory an average of 15 times each year. - Answer- sells its entire
inventory an average of 15 times each year.
The Wood Shop generates $.97 in sales for every $1 invested in total assets. Which
one of the following ratios would reflect this relationship?
