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Exam 14: Capital Budgeting Decisions

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Question 61

Multiple Choice

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Mcrae Corporation's total current assets are $380,000,its noncurrent assets are $500,000,its total current liabilities are $340,000,its long-term liabilities are $250,000,and its stockholders' equity is $290,000.Working capital is:

A) $380,000
B) $40,000
C) $250,000
D) $290,000

E) B) and D)
F) A) and B)

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Question 62

True/False

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All other things the same,if the company purchases equipment on credit,this transaction would have no impact on the company's book value per share.

A) True
B) False

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Question 63

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Excerpts from Candle Corporation's most recent balance sheet (in thousands of dollars)appear below: Sales on account during the year totaled $1,200 thousand.Cost of goods sold was $800 thousand. Required: Compute the following for Year 2: a.Working capital. b.Current ratio. c.Acid-test ratio. d.Accounts receivable turnover. e.Average collection period. f.Inventory turnover. g.Average sale period.

Financial statements for Praeger Corporation appear below: Dividends during Year 2 totaled $45 thousand.The market price of a share of common stock on December 31,Year 2 was $30. Required: Compute the following for Year 2: a.Return on total assets. b.Working capital. c.Current ratio. d.Acid-test ratio. e.Accounts receivable turnover. f.Average collection period. g.Inventory turnover. h.Average sale period. i.Times interest earned. j.Debt-to-equity ratio.

Keyton Corporation's net operating income in Year 2 was $43,714,net income before taxes was $30,714,and the net income was $21,500.Total common stock was $200,000 at the end of both Year 2 and Year 1.The par value of common stock is $4 per share.The company's total stockholders' equity at the end of Year 2 amounted to $1,148,000 and at the end of Year 1 to $1,130,000.The company declared and paid $3,500 dividends on common stock in Year 2.The market price per share was $8.43 at the end of Year 2.The company's dividend payout ratio for Year 2 is closest to:

Zack Company has a current ratio of 2.5.What will be the effect of a purchase of inventory with cash on the acid-test ratio and on working capital?

Kienle Corporation's Year 2 income statement appears below: The company's total assets at the end of Year 2 amounted to $1,359,000 and at the end of Year 1 to $1,320,000.The company's return on total assets for Year 2 is closest to:

Weightman Corporation's net operating income in Year 2 was $76,385,net income before taxes was $55,385,and the net income was $36,000.Total common stock was $200,000 at the end of both Year 2 and Year 1.The par value of common stock is $4 per share.The company's total stockholders' equity at the end of Year 2 amounted to $983,000 and at the end of Year 1 to $950,000.The market price per share at the end of Year 2 was $7.92.The company's price-earnings ratio for Year 2 is closest to:

Ribaudo Corporation has provided the following financial data from its balance sheet and income statement: The company's accounts receivable turnover for Year 2 is closest to:

Financial statements for Maraby Corporation appear below: Maraby Corporation's inventory turnover for Year 2 was closest to:

Pribyl Corporation has provided the following financial data: Required: a.What is the company's net profit margin percentage for Year 2? b.What is the company's gross margin percentage for Year 2? c.What is the company's return on total assets for Year 2? d.What is the company's return on equity for Year 2?

A company whose inventory turnover ratio is much slower than the average for its industry may have too much inventory or the wrong sorts of inventory.

Doonan Corporation has provided the following financial data from its balance sheet and income statement: The market price of common stock at the end of Year 2 was $4.79 per share. The company's return on equity for Year 2 is closest to:

Broch Corporation's income statement appears below: The company's times interest earned is closest to:

Excerpts from Colter Corporation's most recent balance sheet appear below: Sales on account in Year 2 amounted to $1,210 and the cost of goods sold was $720. The acid-test ratio at the end of Year 2 is closest to:

Data from Dunshee Corporation's most recent balance sheet appear below: Sales on account in Year 2 amounted to $1,170 and the cost of goods sold was $730. The average collection period for Year 2 is closest to:

Recher Corporation's common stock has a par value of $3 per share and has been stable at a total value of $270,000 on the company's balance sheet for several years.The total stockholders' equity at the end of this year was $1,023,000 and at the beginning of the year was $1,010,000.Net income for the year was $17,500.Dividends on common stock during the year totaled $4,500.The market price of common stock at the end of the year was $3.76 per share. The company's dividend payout ratio is closest to:

The accounts receivable for Note Corporation was $240,000 at the beginning of the year and $260,000 at the end of the year.If the accounts receivable turnover for the year was 8 and 20% of the total sales were cash sales,the total sales for the year were:

Gremel Corporation has provided the following financial data: Required: a.What is the company's working capital? b.What is the company's current ratio? c.What is the company's acid-test (quick)ratio?

Falmouth Corporation's debt to equity ratio is 0.6.Current liabilities are $120,000,long term liabilities are $360,000,and working capital is $140,000.Total assets of the corporation must be: