Final Review Essay Example
FIN 2201 -- Final Exam Review Problems
Fall, 2013
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____
1. Prezas Company's balance sheet showed total current assets of $4,250, all of which were required in operations.
Its current liabilities consisted of $975 of accounts payable, $600 of 6% short-term notes payable to the bank, and $250 of accrued wages and taxes. What was its net operating working capital?
a. $2,874
b. $3,025
c. $3,176
d. $3,335
e. $3,502
____
2. Brown Office Supplies recently reported $15,500 of sales, $8,250 of operating costs other than depreciation, and $1,750 of depreciation. It had $9,000 of bonds outstanding that carry a 7.0% interest rate, and its federal-plus-state income tax rate was 40%. How much was the firm's earnings before taxes (EBT)?
a. $4,627
b. $4,870
c. $5,114
d. $5,369
e. $5,638
____
3. Wu Systems has the following balance sheet. How much net operating working capital does the firm have?
Cash
Accounts receivable
Inventory
Current assets
Net fixed assets
Total assets
a.
b.
c.
d.
e.
____
$
100
650
550
$1,300
1,000
Accounts payable
Accruals
Notes payable
Current liabilities
Long-term debt
Common equity
Retained earnings
$2,300 Total liab. & equity
$
200
350
350
$ 900
600
300
500
$2,300
$675
$750
$825
$908
$998
4. Vasudevan Inc. recently reported operating income of $2.75 million, depreciation of $1.20 million, and had a tax rate of 40%. The firm's expenditures on fixed assets and net operating working capital totaled $0.6 million.
How much was its free cash flow, in millions?
a. $1.93
b. $2.03
c. $2.14
d. $2.25
e. $2.36
____
5. Your sister is thinking about starting a new business. The company would require $375,000 of assets, and it would be financed entirely with common stock. She will go forward only if she thinks the firm can provide a
13.5% return on the invested
Fall, 2013
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____
1. Prezas Company's balance sheet showed total current assets of $4,250, all of which were required in operations.
Its current liabilities consisted of $975 of accounts payable, $600 of 6% short-term notes payable to the bank, and $250 of accrued wages and taxes. What was its net operating working capital?
a. $2,874
b. $3,025
c. $3,176
d. $3,335
e. $3,502
____
2. Brown Office Supplies recently reported $15,500 of sales, $8,250 of operating costs other than depreciation, and $1,750 of depreciation. It had $9,000 of bonds outstanding that carry a 7.0% interest rate, and its federal-plus-state income tax rate was 40%. How much was the firm's earnings before taxes (EBT)?
a. $4,627
b. $4,870
c. $5,114
d. $5,369
e. $5,638
____
3. Wu Systems has the following balance sheet. How much net operating working capital does the firm have?
Cash
Accounts receivable
Inventory
Current assets
Net fixed assets
Total assets
a.
b.
c.
d.
e.
____
$
100
650
550
$1,300
1,000
Accounts payable
Accruals
Notes payable
Current liabilities
Long-term debt
Common equity
Retained earnings
$2,300 Total liab. & equity
$
200
350
350
$ 900
600
300
500
$2,300
$675
$750
$825
$908
$998
4. Vasudevan Inc. recently reported operating income of $2.75 million, depreciation of $1.20 million, and had a tax rate of 40%. The firm's expenditures on fixed assets and net operating working capital totaled $0.6 million.
How much was its free cash flow, in millions?
a. $1.93
b. $2.03
c. $2.14
d. $2.25
e. $2.36
____
5. Your sister is thinking about starting a new business. The company would require $375,000 of assets, and it would be financed entirely with common stock. She will go forward only if she thinks the firm can provide a
13.5% return on the invested