CHAPTER 3 FINANCIAL STATEMENTS, CASH FLOW, AND TAXES

CHAPTER 3 FINANCIAL STATEMENTS, CASH FLOW, AND TAXES -...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
FINANCIAL STATEMENTS, CASH FLOW, AND TAXES 1. Below are the 2007 and 2008 year-end balance sheets for Tran Enterprises: Assets: 2008 2007 Cash $ 200,000 $ 170,000 Accounts receivable 864,000 700,000 Inventories 2,000,000 1,400,000 Total current assets $3,064,000 $2,270,000 Net fixed assets 6,000,000 5,600,000 Total assets $9,064,000 $7,870,000 Liabilities and equity: Accounts payable $1,400,000 $1,090,000 Notes payable 1,600,000 1,800,000 Total current liabilities $3,000,000 $2,890,000 Long-term debt 2,400,000 2,400,000 Common stock 3,000,000 2,000,000 Retained earnings 664,000 580,000 Total common equity $3,664,000 $2,580,000 Total liabilities and equity $9,064,000 $7,870,000 The firm has never paid a dividend on its common stock, and it issued $2,400,000 of 10-year, non-callable, long-term debt in 2007. As of the end of 2008, none of the principal on this debt had been repaid. Assume that the company’s sales in 2007 and 2008 were the same. Which of the following statements must be CORRECT? a. The firm increased its short-term bank debt in 2008. b. The firm issued long-term debt in 2008. c. The firm issued new common stock in 2008. d. The firm repurchased some common stock in 2008. e. The firm had negative net income in 2008. Answer: c 2. On its 12/31/08 balance sheet, Barnes Inc showed $510 million of retained earnings, and exactly that same amount was shown the following year. Assuming that no earnings restatements were issued, which of the following statements is CORRECT? a. If the company lost money in 2008, it must have paid dividends. b. The company must have had zero net income in 2008. c. The company must have paid out half of its 2008 earnings as dividends. d. The company must have paid no dividends in 2008. e. Dividends could have been paid in 2008, but they would have had to equal the earnings for the year. Answer: e 3. Below is the common equity section (in millions) of Timeless Technology’s last two year-end balance sheets: 2008 2007 Common stock $2,000 $1,000 Retained earnings 2,000 2,340 Total common equity $4,000 $3,340 CHAPTER 3
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The firm has never paid a dividend to its common stockholders. Which of the following statements is CORRECT? a. The company’s net income in 2008 was higher than in 2007. b. The firm issued common stock in 2008. c. The market price of the firm's stock doubled in 2008. d. The firm had positive net income in both 2007 and 2008, but its net income in 2008 was lower than it was in 2007. e. The company has more equity than debt on its balance sheet. Answer: b 4. Which of the following statements is CORRECT? a. Typically, a firm’s DPS should exceed its EPS. b. Typically, a firm’s net income should exceed its EBIT. c.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/16/2012 for the course BUSINESS 331 taught by Professor Rhee during the Spring '12 term at Strayer.

Page1 / 12

CHAPTER 3 FINANCIAL STATEMENTS, CASH FLOW, AND TAXES -...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online