FIN 300 Study Guide - Final Guide: Dividend Payout Ratio, Promissory Note, Quick Ratio

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ochretoad724

13 Jan 2016

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14. the common set of standards and procedures by which audited financial statements are prepared is known as: Ans: c level: basic subject: gaap type: definitions. Net income divided by the total number of shares outstanding. Net income divided by the par value of common stock. Gross income multiplied by the par value of common stock. Operating income divided by the par value of common stock. Ans: a level: basic subject: earnings per share type: definitions. Expenses incurred for the purchase of intangible fixed assets. Expenses charged against revenues that do not directly affect cash flow. All accounts on the balance sheet other than cash on hand. Ans: d level: intermediate subject: non-cash items type: definitions. Ans: b level: intermediate subject: income statement type: concepts. Accounting income is generally equal to firm cash flow. Accounting statements are usually prepared to match the timing of income and expenses. The balance sheet equity account represents the market value of the firm to shareholders.

Related Questions

Corizon Company's balance sheet and income statement are shown below (in millions of dollars). Corizon and its creditors have agreed upon a voluntary reorganization plan. In this plan, each share of the $5 preferred will be exchanged for one share of $2.00 preferred with a par value of $50 plus one 10% subordinated income debenture with a par value of $50. The $8 preferred issue will be retired with cash. The company's tax rate is 30%.

Balance Sheet prior to Reorganization (in millions)
Current Assets	200	Current liabilities	175
Net fixed assets	225	Advance payments	10
		$5 preferred stock, $100 par value (1,000,000) shares	100
		$8 preferred stock, no par, callable at 100 (80,000 shares)	8
		Common stock, $1.00 par value (25,000,000) shares	25
		Retained earnings	107
Total assets	425	Total claims	425

A. construct the pro forma balance sheet after the reorganization takes place. show the new preferred at its par value

B.Construct the pro forma income statement after reorganization takes place. How does the recapitalization affect net income available to common stockholders?

C. Calculate the required pre-tax earnings before and after the recapitalization?

D. Calculate the debt ratio before and after the reorganization?

E. Would the common stockholders be in favor of the reorganization? Why or why not?

E13-5 Matching Each Ratio with Its Computational Formula LO 13-4, 13-5, 13-6, 13-7

Match each definition with its related ratios or percentages by selecting the appropriate letter in the drop down provided.

Definitions:			Ratios or Percentages	Definitions
A.	Net Income (before extraordinary items) Ã· Net Sales	1	Profit margin
B.	Days in Year Ã· Receivable Turnover ratio	2	Inventory turnover ratio
C.	Net Income Ã· Average Stockholdersâ Equity	3	Average collection period
D.	Net Income Ã· Average Number of Shares of Common Stock Outstanding	4	Dividend yield ratio
E.	Return on Equity â Return on Assets	5	Return on equity
F.	Quick Assets Ã· Current Liabilities	6	Current ratio
G.	Current Assets Ã· Current Liabilities	7	Debt-to-equity ratio
H.	Cost of Goods Sold Ã· Average Inventory	8	Price/earnings ratio
I.	Net Credit Sales Ã· Average Net Receivables	9	Financial leverage percentage	E
J.	Days in Year Ã· Inventory Turnover Ratio	10	Receivable turnover ratio
K.	Total Liabilities Ã· Stockholdersâ Equity	11	Average daysâ supply of inventory
L.	Dividends per Share Ã· Market Price per Share	12	Earnings per share
M.	Market Price per Share Ã· Earnings per Share	13	Return on assets
N.	[Net Income + Interest Expense (net of tax)] Ã· Average Total Assets	14	Quick ratio
O.	Cash from Operating Activities (before interest and taxes) Ã· Interest Paid	15	Times interest earned
P.	Net Sales Revenue Ã· Net Fixed Assets	16	Cash coverage ratio
Q.	(Net Income + Interest Expense + Income Tax Expense) Ã· Interest Expense	17	Fixed asset turnover ratio

blackgerbil844

Please help with question D

Last year Rattner Robotics had $5 million of operating income. Its depreciation expense was $1 million, its interest expense was $1 million, and its corporate tax rate was 40%. At year-end, it had $14 million in current asset, $3 million in accounts payable, $1 million in (expense) accrualâs, $2 million in notes payable, and $15 million in net plant and equipment. Rattner had no other current liabilities. Assume that Rattner's only noncash item was depreciation.

a. What was the company's net income?

b. What was its net operating working capitals (NOWC)?

c. What was its net working capital (NWC)?

d. Rattner had $12 million in net plant and equipment the prior year. Its net operating working capital has remained constant over time. What is the company's free cash flow (FCF) for the year that just ended?

e. Rattner had 500,000 common shares outstanding and the common stock amount on the balance sheet is $5 million. The company has not issued or repurchased common stock during last years. Last year's balance in retained earnings was $12 million and the firm paid out dividends of $1.2 million during the year. Develop Rattner's end-of-year Statement of StockHolders Equity.

What was the company's net income?

Company's net income = (operating income - interest expense)*(1-tax rate)

(5 -1)*(1-40%)

Company's net income = $ 2.40 Milliion

What was its net operating working capitals (NOWC)?

Net operating working capitals = current asset - accounts payable - accruals

14 - 3 - 1

Net operating working capitals = $ 10 Million

What was its net working capital (NWC)?

Net working capital = current asset - Current liabilty

14 - (3 + 1 + 2)

Net working capital = $ 8 Million

Rattner had $12 million in net plant and equipment the prior year. Its net operating working capital has remained constant over time. What is the company's free cash flow (FCF) for the year that just ended?

End of Year Statement of Stockholders Equity
Particulars
Common Stock		5,000,000.00
Retained earnings		10,800,000.00

Total Stockholders Equity		15,800,000.00


	Retained earnings =last years earnings-dividend paid
	12,000,000.00-1,200,000.00=10,800,000.00

redfish597

FIN 300 Study Guide - Final Guide: Dividend Payout Ratio, Promissory Note, Quick Ratio

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