FINA 2201 Chapter Notes - Chapter 3: Intangible Asset, Profit Margin, Asset

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whiteguinea-pig187

18 Sep 2016

School

Northeastern University

Department

Finance & Insurance

Course

FINA 2201

Professor

Mkrtchyan Anahit

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Document Summary

Selling a security involves either borrowing or selling an equity interest (shares of stock) in the firm. Cash flow from assets = cash flow to creditors + cash flow to owners. Sources of cash = a firm"s activities that generate cash. Uses of cash = a firm"s activities in which cash is spent. If an asset account went down, then on a net basis, the firm sold some assets (net source) If a liability account goes down, then the firm has made a net payment - a use of cash. An increase in a left-side (asset) account or a decrease in a right-side (liability or equity) account is a use of cash. A decrease in an asset account or an increase in a liability/equity account is a source of cash. Statement of cash flows = a firm"s financial statement that summarizes its source and uses of cash over a specified period. Changes sorted into operating, financing, and investing activities.

Related Questions

1. Bowyer Driving Schoolâs 2014 balance sheet showed net fixed assets of $4.4 million, and the 2015 balance sheet showed net fixed assets of $5.1 million. The companyâs 2015 income statement showed a depreciation expense of $240,000.What was net capital spending for 2015?

2. The 2014 balance sheet of Sugarpovaâs Tennis Shop, Inc., showed long-term debt of $5.5 million, and the 2015 balance sheet showed long-term debt of $5.9 million. The 2015 income statement showed an interest expense of $135,000. What was the firmâs cash flow to creditors during 2015?

3. Billyâs Exterminators, Inc., has sales of $746,000, costs of $300,000, depreciation expense of $52,000, interest expense of $36,000, and a tax rate of 35 percent. What is the net income for this firm?

4. The 2014 balance sheet of Sugarpova's Tennis Shop, Inc., showed long-term debt of $6.3 million, and the 2015 balance sheet showed long-term debt of $6.5 million. The 2015 income statement showed an interest expense of $220,000. During 2015, the company had a cash flow to creditors of $20,000 and the cash flow to stockholders for the year was $75,000. Suppose you also know that the firmâs net capital spending for 2015 was $1,480,000, and that the firm reduced its net working capital investment by $91,000.What was the firmâs 2015 operating cash flow, or OCF?

5. Braam Fire Prevention Corp. has a profit margin of 9.70 percent, total asset turnover of 1.42, and ROE of 18.61 percent. What is its firm's debt-equity ratio?

6. Based only on the following information for Bennington Corp., did cash go up or down? By how much?


Decrease in inventory	$510
Decrease in accounts payable	160
Increase in notes payable	740
Increase in accounts receivable	210

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3. Profit margin and asset turnover can be combined to create

a. return on assets

b return on equity

c. earnings per share

d. price earnings ratio

e. none

4.which of the following increases cash

a. issuance to long term debt

b. acquisition of property plant and equipment

c. payment of divdends

d decrease in short term debt

e. none

11.elsie Jackson is saving for a down payment on a condo. She needs 20,000. How much must she invest in a savings account that pays 5% annually to have the 20,000 in 8years? Round to the nearest dollar.

a. 13,206

b $12,983

c. 13,616

d. 13,537

e. none

13. which of the following increase cash?

a.issuance of long term debt

b. acquisition of property plant and equipment

c. payment of divdends

d. decrease in short term debt

e. none

14. profit margin and asset turnover can be combined to create

a. return on assets

b. return on equity

c. earnings per share

d. price earnings ratio

e. none

17. which of the following ratios is coverage ratio

a. return on assets

b. return on equity

c. earnings per share

d. times interest earned

e. none

24.right-hand entries increase

a. asset accounts

b owners equity accounts

c. liabilities

d. both b and c

e. none

26. a customer pays on an account receivable. The account that should be credited is

a. inventory

b. cash

c. accounts payable

d. accounts receivable

e. none

27. which of the following ratios measures liquidity?

a. current

b. payout

c. gross margin

d. asset turnover

e. none

31.capital stock is a part of which of the following accounts?

a. ownersâ equity

b. liabilities

c. current assets

d. long term assets

e. none

37. Agr corporation signed a two-yr lease for the building that the company occupies. The account that should be debited is

a. prepaid expense

b.cash

c. accounts payable

d. building

e. none

38. left-hand entries DECREASE

a. asset accounts

b. liability accounts

c. ownerâs equity accounts

d. both b and c*

e.none

which of the following increases cash?

Issuance of long-term debt

Acquition of property plant and equipment

C.paymentof divdends

D. decrease in short term debt

none

1. Discuss the importance of financial statements and how they are used by businesses.

2. What is the basic format of the income statement and what is the relevance of the basic categories?

3. Cash flows for an organization come from operating activities and investment activities. Discuss the importance of each to the organization.

The Happy Auto Shop has the following annual information:

Gross Sales	$700,000
Net sales	$696,000
Gross profit	$448,000

What are the shopâs returns and allowances and cost of goods sold?

Construct a statement of financial position (balance sheet) for the Humperdink family using the following information:

cash	$50
Checking account	$2,500
student loan balance	$6,000
stocks and bonds	$2,600
savings account	$5,850
residence	$110,000
automobile	$12,000
savings account	$5,800
automobile loan balance	$12,000
401K retirement account	$15,000
furniture, clothing, jewelry	$8,000
credit card balance	$4,000
mortgage loan balance	$99,000

What is the purpose of financial statement analysis? How do the three types of financial statement analysis differ from each other and when is each used?

Samantha Knight is applying for a small-business loan. She provides the bank with the following information:

cash in checking accounts	$5,000
cash in savings	$10,350
home market value	$145,500
first mortgage on house	$25,000
home equity loan limit	$70,000
home equity loan	$10,000
automobile market value	$19,000
automobile loan outstanding	$15,000
credit card debt	$1,500

Calculate the debt-to-asset ratio.

Calculate the debt-to-equity ratio.

What percentage of Samantha's assets is owned by others?

Given the profit loss (income statement) and balance sheet for Sam's Sandwich Delivery (Table 4-8, page 121 of your textbook), answer the following:

Calculate the following ratios: current, quick, accounts receivable turnover, fixed asset turnover.

Using the inventory figure on the balance sheet as average inventory, calculate the inventory turnover ratio.

Calculate the debt-to-equity ratio, debt-to-total asset ratio, and operating profit margin ratio.

Perform a vertical analysis of the income statement.

Perform a vertical analysis of the balance sheet.

Based on your analysis, would you consider investing in Sam's Sandwich Delivery?

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FINA 2201 Chapter Notes - Chapter 3: Intangible Asset, Profit Margin, Asset

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