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foundations financial management

Questions and Answers of Foundations Financial Management

The Quinn Corporation shows the following income statement. The firm uses FIFO inventory accounting.a. Assume that the same 10,000 unit volume is maintained in 2016, but the sales price increases by
The Global Products Corporation has three subsidiaries.a. Which division has the lowest return on sales?b. Which division has the highest ROA?c. Compute the ROA for the entire corporation.d. If the
Quantum Moving Company has the following data. Industry information is also shown.As an industry analyst comparing the firm to the industry, are you likely to praise or criticize the firm in terms
JAS Clocks Corp. shows the following data:a. Compute the ratio of net income to total assets for each year and comment on the trend.b. Compute the ratio of net income to shareholders' equity and
In January 2006 the Status Quo Company was formed. Total assets were $500,000, of which $300,000 consisted of capital assets. Status Quo uses straight-line amortization, and in 2006 it estimated its
Century Plaza Enterprises has three subsidiaries:a. Which subsidiary has the lowest return on sales?b. Which subsidiary has the highest ROA?c. Calculate the ROA for the whole company.d. If Century
Using the income statement for the Sports Car Tire Company, compute the following ratios:a. The interest coverageb. The fixed charge coverageThe total assets for this company equal $40,000. Set up
The Simmons Corporation's income statement is given below.a. What is the times interest earned ratio?b. What would be the fixed charge coverage ratio?SIMMONS
The balance sheet for Bryan Corporation is given below. Sales for the year were $3 ,040,000, with 75 percent of sales sold on credit.Compute the following ratios:a. Current ratiob. Quick ratioc.
A firm has sales of $1.2 million, and 10 percent of the sales are for cash. The year end accounts receivable balance is $360,000. What is the average collection period?
Assume the following data for Interactive Technology and Silicon Software.a. Compute return on shareholders' equity for both firms. Which firm has the higher return?b. Compute the following ratios
Donovan Bailey's Shoe Stores has $3,000,000 in sales and turns over its assets 3.75 times per year. The firm earns 6.2 percent on each sales dollar. It has $90,000 in current liabilities and $200,000
Pony Express Company has $750,000 in assets and $300,000 of debt. The income for the year is $55,000.a. Calculate the ROA.b. Determine the return on shareholders' equity.c. If the asset turnover
Using the DuPont method, evaluate the effects of the following relationships for the Lollar Corporation.a. Lollar Corporation has a profit margin of 5 percent and its ROA (investment) is 13.5
Acme Transportation Company has the following ratios compared to its industry for 2015.Explain, with supporting calculations, why the return-on-equity ratio is so much less favourable than the
Global Healthcare Products has the following ratios compared to its industry for 2015.Explain, with supporting calculations, why the return-on-assets ratio is so much more favourable than the
Sharpe Razor Company has total assets of $2,500,000 and current assets of $1,000,000. It turns over its capital assets five times a year and has $700,000 of total debt. Its return on sales is 3
What effect will disinflation (after a high inflationary period) have on the reported income of the firm?Why might disinflation prove to be favourable to financial assets?
Hugh Snore Bedding has assets of $400,000 and turns over its assets 1.5 times per year. ROA is 12 percent. What is the firm's profit margin?
Why is trend analysis helpful in analyzing ratios? What are the problems of trend analysis when different bases of accounting are applied to different years?
Walker Glove and Bat Shop can open a new store that will have annual sales of $1,250,000. It will turn over its assets 3.4 times per year. The profit margin on sales will be 8 percent. What would net
Watson Data Systems is considering expanding into a new product line. New assets to support expansion will cost $500,000. It is estimated that Watson can generate $1.2 million in annual sales, with a
How would our analysis of profitability ratios be distorted if we used income before taxes? Income before interest and taxes?
Easter Egg and Poultry Company has $2,000,000 in assets and $1,400,000 of total debt. It reports net income of $200,000.a. What is its ROA?b. What is the return on shareholders' equity?c. If the firm
Griffey Junior Wear has $800,000 in assets and $200,000 of total debt. It reports net income of $100,000.a. What is its ROA?b. What is the return on shareholders' equity?c. If the firm has an asset
Jasper Corporation has determined that its average bondholder has a marginal tax rate of 39 percent. Jasper's corporate tax rate is 40 percent. A current bond issue would require a 7 percent yield.
Billie Fruit lives in the Yukon and her income fluctuates from year to year ranging from over $100,000 to about $35,000. She has two investments of $20,000 each in shares both achieving a return of 7
J, B. Wands has $14,000 to invest. He lives in Saskatchewan and has other income of $40,000 for the year. A current bond issue is paying 6 percent, while a popular share issue offers a 5 percent
R. E. Forms Ltd., a CCPC, had taxable income of $75,000 from an active business in 2014. Calculate both federal and provincial tax payable if it operates in Alberta (14%) as compared to operating in
For Nix Corporation, what is the tax savings due to amortization expense?
Given the following information, prepare, in good form, an income statement for the Nix Corporation. Use the corporate tax rates in Chapter 2 (14.5%) to calculate taxes. Nix is a CCPC manufacturer in
David's Magic Stores has an operating profit of $210,000. Interest expense for the year was $30,000; preferred dividends paid were $24, 700; and common dividends paid were $36,000. The tax was
How can we use a statement of cash flows to analyze how a firm's assets were financed?
Compute the book value per common share for 2014 and 2015 for the Maris Corporation.WINFIELD CORPORATIONIncome StatementYear Ended December 31 ,
Prepare a statement of cash flows for the Maris Corporation.MARIS CORPORATIONIncome StatementYear ended December
The following information is provided for the Waif Corporation.During 2015, the following occurred:1. Net income was $91,000.2. Bonds were retired by issuing new common stock.3. No equipment was
The following information is provided for the Loofa Corporation.During 2015, the following occurred:1. Net income was $54,610.2. Equipment was purchased for cash, and no equipment was sold.3. Shares
Identify whether each of the following items increases or decreases cash flow:Increase in inventory...........................Increase in short-term notes payableDecrease in prepaid
Fill in the blank spaces with categories 1 through 7:1. Balance sheet (BS)2. Income statement (IS)3. Current assets (CA)4. Capital assets (Cap A)5. Current liabilities (CL)6. Long-term liabilities
Phelps Labs has assets of $1,800,000, current liabilities of $595,000, and long-term liabilities of $630,000. There is $165,000 in preferred stock outstanding; 20,000 shares of common stock have
Monique's Boutique has assets of $600,000, current liabilities of $150,000, and long term liabilities of $120,000. There is $75,000 in preferred stock outstanding; 30,000 shares of common stock have
Bengal Wood Company has current assets of $100,000 and capital assets of $140,000. Current liabilities are $60,000 and long-term liabilities are $90,000. There is $20,000 in preferred stock
Arrange the following items in proper balance sheet presentation:Accumulated amortization....................................$300,000Retained earnings. . ................ .. .. .. ..
Classify the following balance sheet items as current or noncurrent:Common stock................InvestmentsAccounts payable............Marketable securitiesPreferred stock................Accounts
Brandon Fast Foods Inc. has operating profit of $210,000. The company has 16,000 common shares outstanding and paid corporate taxes of $59,300. Interest expense for the year was $30,000, preferred
Thermo Dynamics had $450,000 of retained earnings on December 31, 2015. The company paid dividends of $25,000 in 2015 and had retained earnings of $400,000 on December 31, 2014.a. How much did Thermo
Arrange the following income statement items so they are in the proper order of an income statement:Taxes...................................Earnings after taxesShares outstanding.............Earnings
Carr Auto Wholesalers had sales of $900,000 in 2015, and cost of goods sold represented 65 percent of sales. Selling and administrative expenses were 9 percent of sales. Amortization expense was
The Aztec Book Company sold 1,400 finance textbooks to High Tuition College for $84 each in 2015. These books cost $63 to produce. In addition, Aztec Books spent $2,000 (selling expense) to persuade
The Moore Enterprise has gross profit of $880,000 with amortization expense of $360,000. The Kipling Corporation has $880,000 in gross profits but only $60,000 in amortization expense. The selling
Compare the balance based on IFRS with that based on ASPE, and describe limitations of the balance sheet information for financial analysis.
Sheridan Travel had earnings after taxes of $600,000 in 2014 with 300,000 common shares outstanding. On January 1, 2015, the firm issued 40,000 new common shares. There is a 25 percent increase in
What is the difference between accumulated amortization and amortization expense? How are they related?
Far East Fast Foods had earnings after taxes of $230,000 in the year 2014 with 200,000 shares outstanding. On January 1, 2015, the firm issued 30,000 new shares. Because of the proceeds from these
Explain how amortization generates actual cash flows for the company.
Dover River Company has current operating profit of $200,000 before taxes. Interest expense is $10,000, dividends paid on preferred shares were $18,750, and common dividends paid of $30,000. The
Prepare a statement of cash flows for the Win field Corporation for 2015.WINFIELD CORPORATIONIncome StatementYear Ended December 31 ,
For December 31 , 2014, the balance sheet of the Gardner Corporation is as follows:Sales for 2015 were $220,000, with cost of goods sold being 60 percent of sales. Amortization expense was 10 percent
Ron's Aerobics Ltd., a CCPC located in downtown Winnipeg, Manitoba, has the following taxable income for 2014 and 2015.2014 ........$ 68,0002015 ........142,000a. Compute the total tax obligation for
Inland Fisheries Corp. anticipates cash flows from operating activities of $6 million in 2016. It will need to spend $2 million on capital investments in order to remain competitive within the
What was the first area of study to generate newfound enthusiasm for decision related analysis in finance?
Incubus Corporation began with an investment by shareholders of $40,000.a. In its first year its income showed a deficit of $7,000. What would the equity section of its balance sheet show?b. In the
If shares of both a high-tech startup company and the Royal Bank promised cash flow of $2 per share over the next year, for which shares would you be prepared to pay the higher price? Why?
Puppet Corporation began with an investment by shareholders of $20,000.a. In its first year its income earned $2,000. What would the equity section of its balance sheet show?b. In the second year it
What is meant by the goal of maximization of shareholder wealth? Why is profit maximization, by itself, an inappropriate goal?
Two-to-Ten Dollar Corporation has expected earnings per share of $2.00 in its first year, $4.00 its second year, and then $10.00 per year for many more years. Ten Dollar Corporation has expected
What issue does agency theory examine? Why has it become more important in recent times?
A well-known financial institution expects that it will have no earnings for the next three years as the result of restructuring activities. Then it will begin to return to earnings of $3.00 a share.
Why are institutional investors important in today's financial markets?
The board of directors is faced with making a decision on one of the following projects:a) A new product with high profit margins and with preliminary research showing strong consumer acceptance.b)
The government has passed regulations over the years that require pollution controls, development restrictions, hiring equity, and pay equity. Can a firm still achieve the maximization of shareholder
The senior management of corporations have often received generous compensation even after the firms have suffered significant losses. Are senior managers paid too much?
Suggest two forms of daily functions and two forms of occasional functions that the financial manager performs.
Contrast the liability provisions for a sole proprietorship, a partnership, a limited partnership, and a corporation.
Why is the corporate form of organization best suited to a large organization?
What effect do government debt loads have on the financial markets?
Who are the stakeholders in the corporation?

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