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fundamentals of financial management 10th

Questions and Answers of Fundamentals Of Financial Management 10th

27. Compute the book value per common share for both 2006 and 2007 for the Jeter Corporation.
26. Has the buildup in plant and equipment been financed in a satisfactory manner?Briefly discuss. assets
25. Describe the general relationship between net income and net cash flows from operating activities for the firm.
24. Prepare a statement of cash flows for the Jeter Corporation. Follow the general flows procedures indicated in Table 2-10 on page 36 of the chapter.(The following questions apply to the Jeter
23. For December 31, 2006, the balance sheet of Baxter Corporation is as follows:Sales for 2007 were $220,000, and the cost of goods sold was 60 percent of sales. Selling and administrative expense
22. In Problem 21, if the firm sells at 2.5 times book value per share, what will the P/E ratio be? (Round to the nearest whole number.)
21. Amigo Software, Inc., has total assets of $800,000, current liabilities of$150,000, and long-term liabilities of $120,000. There is $65,000 in preferred stock outstanding. Thirty thousand shares
20. Landers Nursery and Garden Stores has current assets of $220,000 and fixed assets of $170,000. Current liabilities are $80,000 and long-term liabilities are$140,000. There is $40,000 in preferred
19. Arrange the following items in proper balance sheet presentation; Accumulated depreciation.. Retained earnings.. Cash Bonds payable.. $300,000 96,000 10,000 136,000 Accounts receivable. 48,000
18. The Jupiter Corporation has a gross profit of $700,000 and $240,000 in depreciation expense. The Saturn Corporation also has $700,000 in gross profit, with $40,000 in depreciation expense.
17. Fill in the blank spaces with categories 1 through 7 below: 1. Balance sheet (BS) 2. Income statement (IS) 3. Current assets (CA) 4. Fixed assets (FA) Indicate Whether Item Is on Balance Sheet
16. Coastal Pipeline, Inc., anticipated cash flow from operating activities of $8 million in 2008. It will need to spend $1.5 million on capital investments in order to remain competitive within the
15. Quantum Technology had $640,000 of retained earnings on December 31, 2007. The company paid common dividends of $30,000 in 2007 and had retained earnings of $500,000 on December 31, 2006. How
14. Okra Snack Delights, Inc., 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
13. Assume for Botox Facial Care discussed in Problem 12 that in 2008, earnings after taxes declined to $140,000 with the same 200,000 shares outstanding. The stock price declined to $24.50.a.
12. Botox Facial Care had earnings after taxes of $280,000 in 2006 with 200,000 shares of stock outstanding. The stock price was $30.80. In 2007, earnings after taxes increased to $320,000 with the
11. Identify whether each of the following items increases or decreases cash flow: Increase in accounts receivable Increase in notes payable Depreciation expense Increase in investments Decrease in
10. Classify the following balance sheet items as current or noncurrent: Retained earnings Accounts payable Prepaid expenses Plant and equipment Inventory Common stock Bonds payable Accrued wages
9.a. Hillary Swank Clothiers had sales of $360,000 and cost of goods sold of$244,800. What is the gross profit margin (ratio of gross profit to sales)?b. If the average firm in the clothing industry
8. Lemon Auto Wholesalers had sales of $700,000 in 2007 and cost of goods sold profitability represented 70 percent of sales. Selling and administrative expenses were 12 percent of sales.
7. Censored Books, Inc., sold 1,400 finance textbooks for $160 each to High Tuition University in 2007. These books cost $125 to produce. Censored Books spent $8,000 (selling expense) to convince the
6. Prepare in good form an income statement for Virginia Slim Wear. Take your calculations all the way to computing earnings per share. Sales $600,000 Shares outstanding. 100,000 Cost of goods sold..
5. Prepare in good form an income statement for ATM Cards, Inc. Take your calculations all the way to computing earnings per share. Sales. $800,000 Shares outstanding. 100,000 Cost of goods sold..
4. Given the following information prepare in good form an income statement for the Dental Drilling Company. Selling and administrative expense Depreciation expense 60,000 70,000 Sales 470,000
3. Arrange the following income statement items so they are in the proper order of an income statement: Taxes Shares outstanding Gross profit shares outstanding Interest expense Depreciation expense
2. Bettis Bus Company had earnings after taxes of $600,000 in the year 2006 with 300,000 shares of stock outstanding. On January 1, 2007, the firm issued 40,000 new shares. Because of the proceeds
1. Frantic Fast Foods had earnings after taxes of $390,000 in the year 2006 with 300,000 shares outstanding. On January 1, 2007, the firm issued 25,000 new shares. Because of the proceeds from these
2. Northern Energy Company has assets of $7,000,000, liabilities of $4,000,000, and $500,000 in preferred stock outstanding. Four hundred thousand common profitability stock shares have been
10. Why is interest expense said to cost the firm substantially less than the actual expense, while dividends cost it 100 percent of the outlay?
9. What is free cash flow? Why is it important to leveraged buyouts?
8. What are the three primary sections of the statement of cash flows? In what section would the payment of a cash dividend be shown?
7. Explain why the statement of cash flows provides useful information that goes beyond income statement and balance sheet data.
6. Comment on why inflation may restrict the usefulness of the balance sheet as normally presented.
5. How is the income statement related to the balance sheet?
4. What is the difference between accumulated depreciation and depreciation expense? How are they related?
3. Explain how depreciation generates actual cash flows for the company.
2. What is the difference between book value per share of common stock and market value per share? Why does this disparity occur?
1. Discuss some financial variables that affect the price-earnings ratio.
12. What changes can take place under restructuring? In recent times, what group of investors has often forced restructuring to take place?
11. Assume you are looking at many companies with equal risk; which ones will have the highest stock prices?
10. What is the difference between a primary and a secondary market?
9. In terms of the life of the securities offered, what is the difference between money and capital markets?
8. When does insider trading occur? What government agency is responsible for = protecting against the unethical practice of insider trading?
7. Why is profit maximization, by itself, an inappropriate goal? What is meant by the goal of maximization of shareholder wealth?
6. Why are institutional investors important in today’s business world?
5. What issue does agency theory examine? Why is it important in a public corporation rather than in a private corporation?
4. What document is necessary to form a corporation?
3. In a corporation, what group has the ultimate responsibility for protecting and managing the stockholders’ interests?
2. What form of partnership allows some of the investors to limit their liability?Explain briefly.
Discuss how the health care industry’s share of GDP aff ects the overall economy. Is too much money being spent for health care? Can America continue to spend this amount (or more) without sacrifi
Build a pro forma for a much needed hospital capital project or for capital equipment. Be sure to spend the appropriate amount of time to validate the volumes. Finish the analysis with an internal
Review the items in exhibit 1.3, and determine which have the greatest opportunity for adjustments by the auditors. What can the fi nance staff do to reduce or eliminate audit adjustments? EXHIBIT
Discuss the five financial statement types. How are they specifically related? What elements of the financial statements are most important to the hospital’s operation?
Discuss the reasons why the six items most likely to receive an audit adjustment are so sensitive.Why should the health care organization spend so much time on each of these items?
Using the balance sheet and statement of operations in the chapter, calculate the three bond repayment ratios, and use it to determine the fi nancial condition of the health care organization. Table
Discuss the importance of the three-year strategic plan. How does it relate to the hospital’s future fi nancial health? If the hospital were not required to prepare such a plan, what impact would
Discuss the needs for hospitals to spend the time developing the fi ve-year strategic fi nancial plan. What benefi ts can be gained by the hospital. What would be the results if this plan were not
Gain access to one hospital’s balance sheet and statement of operations. [A good source is www.guidestar.org, where many 501(c)(3) hospital IRS 990s, which include these statements, are stored.]
Discuss the implications of the Medicare and Medicaid programs on the fi nancial outcomes of providers of care in the United States. Also discuss the changes in the clinical health of the US
Using the payer mix information in table 4.1, determine the changes in the hospital’s net revenue (up or down) if the RHMC percentages moved to the national averages. (Make broad dollar assumptions
Discuss why most managed care companies would rather reimburse hospitals on a per diem basis rather than using a discount from gross charges.
Discuss the pros and cons of having the patient registration department report to the fi nance division or the operating division. Determine to which it should report.
Review the OIG’s current work plan and determine actions the organization can take to minimize governmental penalties.
Review the entire depth and breadth of the revenue cycle in figure 5.1. Are there any elements that appear unnecessary or extraneous? Which elements take the most time for the organization? Which
Discuss the most important steps in the operating budget process. Why are these more important than other steps? What impacts do they have on the timeliness, eff ectiveness, and quality of the budget?
Discuss the most important steps in the capital budget process. Why are these more important than other steps? What impacts do they have on the timeliness, eff ectiveness, and quality of the budget?
Compare the different responsibilities of the accounting and finance departments, and determine if there are any responsibilities that can be eliminated or any that may need to be added.
Discuss the pros and cons of the top-down and bottom-up methods for establishing the operating budget. Which is better? Why?
Debate the issues relating to across-the-board labor cuts versus cuts predicated on labor standards. What are the pros and cons of each method? Which is preferable?
Discuss the role and functions of The Joint Commission. How do the standards they set aff ect the fi nances and operation of the hospital?
Develop a list of twenty capital budget requested items of your choosing. Apply a purchase price against each of them. Sort the list by highest to lowest price. See if this arbitrary list with
Compare the bottom-line financial results of using a fixed budget and a flexible budget if volumes(a) increase by 10 percent or(b) decrease by 10 percent.
Discuss the value of using microbased cost accounting in the hospital organization and the defi ciencies caused if cost accounting is not used or is used ineff ectively.
Compare the difference between an operating budget, a capital budget, and a cash budget.What are the primary elements in each budget?
Discuss the ways physicians and their practice behaviors affect the financial results of an operating budget and a capital budget.
Debate the differences between an alert-based decision-support management-accountability budgeting, monitoring, and reporting system and a standard reporting system that does not provide instant
Discuss the benefits to a health care organization of acquiring and using the ten necessary decision support tools.
List and quantify some of the benefi ts that could be derived from the acquisition of a clinical IT system. If possible, estimate the costs of these systems, and develop a return on investment (ROI),
Design an operating and capital budget package for the finance committee that would provide it with the most value-added information, allowing for its approval the first time.
Discuss the pros and cons of reporting contractual adjustments directly on the monthly fi nancial reports at the department level.
Determine at least ten key success factors (key financial indicators) to benchmark in any hospital.
Compare the benefi ts (as described in table 11.4) being received by a representative hospital in the community with the real amounts of the cost of uncompensated care being given by the
Pick one hospital area that is generally profi table (imaging, surgical services, cardiology), and develop a pro forma for a service expansion of your choice. Remember the importance of volumes in
Debate the need and usefulness of hospital and physician professional liability (malpractice) insurance in the United States. Does the need for the insurance add to or detract from the care that is
Discuss the future of health care fi nance. What do you think it will look like ten years from now? What do you want it to look like? How can you reconcile the diff erences, if any? Most important,
Weston Corporation just paid a dividend of $1.00 a share (it, Do = 51.00). The dividend is expected to grow 12% a year for the next 3 years and then at 5% a year thereafter. What is the expected
A stock is expected to pay a dividend of $2.75 at the end of the year (i.e., DI = $2.75), and it should continue to grow at a constant rate of 5% a year. If its required return is 15%, what is the
Currently, Forever Flowers Inc. has a capital structure consisting of 25% debt and 75% equity. Forever's debt currently has a 7% yield to maturity. The risk-free rate (rn) is 6%, and the market risk
The real risk-free rate is 2.05%. Inflation is expected to be 3.05% this year, 4.75% next year, and 2.3% thereafter. The maturity risk premium is estimated to be 0.05 X (t — 1)%, where t = number
Is it possible to construct a portfolio of real-world stocks that has a required return equal to the risk-free rate? Explain
How long will it take $300 to double if it earns the following rates? Compounding occurs once a year.a. 6%b. 13%c. 21%d. 100%
Corporation's 2018 sales were $5 million. Its 2013 sales were $2.5 million.At what rate have sales been growing?Suppose someone made this statement: "Sales doubled in 5 years. This represents a
You have just been hired as a financial analyst for Barrington Industries. Unfortunately, company headquarters (where all of the firm's records are kept) has been destroyed by are. So, your first job
Investors generally can make one vote for each share of stock they hold. TIAA-CREF is the largest institutional shareholder in the United States; therefore, it holds many shares and has more votes

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