The document is also attached, it's a cleaner looking copy.

1. A firm has $1,600 in retained earnings on its 2015 balance sheet. In 2016, it reported a net loss of $400 (i.e., net income was negative $400) and paid a dividend of $200. What will be the amount of retained earnings on its 2016 balance sheet?

a. _____ $1,200

b. _____ $1,000

c. _____ $1,800

d. _____ $1,600

e. _____ $2,200

2. Over the most recent year, a company?s cash increased by $100, accounts receivable increased by $120, inventory decreased by $80, and accounts payable increased by $50. What was the change in net working capital?

a. _____ increase of $90

b. _____ decrease of $90

c. _____ increase of $190

d. _____ decrease of $190

e. _____ decrease of $10

3. In 2016, a company spent $5,000 on new machinery, recorded depreciation expense of $800, sold old machinery valued at $300, and reported net fixed assets of $11,400 on the year-end balance sheet. What was the amount of net fixed assets at the end of 2015?

a. _____ $15,300

b. _____ $16,900

c. _____ $6,900

d. _____ $5,300

e. _____ $7,500

4. A company has sales of $2,000,000. Labor and material expense is $900,000, and depreciation is $300,000. Selling, general, and administrative expense is $200,000. Interest expense is $100,000 and the tax rate is 40%. What is the level of operating income?

a. _____ $300,000

b. _____ $360,000

c. _____ $500,000

d. _____ $600,000

e. _____ $800,000

5. Toronto Technology has sales of $5,000, net income of $600, total liabilities of $800, and equity of $1,200. The firm has $400 in accounts payable. On the common-size statement, what is the value of accounts payable?

a. _____ 8.0 percent

b. _____ 16.7 percent

c. _____ 20.0 percent

d. _____ 50.0 percent

e. _____ 66.7 percent

6. At the end of 2015, the current ratio for Company A was 0.5, and the current ratio for Company B was 2.0. For both companies, accounts receivable, inventory, and accounts payable did not change during 2016. During 2016, Company A issued some long-term debt and put the proceeds in its cash account; Company B used some existing cash to repurchase stock. What will happen to the current ratios for these two companies at the end of 2016?

a. _____ Company A?s current ratio will be higher than 0.5; Company B?s current ratio will be higher than 2.0

b. _____ Company A?s current ratio will be lower than 0.5; Company B?s current ratio will be higher than 2.0

c. _____ Company A?s current ratio will be higher than 0.5; Company B?s current ratio will be lower than 2.0

d. _____ Company A?s current ratio will be lower than 0.5; Company B?s current ratio will be lower than 2.0

e. _____ Company A?s current ratio will be remain at 0.5; Company B?s current ratio will remain at 2.0

7. In general, which of the following trends is most consistent with ?good? financial performance for a company?

a. _____ decreasing net profit margin and increasing total asset turnover

b. _____ increasing inventory turnover and increasing operating profit margin

c. _____ decreasing gross profit margin and increasing debt/equity ratio

d. _____ decreasing current ratio and increasing debt/(total assets)

e. _____ decreasing quick ratio and decreasing debt/equity ratio

8. Kramerica Corporation has a return on equity of 12 percent. The equity multiplier is 1.20. The profit margin is 10 percent. Sales are $5,000. What is the amount of total assets?

a. _____ $2,500

b. _____ $5,000

c. _____ $500

d. _____ $600

e. _____ $6,000

9. Samir needs $8,000 in five years to buy a car, and $50,000 in ten years for a down payment on a house. He plans to make a single deposit of money into an account today to achieve these goals. How much does he need to deposit, if his money will earn 6% per year?

a. _____ $100,248

b. _____ $401,703

c. _____ $28,604

d. _____ $58,000

e. _____ $33,898

10. Consider a growing annuity that runs for 40 years, with the first deposit occurring one year from today. The annual growth in deposits is 3%, and the money is placed in an investment account earning an annual return of 8%. If you want this account to have a balance of $5,000,000 in 40 years, what has to be the amount of the first deposit?

a. _____ $125,000

b. _____ $27,539

c. _____ $13,541

d. _____ $16,928

e. _____ $45,893

11. Youngsoo plans to borrow $24,000 to buy a car. The loan will involve monthly payments over five years, at an interest rate of 12% per year (1% per month). What will be the amount of each payment?

a. _____ $294

b. _____ $457

c. _____ $534

d. _____ $600

e. _____ $2883

The following information is relevant for Questions 12 ? 16:

Solar Inc. 2015 Income Statement

Sales

8,000

COGS

(6,000)

Operating income

2,000

Interest expense

(400)

Taxable income

1,600

Taxes (40%)

(640)

Net Income

960

Dividends

96

Solar Inc. 2015 Balance Sheet

Cash

600

A/P

1,000

A/R

800

Notes payable

600

Inventory

2,400

Total current liabilities

1,600

Total current assets

3,800

Long-term debt

2,400

Common stock

2,000

Fixed assets

6,200

Retained earnings

4,000

Total equity

6,000

Total

10,000

Total

10,000

The following assumptions are relevant for the forecasted income statement and balance sheet for 2016. (Use a 360-day year in financial ratio calculations when necessary.)

• sales grow by 15%
• operating margin will be 30%
• interest expense for the coming year will be $400
• the retention ratio will be 80%
• cash will be 10% of sales
• accounts receivable turnover will be 12
• inventory period will be 60 days
• fixed asset turnover will be 1
• accounts payable period will be 30 days

12. For 2016, the forecasted level of cost of goods sold is:

a. _____ $2,760

b. _____ $6,000

c. _____ $6,440

d. _____ $6,900

13. For 2016, the forecasted level of dividends is:

a. _____ $110

b. _____ $283

c. _____ $455

d. _____ $1,133

14. For 2016, the forecasted level of accounts receivable is:

a. _____ $695

b. _____ $767

c. _____ $864

d. _____ $920

15. For 2016, the forecasted level of inventory is:

a. _____ $1,073

b. _____ $1,211

c. _____ $1,533

d. _____ $2,400

16. For 2016, the forecasted level of fixed assets is:

a. _____ $5,600

b. _____ $6,200

c. _____ $8,000

d. _____ $9,200

The following information is relevant for Questions 17 ? 20:

Yuck Yuck Brands Common-size Financial Statements

Income Statement

Balance Sheet

Sales

100%

Cash

4%

Cost of goods sold

70%

Accounts receivable

8%

Administrative expense

11%

Inventory

18%

Interest expense

4%

Fixed assets

70%

Income tax expense

6%

Total assets

100%

Net income

9%

Accounts payable

20%

Long-term debt

30%

Common equity

50%

Total

100%

Sales

$10,000

Total assets

$4,000

17. The gross profit margin is:

a. _____ 9%

b. _____ 15%

c. _____ 19%

d. _____ 30%

18. The interest coverage ratio (times interest earned) is:

a. _____ 2.75

b. _____ 4.75

c. _____ 5.33

d. _____ 7.50

19. The total liabilities to total assets ratio is:

a. _____ 0.20

b. _____ 0.30

c. _____ 0.50

d. _____ 1.00

20. The total asset turnover is:

a. _____ 0.40

b. _____ 1.00

c. _____ 1.75

d. _____ 2.50

Problem 1 (10 points) _____ (NOTE: You must show your work on this problem.)

Anne Bankroll is reviewing her investment portfolio of stocks and bonds. Her recent account statements indicate the following:

Date

Value of bonds

Value of stocks

31 December 2015

$12,560

$28,784

31 December 2016

$12,903

$31,137

1. During 2016, the rate of inflation was 1.2%. Calculate the return (i.e., the percentage increase in value) on Anne?s total portfolio in

1. Nominal terms (3 points)

1. Real terms (2 points)

1. Anne is attempting to determine the value of one her stocks. The company does not currently pay dividends. However, the company announced that it expects to pay a dividend of $0.50 per share in two years. The dividend is likely to increase by 20% annually for the next five years (in other words, from Year 3 to Year 7). After Year 7, the growth in dividends is expected to be 4% per year, forever. Investors in this company require a return of 9%. Estimate the current value per share. (5 points)