Fundamentals of Corporate Finance 3e Test Bank
57.
Simplex Healthcare had net income of $5,411,623 after paying taxes at 34 percent. The firm
had revenues of $20,433,770.Its interest expense for the year was $1,122,376, while
depreciation expense was $2,079,112. What was the firm’s operating expenses excluding
depreciation? Round your intermediate calculations and final answer to the nearest dollar.
Fundamentals of Corporate Finance 3e Test Bank
58.
Triumph Trading Company provided the following information to its auditors. For the year
ended March 31, 2008, the company had revenues of $1,122,878, operating expenses
(excluding depreciation and leasing expenses) of $612,663, depreciation expenses of
$231,415, leasing expenses of $126,193, and interest expenses of $87,125. If the company’s
average tax rate was 34 percent, what is its net income after taxes? Round your final answer to
the nearest dollar.
A)
$43,218
B)
$65,482
C)
$152,607
D)
None of the above.
Fundamentals of Corporate Finance 3e Test Bank
59.
Parrino Corporation has announced that its net income for the year ended June 30, 2008, is
$1,824,214. The company had an EBITDA of $5,174,366, and its depreciation and amortization
expense was equal to $1,241,790. The company’s average tax rate is 34 percent. What is the
amount of interest expense for the firm?
A)
$2,763,961
B)
$939,747
C)
$1,187,720
D)
$1,168,615
Ans:
D
60.
Arco Steel, Inc. generated total sales of $45,565,200 during fiscal 2010. Depreciation and
amortization for the year totaled $2,278,260, and cost of goods sold was $27,339,120. Interest
expense for the year was $9,641,300 and selling, general, and administrative expenses totaled
$4,556,520 for the year. What is Arco’s EBIT for 2010?
A)
$9,641,300
B)
$11,391,300
C)
$13,275,030
D)
$18,490,000
Ans:
B
Cost of goods sold
Gross Profit
Selling, general and administrative expenses
Fundamentals of Corporate Finance 3e Test Bank
61.
Which of the following is an income statement item?
A)
Accounts payable
B)
Accrued taxes
C)
Retained earnings
D)
Selling and administrative expenses
Ans:
D
62.
Which of the following is NOT a cash flow from operating activities?
A)
Cash payments on the principal of long-term debt
B)
Payments for utilities and rent
C)
Payments to purchase raw materials
D)
Cash receipts from selling goods and services
Ans:
A
63.
Cash flows from financing activities include all but one of the following:
A)
Cash payments on the principal of long-term debt
B)
Buying and selling bonds or stock of other firms
C)
Cash purchases of treasury stock
D)
Cash proceeds from a bank loan
Ans:
B
Fundamentals of Corporate Finance 3e Test Bank
64.
Which of the following is NOT a cash flow from investing activities?
A)
Buying and selling bonds of other firms
B)
Buying or selling of land, buildings, and plant and equipment
C)
Cash payments of dividends to shareholders
D)
Buying and selling stocks of other firms
Ans:
C
65.
Trident Corporation had the following cash flows in the current year. Which of the following
will be categorized under the financing activities section of the statement of cash flows?
A)
Rent on a warehouse amounting to $1.1 million
B)
Purchase of $125,000 worth of five-year bonds issued by Towson Utilities
C)
Preferred dividends of $330,000 paid to shareholders
D)
Lease income received on a piece of land
Ans:
C
66.
During 2008, Towson Recording Company increased its investment in marketable securities by
$36,845, funded fixed assets acquisition by $109,455, and had marketable securities of $14,215
mature. What is the net cash provided by (used in) investing activities?
A)
$132,085
B)
$145,940
C)
–$132,085
D)
–$145,940
Ans:
C
Fundamentals of Corporate Finance 3e Test Bank
67.
Trident Manufacturing Company’s treasurer identified the following cash flows during this year
as significant. The company repaid existing debt of $425,110, while raising additional debt
capital of $750,000. It also repurchased stock in the open markets for a total of $63,250 and
paid $233,144 in dividends to its shareholders. What is the net cash provided by (used in)
financing activities?
A)
$28,496
B)
$91,746
C)
–$28,496
D)
–$91,746
Ans:
A
Fundamentals of Corporate Finance 3e Test Bank
68.
Super Grocers, Inc., provided the following financial information for the quarter ending
September 30, 2006:
Depreciation and amortization – $133,414
Net income – $341,463
Increase in receivables – $112,709
Increase in inventory – $81,336
Increase in accounts payables – $62,411
Decrease in marketable securities – $31,225
What is the cash flow from operating activities generated during this quarter by the firm?
A)
$308,458
B)
$374,468
C)
–$374,468
D)
–$308,458
Ans:
B
Operating Activities
Additions (sources of cash)
Subtractions (uses of cash)
Net cash provided by operating activities
Fundamentals of Corporate Finance 3e Test Bank
69.
What is the firm’s net cash flow from operating activities?
A)
$304,322
B)
$299,176
C)
$192,602
D)
None of the above.
Ans:
B
Fundamentals of Corporate Finance 3e Test Bank
70.
What is the firm’s net cash flow from (used in) investing activities?
A)
$0
B)
$46,124
C)
–$46,124
D)
None of the above
Ans:
C
71.
What is the firm’s cash flow from financing activities?
A)
–$66,405
B)
$61,656
C)
–$61,656
D)
−$182,057
Ans:
D
Fundamentals of Corporate Finance 3e Test Bank
72.
Which of the following is a cash flow from investing activities?
A)
Cash payment of dividends to shareholders
B)
Cash from sale of products
C)
Purchase of plant and equipment
D)
Rent received from industrial property owned
Ans:
C
73.
Natural Lite, Inc. reported the following items during fiscal 2010. The firm purchased
marketable securities of $87,500, paid down a long-term loan in the amount of $650,000,
purchased $4,250,000 of new equipment. The firm also issued $6,250,000 of common stock,
paid $350,225 in dividends to its common shareholders, and repurchased $1,250,000 of
common stock in the open market. What is the net cash provided by financing activities?
A)
$4,575,210
B)
$1,733,285
C)
$3,999,775
D)
$2,467,915
Ans:
C
Fundamentals of Corporate Finance 3e Test Bank
74.
Which of the following presents a summary of the changes in a firm’s balance sheet from the
beginning of an accounting period to the ending of an accounting period?
A)
The statement of retained earnings
B)
The statement of working capital
C)
The statement of cash flows
D)
The statement of net worth
Ans:
C
Fundamentals of Corporate Finance 3e Test Bank
75.
Trimeton Corporation announced that in the year ended June 30, 2008, its earnings before taxes
amounted to $2,367,045. Calculate its taxes using the following table. Round your final answer
to the nearest dollar.
Tax Rate
Taxable Income
15%
$0 to $50,000
25
50,001 – 75,000
34
75,001 – 100,000
39
100,001 – 335,000
34
335,001 – 10,000,000
35
10,000,001 – 15,000,000
38
15,000,001 – 18,333,333
35
More than $18,333,333
A)
$804,795
B)
$690,895
C)
$713,145
D)
None of the above
Ans:
A
6,250
690,895
Total taxes payable
Fundamentals of Corporate Finance 3e Test Bank
76.
Chartworth Associates’ financial statements indicated that the company had EBITDA of
$3,145,903. It had depreciation of $633,000, and its interest rate on debt of $1.25 million was
7.5 percent. Calculate the amount of taxes the company is likely to owe. Round your final
answer to the nearest dollar.
Tax Rate
Taxable Income
15%
$0 to $50,000
25
50,001 – 75,000
34
75,001 – 100,000
39
100,001 – 335,000
34
335,001 – 10,000,000
35
10,000,001 – 15,000,000
38
15,000,001 – 18,333,333
35
More than $18,333,333
A)
$1,069,607
B)
$1,037,732
C)
$822,512
D)
none of the above
Ans:
C
Fundamentals of Corporate Finance 3e Test Bank
77.
Chartworth Associates’ financial statements indicated that the company has EBITDA of
$3,145,903. It had depreciation of $633,000, and its interest rate on debt of $1.25 million was
7.5%. The company is likely to owe $822,512 in taxes. What are the marginal and average tax
rates for this company?
Tax Rate
Taxable Income
15%
$0 to $50,000
25
50,001 – 75,000
34
75,001 – 100,000
39
100,001 – 335,000
34
335,001 – 10,000,000
35
10,000,001 – 15,000,000
38
15,000,001 – 18,333,333
35
More than $18,333,333
A)
34%, 35%
B)
35%, 34%
C)
34%, 34%
D)
none of the above
Ans:
C
78.
Which of the following best represents cash flows to investors?
A)
Cash flow from operating activity, plus cash flow generated from net working capital
B)
Earnings before interest and taxes times 1 minus the firm’s tax rate
C)
Net income minus dividends paid to preferred stockholders.
D)
Cash flow from operating activity minus cash flow invested in net working capital minus
cash flow invested in long-term assets.
Ans:
D
Fundamentals of Corporate Finance 3e Test Bank
79.
Clarity Music Company has a marginal tax rate of 34 percent and an average tax rate of 32
percent this year. It is planning to construct a new recording studio next year. The appropriate
tax rate to be applied on the income generated from the new studio is:
A)
the average tax rate.
B)
the marginal tax rate.
C)
either one.
D)
None of the above.
Ans:
B
80.
Which of the following statements is true?
A)
Only 20 percent of interest income is taxable for a corporation.
B)
Dividend income is fully taxable.
C)
Interest paid on debt obligations is a tax-deductible business expense.
D)
Dividends paid to stockholders are a tax-deductible business expense.
Ans:
C
Fundamentals of Corporate Finance 3e Test Bank
81.
United Brands Corp. just completed their latest fiscal year. The firm had sales of $16,650,000.
Depreciation and amortization was $832,500, interest expense for the year was $825,000, and
selling general and administrative expenses totaled $1,665,000 for the year, and cost of goods
sold was $9,990,000 for the year. Assuming a federal income tax rate of 34%, what was the
United Brands net income after-tax?
A)
$2,202,750
B)
$1,745,325
C)
$3,505,100
D)
$2,813,000
Ans:
A
Fundamentals of Corporate Finance 3e Test Bank
82.
Identify and explain the five fundamental principles that form the basis of accounting standards in
United States.
Fundamentals of Corporate Finance 3e Test Bank
83.
Explain the differences while using FIFO versus LIFO method of valuation in accounting for
inventory.
84.
What are the advantages and disadvantages of using market-value accounting?
Fundamentals of Corporate Finance 3e Test Bank
85.
Explain the following income statement items.
a. Amortization expense
b. Extraordinary items
c. EBITDA
Fundamentals of Corporate Finance 3e Test Bank
86.
Identify the noncash items that a firm may have on its financial statements and explain their
impact on the shareholders of the firm.