Exam 2: Essential Concepts in Finance: Part A

Ajax Inc. had profits of $200,000 for the year. Their retained earnings account grew from $800,000 at the beginning of the year to $950,000 by year end. How much did the firm pay out in dividend?

If the inventory turnover ratio is very low relative to industry averages:

Shares outstanding of common stock = 1,000,000 Shares outstanding of preferred stock = 500,000 Market price of common stock = $18. -The Inventory Turnover ratio is:

Use the following information to answer the question: Calculate net income.

Shares outstanding of common stock = 1,000,000 Shares outstanding of preferred stock = 500,000 Market price of common stock = $18. -Return on Assets ratio is:

Use the following information to answer the question: -What is the expected increase in retained earnings for the year? (Assume that fixed costs and depreciation do not change year over year)

Which of the following statements is false?

Use the following information to answer the question: Sales for 2000 are projected to be $25,000; The firm currently uses straight line depreciation; No new equipment purchases are planned for 2000; There will be a 100% earnings distribution for 2000. The current assets, accounts payable, and accrued expenses vary at a constant percent of sales as do COGS and selling expenses. Assume that notes payable is paid off in 2000. -Operating Income for 2000 is projected to be:

Define market value added (MVA).

The basic accounting equation:

Which of the following equations best describes net working capital?

Use the following information to answer the question: The firm currently uses straight line depreciation. No fixed assets are expected to be purchased or sold. Current assets and accounts payable vary directly with sales. Notes payable will be paid off in the year 2000. Depreciation in 1999 was $2,000. Sales are expected to grow by 50% in 2000. All net income is paid out in dividends and no new stock or bonds will be issued or retired. Calculate total liabilities for the end of the year 2000.

Sales forecasts are usually NOT influenced by which of the following?

It has been said that a young company is most likely to encounter severe financial difficulties when it becomes established and its sales begin to grow rapidly. Discuss why this might occur.

Use the following information to answer the question: -Assuming that cost of goods sold remain a constant percentage of sales, what is its forecast for next year?

Gross profit equal:

Interest expense is deducted:

When a company issues new stock it, it would appear on the cash flow statement as:

Working capital includes both current and non- current assets. Do you agree or disagree with this statement? Explain.

The Return on Assets ratio is most vulnerable to misinterpretation because: