accounts data bank
13. Clayton Industries is planning its operations for next year, and the CEO wants you to forecast the firm's additional funds needed (AFN). Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year? Dollars are in millions.
Last year’s sales = S0 $350 Last year’s accounts payable $40
Sales growth rate = g 30% Last year’s notes payable $50
Last year’s total assets = A*0 $500 Last year’s accruals $30
Last year’s profit margin = M 5% Target payout ratio 60%
14. Which of the following would, generally, indicate an improvement in a company’s financial position, holding other things constant?
a. The TIE declines.
b. The DSO increases.
c. The quick ratio increases.
d. The current ratio declines.
e. The total assets turnover decreases.
15. Casey Communications recently issued new common stock and used the proceeds to pay off some of its short-term notes payable. This action had no effect on the company’s total assets or operating income. Which of the following effects would occur as a result of this action?
a. The company’s current ratio increased.
b. The company’s times interest earned ratio decreased.
c. The company’s basic earning power ratio increased.
d. The company’s equity multiplier increased.
e. The company’s debt ratio increased.
16. Ajax Corp's sales last year were $435,000, its operating costs were $362,500, and its interest charges were $12,500. What was the firm's times-interest-earned (TIE) ratio?
17. Last year Harrington Inc. had sales of $325,000 and a net income of $19,000, and its year-end assets were $250,000. The firm's total-debt-to-total-assets ratio was 45.0%. Based on the DuPont equation, what was the ROE?
18. Wie Corp's sales last year were $315,000, and its year-end total assets were $355,000. The average firm in the industry has a total assets turnover ratio (TAT) of 2.4. The firm's new CFO believes the firm has excess assets that can be sold so as to bring the TAT down to the industry average without affecting sales. By how much must the assets be reduced to bring the TAT to the industry average, holding sales constant?
19. Towson, Inc. currently has $1,600,000 in accounts receivables and its days sales outstanding (DSO) is 20 days. If accounts receivable comprise 50% of the company’s current assets and Towson has $4,800,000 in net fixed assets, what is its total asset turnover ratio?
20. Which of the following is a primary market transaction?
a. You sell 200 shares of IBM stock on the NYSE through your broker.
b. You buy 200 shares of IBM stock from your brother. The trade is not made through a broker--you just give him cash and he gives you the stock.
c. IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker.
d. One financial institution buys 200,000 shares of IBM stock from another institution. An investment banker arranges the transaction.
e. IBM sells 2,000,000 shares of treasury stock to its employees when they exercise options that were granted in prior years.
21. What is the opportunity cost of Project A if it is expected to yield 10%, while the yields from other projects range from 6.5% to 11.5% with the mean 9% and 5% standard deviation?
22. You recently sold 200 shares of Disney stock, and the transfer was made through a broker. This is an example of:
a. A money market transaction.
b. A primary market transaction.
c. A secondary market transaction.
d. A futures market transaction.
e. An over-the-counter market transaction.
23. Which of the following statements is CORRECT?
a. Hedge funds are legal in Europe and Asia, but they are not permitted to operate in the United States.
b. Hedge funds are legal in the United States, but they are not permitted to operate in Europe or Asia.
c. Hedge funds have more in common with investment banks than with any other type of financial institution.
d. Hedge funds have more in common with commercial banks than with any other type of financial institution.
e. Hedge funds are not as highly regulated as most other types of financial institutions. The justification for this light regulation is that only "sophisticated" investors (i.e., those with high net worths and high incomes) are permitted to invest in these funds, and such investors supposedly can do any necessary "due diligence" on their own rather than have it done by the SEC or some other regulator.
24. Which of the following statements is CORRECT?
a. While the distinctions are becoming blurred, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other parties.
b. The NYSE operates as an auction market, whereas Nasdaq is an example of a dealer market.
c. Money market mutual funds usually invest their money in a well-diversified portfolio of liquid common stocks.
d. Money markets are markets for long-term debt and common stocks.
e. A liquid security is a security whose value is derived from the price of some other "underlying" asset.
25. Dell has an inventory period of 1 month, and an account receivable period of 0 (zero) months. It also has a payable period of 6 months. What are the cash conversion cycle period and the interest expense for Dell if they have annual net total (credit) sales volume of $10 billion? The market interest rate is 6.0%.
a. -5.0, $-250 m
b. 6.0, $300m
c. 1.0, $100m
d. 3.0, $150m
e. 0.0, $100m