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FIN 534 Week 4 quiz 3

FIN 534 Week 4 quiz 3

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FIN 534 Week 4 quiz 3

Which of the following factors could explain why Dellva Energy had a negative net cash flow last year, even though the cash on its balance sheet increased?

Answer

The company sold a new issue of bonds.

The company made a large investment in new plant and equipment.

The company paid a large dividend.

The company had high amortization expenses.

The company repurchased 20% of its common stock.
 

2 points

Question 2

Which of the following items is NOT included in current assets?

Answer

Accounts receivable.

Inventory.

Bonds.

Cash.

Short-term, highly liquid, marketable securities.
 

2 points

Question 3

Other things held constant, which of the following actions would increase the amount of cash on a company’s balance sheet?

Answer

The company repurchases common stock.

The company pays a dividend.

The company issues new common stock.

The company gives customers more time to pay their bills.

The company purchases a new piece of equipment.
 

2 points

Question 4

Analysts who follow Howe Industries recently noted that, relative to the previous year, the company’s operating net cash flow increased, yet cash as reported on the balance sheet decreased. Which of the following factors could explain this situation?

Answer

The company cut its dividend.

The company made a large investment in a profitable new plant.

The company sold a division and received cash in return.

The company issued new common stock.

The company issued new long-term debt.
 

2 points

Question 5

Below are the 2008 and 2009 year-end balance sheets for Wolken Enterprises:

Assets: 2009 2008 
Cash $ 200,000 $ 170,000 
Accounts receivable 864,000 700,000 
Inventories 2,000,000 1,400,000 
Total current assets $ 3,064,000 $2,270,000 
Net fixed assets 6,000,000 5,600,000 
Total assets $ 9,064,000 $7,870,000 

Liabilities and equity: 
Accounts payable $ 1,400,000 $1,090,000 
Notes payable 1,600,000 1,800,000 
Total current liabilities $ 3,000,000 $2,890,000 
Long-term debt 2,400,000 2,400,000 
Common stock 3,000,000 2,000,000 
Retained earnings 664,000 580,000 
Total common equity $ 3,664,000 $2,580,000 
Total liabilities and equity $ 9,064,000 $7,870,000 

Wolken has never paid a dividend on its common stock, and it issued $2,400,000 of 10-year non-callable, long-term debt in 2008. As of the end of 2009, none of the principal on this debt had been repaid. Assume that the company’s sales in 2008 and 2009 were the same. Which of the following statements must be CORRECT?

Answer

Wolken increased its short-term bank debt in 2009.

Wolken issued long-term debt in 2009.

Wolken issued new common stock in 2009.

Wolken repurchased some common stock in 2009.

Wolken had negative net income in 2009. 

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