Question Details

Tucker Electronic System's current balance sheet 



1.	Which of the following statements is CORRECT?
a.	If a firm reports a loss on its income statement, then the retained earnings account as shown on the balance sheet will be negative.
b.	Since depreciation is a source of funds, the more depreciation a company has, the larger its retained earnings will be, other things held constant.
c.	A firm can show a large amount of retained earnings on its balance sheet yet need to borrow cash to make required payments.
d.	Common equity includes common stock and retained earnings, less accumulated depreciation.
e.	The retained earnings account as shown on the balance sheet shows the amount of cash that is available for paying dividends.



	2.	Olivia Hardison, CFO of Impact United Athletic Designs, plans to have the company issue $500 million of new common stock and use the proceeds to pay off some of its outstanding bonds. Assume that the company, which does not pay any dividends, takes this action, and that total assets, operating income (EBIT), and its tax rate all remain constant. Which of the following would occur?
a.	The company would have to pay less taxes.
b.	The company's taxable income would fall.
c.	The company's interest expense would remain constant.
d.	The company would have less common equity than before.
e.	The company's net income would increase.




	3.	Jessie's Bobcat Rentals' operations provided a negative net cash flow last year, yet the cash shown on its balance sheet increased. Which of the following statements could explain the increase in cash, assuming the company's financial statements were prepared under generally accepted accounting principles?
a.	The company had high depreciation expenses.
b.	The company repurchased some of its common stock.
c.	The company dramatically increased its capital expenditures.
d.	The company retired a large amount of its long-term debt.
e.	The company sold some of its fixed assets.


		

	4.	Tucker Electronic System's current balance sheet shows total common equity of $3,125,000. The company has 125,000 shares of stock outstanding, and they sell at a price of $52.50 per share. By how much do the firm's market and book values per share differ?
a.	$27.50
b.	$28.88
c.	$30.32
d.	$31.83
e.	$33.43




	5.	Hunter Manufacturing Inc.'s December 31, 2012, balance sheet showed total common equity of $2,050,000 and 100,000 shares of stock outstanding. During 2013, Hunter had $250,000 of net income, and it paid out $100,000 as dividends. What was the book value per share at 12/31/13, assuming that Hunter neither issued nor retired any common stock during 2013?
a.	$20.90
b.	$22.00
c.	$23.10
d.	$24.26
e.	$25.47




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