Question 1. Based on the information in the table, calculate the after tax cash flow from operations for 2002 (no assets were disposed of during the year, and there was no change in interest payable or taxes payable):
Jones Company
Financial Information
December 2001 December 2002
Net income $1,500 $3,000
Accounts receivable 750 750
Accumulated depreciation 1,125 1,500
Common stock 4,500 5,250
Paid-in capital 7,500 8,250
Retained earnings 1,500 2,250
Accounts payable 750 750
A $3,750
B $3,375
C $3,000
D $2,250
Question 2. Corporations are allowed to deduct specific expenses for income tax purposes. Several of these expenditures are deductible but they are not cash expenses. Which of the following is not a cash expenditure but is still deductible for income tax purposes?
A Marketing expenses
B Payroll tax payments.
C Wages and salaries
D Depreciation expense
Question 3. The quick ratio of a firm would be unaffected by which of the following?
A land held for investment is sold for cash
B equipment is purchased, financed by a long-term debt issue
C inventories are sold for cash
D inventories are sold on a short-term credit basis
Question 4. Which of the following has the most significant influence on return on equity?
a Common dividends
b Principal payments
c Accruals
d Operating income
Question 5. A firm has after-tax cash flow from operations equal to $100,000. Operating working capital increased by $20,000, and the firm purchased $30,000 of fixed assets. The firm's free cash flow (asset perspective) was:
a. $50,000
b. $90,000
c. $110,000
d. $150,000
e. None of the above
Question 6. PDQ Corp. has sales of $3,000,000; the firm's cost of goods sold is $1,425,000; and its total operating expenses are $700,000. The firm's interest expense is $230,000, and the corporate tax rate is 40%. The firm paid dividends to preferred stockholders of $30,000, and the firm distributed $60,000 in dividend payments to common stockholders. What is PDQ's "Addition to Retained Earnings?"
a. $297,000
b. $327,000
c. $387,000
d. $477,000
Question 7. Byron, Inc. has total current assets of $800,000; total current liabilities of $450,000; long-term assets of $300,000; and long-term debt of $200,000. How much is the firm's total equity?
a. $1,150,000
b. $ 150,000
c. $ 450,000
d. $ 750,000
Question 8. Patti Corporation has current assets of $11,400, inventories of $4,000, and a current ratio of 2.6. What is Patti's acid test ratio?
a. 1.69
b. 0.54
c. 0.74
d. 1.35