Ibiam Co.'s ROA for the most recent year was 15%. When you examine the company's long-term debt footnote, you conclude that Ibiam's current borrowing rate is about 8%. Their debt-to-equity ratio is 1-to-1. What would you recommend to the CEO of Ibiam?
a. Use any available cash to pay down debt to avoid the borrowing costs.
b. Borrow money for any investment needs; if excess cash is on hand, buy back some of your own stock.
c. Stop worrying about financing and concentrate on operations.
d. Increase debt by a factor of 10, pay out the proceeds as a big dividend, and head for a non-extradition country.
The Dozier Co. shipped products to customers in 2015, and customers agreed to pay Dozier a total $2,000 in 2016. What factor might lead Dozier to recognize less than $2,000 of revenue in its 2015 income statement?
a. Dozier shipped product to customers with low credit scores
b. Dozier allows customers a limited right of return
c. Dozier included two years of tech support with the products at no extra charge
d. All of the above
e. B & C
The Crowe Co. uses the LIFO cost flow assumption. Your boss has asked you to compare financial results of Crowe with that of another company that uses the FIFO cost flow. You dig around in Crowe's annual report and find the following ending balances: Inventory $3,120; Other Assets $5,000; Shareholders' Equity $7,206; Net Income $690. Your research also reveals that the LIFO reserve was $320 at the end of the year, and the reserve was $370 at the beginning of the year. What ending balance of assets would Crowe report if it had always used the FIFO cost flow assumption? Ignore income taxes.
a. $8,440
b. $8,490
c. $8,120
d. $7,800
e. None of the above
Refer to the question above. What net income would Crowe. Co. report for this year if it has always used the FIFO cost flow assumption?