Review Questions on Financial Planning

Pages: 16 (3192 words) Published: September 19, 2013
FINA Review Block 1
Questions 1-2 Financial Plan
Questions 3-4

____7.Which of the following equations is correct?
a.| Dividends = Net income - Change in Retained Earnings| b.| Dividends = Net income + Change in Retained Earnings| c.| Dividends = Change in Retained earnings - Net income| d.| none of the above|

____13.Which of the following will increase equity?
a.| An increase in dividends paid|
b.| Issuance of new stock|
c.| An increase in retained earnings from net income (i.e., EAT or NI)| d.| Both b & c|
e.| All of the above|

____14.The two forms of equity infusion (investment) are: a.| Long term debt and common stock|
b.| Direct investment in the company's stock and the retention of earnings| c.| Net working capital and accumulated depreciation|
d.| Preferred stock and long-term debt|
e.| Dividends and retained earnings_______16|
____19.Gowen, Inc. began the year with equity of $1,000,000 and 100,000 shares of stock outstanding. During the year the firm paid a dividend of $1.50 per share. Year-end equity was $1,100,000. Assuming no other factors impacted equity, what was Gowen, Inc.'s net income for the year? a.| $100,000|

b.| $150,000|
c.| $200,000|
d.| $250,000|
e.| $300,000|
____16.During the last year Alpha Co had Net Income of $150, paid $20 in dividends, and sold new stock for $40. Beginning equity for the year was $700. Ending Equity was a.| $830 700+150-20+40=870|

b.| $840|
c.| $850|
d.| $870|
____29.Grass Enterprises just closed a good year. It had Sales of $10 million, EBIT of $1 million and Net Income of $500,000. The firm also paid dividends of $150,000 during the year. If Grass started the year with equity of $900,000, what will it's year ending equity be? a.| $1,900,000 begin. Equity 900,000|

b.| $1,400,000 NI 500,000| c.| $1,250,000 Div. Paid (150,000)| d.| $850,000 1,250,000| _____51. A company reports beginning of year retained earnings of $800,000, net income for the year of $140,000, and dividends paid in the current year of $45,000. What will be the end of year retained earnings number? * $800,000+140,000-45,000=$895,000

_____52. A company has ending retained earnings of $1,285,000 and sold $50,000 of stock during the year. What would its beginning retained earnings balance have been? * 1,285,000 since proceeds from the sale of shares doesn’t effect R/E.

_____53. A company has beginning shareholder’s equity of $900,000. Common stock at the beginning of the year is $210,000, and beginning retained earnings is $200,000 and the company sold $110,000 of stock during the year. In addition, net income for the year is $190,000 and dividends of $45,000 are paid. What is the ending shareholder’s equity value?

* 900,000+110,000+190,000-45,000= 1,155,000

_____54. A firm reports beginning retained earnings of $295,000. If the firm reports net income of $185,000 for the year and end of year retained earnings of $416,000, how much did it pay out in dividends to shareholders?

* 295,000+185,000-Div.(x)= 416,0000; x= 64,000

_____55. Beginning owners equity is $415,000, beginning retained earnings are $295,000, net income for the year is $185,000 and dividends paid total $64,000. What will the ending owner’s equity number be? * 415,000+185,000-64,000=536,000

Questions 5,6,7
____15.Which of the following would cause a decrease in cash: a.| Lengthening the time it takes to collect receivables from 15 to 30 days.| b.| Selling fixed assets for more than book value|

c.| An increase in accrued salaries expense|
d.| Paying suppliers in 60 days versus 45 days|
_____43. Cash dividends paid would be shown in the operating activities section of the statement of cash flows
True or...
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