Subject: Business    / Finance

1. Building a Balance Sheet: Bishop, Inc., has current assets of $5,700, net fixed assets of $27,000, current liabilities of $4,400, and long-term debt of $12,900. What is the value of the shareholders’ equity account for this firm? How much is net working capital?

2. Building an Income Statement: Travis, Inc., has sales of $387,000, costs of $175,000, depreciation expense of $40,000, interest expense of $21,000, and a tax rate of 35 percent. What is the net income for the firm? Suppose the company paid out $30,000 in cash dividends. What is the addition to retained earnings?

3. Building a Balance Sheet :The following table presents the long-term liabilities and stockholders’ equity of Information Control Corp. one year ago:

Long-term debt

$ 65,000,000

Preferred stock


Common stock ($1 par value)


Accumulated retained earnings


Capital surplus


During the past year, Information Control issued 10 million shares of new stock at a total price of $58 million, and issued $35 million in new long-term debt. The company generated $9 million in net income and paid $2 million in dividends. Construct the current balance sheet reflecting the changes that occurred at Information Control Corp. during the year.

4. Cash Flow to Stockholders:The 2011 balance sheet of Anna’s Tennis Shop, Inc., showed $490,000 in the common stock account and $3.4 million in the additional paid-in surplus account. The 2012 balance sheet showed $525,000 and $3.7 million in the same two accounts, respectively. If the company paid out $275,000 in cash dividends during 2012, what was the cash flow to stockholders for the year?

5. Equity Multiplier and Return on Equity: Nuber Company has a debt–equity ratio of .80. Return on assets is 9.7 percent, and total equity is $735,000. What is the equity multiplier? Return on equity? Net income?
6. Sales and Growth The most recent financial statements for Fontenot Co. are shown here: (attached picture #6)
Assets and costs are proportional to sales. The company maintains a constant 30 percent dividend payout ratio and a constant debt–equity ratio. What is the maximum increase in sales that can be sustained assuming no new equity is issued?

7.Sustainable Growth:If the Layla Corp. has a 13 percent ROE and a 20 percent payout ratio, what is its sustainable growth rate?

8. Return on Equity: Firm A and Firm B have debt–total asset ratios of 35 percent and 55 percent and returns on total assets of 9 percent and 7 percent, respectively. Which firm has a greater return on equity?

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