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principles managerial finance
Principles of Managerial Finance 15th edition Chad J. Zutter, Scott B. Smart - Solutions
Red Queen Restaurants wishes to prepare financial plans. Use the financial statements and the other information provided below to prepare the financial plans.The following financial data are also available:(1) The firm has estimated that its sales for 2020 will be $900,000.(2) The firm expects to
Peabody & Peabody has 2019 sales of $10 million. It wishes to analyze expected performance and financing needs for 2021, which is 2 years ahead. Given the following information, respond to parts a and b.(1) The percent of sales for items that vary directly with sales are as follows:Accounts
Leonard Industries wishes to prepare a pro forma balance sheet for December 31, 2020. The firm expects 2020 sales to total $3,000,000. The following information has been gathered:(1) A minimum cash balance of $50,000 is desired.(2) Marketable securities are expected to remain unchanged.(3) Accounts
Allen Products Inc. wants to do a scenario analysis for the coming year. The pessimistic prediction for sales is $900,000; the most likely amount of sales is $1,125,000; and the optimistic prediction is $1,280,000. Allen’s income statement for the most recent year follows.
The marketing department of Metroline Manufacturing estimates that its sales in 2020 will be $1.5 million. Interest expense is expected to remain unchanged at $35,000, and the firm plans to pay $70,000 in cash dividends during 2020. Metroline Manufacturing’s income statement for the year ended
The actual sales and purchases for Xenocore Inc. for September and October 2019, along with its forecast sales and purchases for the period November 2019 through April 2020, follow. The firm makes 20% of all sales for cash and collects on 40% of its sales in each of the 2 months following the
Sam and Suzy Sizeman need to prepare a cash budget for the last quarter of 2020 to make sure they can cover their expenditures during the period. Sam and Suzy have been preparing budgets for the past several years and have been able to identify the percentage of their income that they pay for most
Below we reproduce the stockholders’ equity section of the 2019 and 2018 balance sheets for Baker Corporation, which also appear as part of Table 4.5.a. The Baker Corporation statement of cash flows in Table 4.6 shows a $0 cash inflow resulting from changes in stockholders’ equity, yet the
Consider the following balance sheets and selected data from the income statement of Keith Corporation.a. Calculate the firm’s net operating profit after taxes (NOPAT) for the year ended December 31, 2019, using Equation 4.1.b. Calculate the firm’s operating cash flow (OCF) for the year ended
Pavlovich Instruments Inc., a maker of precision telescopes, expects to report pretax income of $430,000 this year. The company’s financial manager is considering the timing of a purchase of new computerized lens grinders. The grinders will have an installed cost of $80,000 and a cost recovery
In early 2019, Sosa Enterprises purchased a new machine for $10,000 to make cork stoppers for wine bottles. The machine has a 3-year recovery period and is expected to have a salvage value of $2,000. Develop a depreciation schedule for this asset using the MACRS depreciation percentages in Table
On March 20, 2019, Norton Systems acquired two new assets. Asset A was research equipment costing $17,000 and having a 3-year recovery period. Asset B was duplicating equipment with an installed cost of $45,000 and a 5-year recovery period. Using the MACRS depreciation percentages in Table 4.2,
Rimier Corp. forecasts sales of $650,000 for 2020. Assume that the firm has fixed costs of $250,000 and variable costs amounting to 35% of sales. Operating expenses are estimated to include fixed costs of $28,000 and a variable portion equal to 7.5% of sales. Interest expenses for the coming year
In Shakespeare’s As You Like It, Rosalind—the lovesick heroine— wonders, “Can one desire too much of a good thing?” By “thing,” she specifically meant love, but the implied answer has transformed the question into a common expression—you can’t get enough of a good thing. As the
A February 2016 analyst report questioned whether the professional networking company LinkedIn was being run for the benefit of shareholders or management. The report noted that in the previous year LinkedIn showed an operating cash flow of $807 million. From that sum, the company invested $507
Home Health Inc. has come to Jane Ross for a yearly financial checkup. As a first step, Jane has prepared a complete set of ratios for fiscal years 2018 and 2019. She will use them to look for significant changes in the company’s situation from one year to the next.a. To focus on the degree of
Use the following 2016 financial information for ATT and Verizon to conduct a DuPont system of analysis for each company.a. Which company has the higher net profit margin? Higher asset turnover?b. Which company has the higher ROA? The higher ROE? ATT Verizon $163,786 Sales $125,980 13,608 Earnings
Given the following financial statements,historical ratios, and industry averages, calculate Sterling Company’s financial ratios for the most recent year. (Assume a 365-day year.)Analyze its overall financial situation from both a cross-sectional and a time-series viewpoint. Break your analysis
The financial statements of Zach Industries for the year ended December 31, 2019, follow.a. Use the preceding financial statements to complete the following table. Assume that the industry averages given in the table are applicable for both 2018 and 2019.b. Analyze Zach Industries’ financial
Use the accompanying financial statements for Fox Manufacturing Company for the year ended December 31, 2019, along with the industry average ratios below, to do the following:a. Prepare and interpret a complete ratio analysis of the firm’s 2019 operations.b. Summarize your findings and make
McDougal Printing Inc. had sales totaling $40,000,000 in fiscal year 2019. Some ratios for the company are listed below. Use this information to determine the dollar values of various income statement and balance sheet accounts as requested.
Financial information from fiscal year 2016 for two companies competing in the cosmetics industry—The Estée Lauder Companies and e.l.f. Beauty Inc.—appears in the table below. All dollar values are in thousands.a. Calculate the debt ratio and the times interest earned ratio for each company.
A common-size income statement for Creek Enterprises’ 2018 operations follows. Using the firm’s 2019 income statement presented in Problem 3–16, develop the 2019 common-size income statement and compare it with the 2018 statement. Which areas require further analysis and investigation?
Using Tables 3.1, 3.2, and 3.3, conduct a complete ratio analysis of the Bartlett Company for the years 2018 and 2019. You should assess the firm’s liquidity, activity, debt, and profitability ratios. Highlight any particularly positive or negative developments that you uncover when comparing
The table below shows 2016 total revenues, cost of goods sold, earnings available for common stockholders, total assets, and stockholders’ equity for three companies competing in the bottled drinks market: The Coca-Cola Company, Pepsico Inc., and Dr Pepper Snapple Group. All dollar values are in
Springfield Bank is evaluating Creek Enterprises, which has requested a $4,000,000 loan, to assess the firm’s financial leverage and financial risk. On the basis of the debt ratios for Creek, along with the industry average and Creek’s recent financial statements (following), evaluate and
The table below shows key financial data for three firms that compete in the consumer products market: Procter & Gamble, Colgate-Palmolive, and Clorox. All dollar values are in thousands.a. Calculate each of the following ratios for all three companies: current ratio, quick ratio, inventory
The table below shows that Blair Supply had an end- of-year accounts receivable balance of $300,000. The table also shows how much of the receivables balance originated in each of the previous 6 months. The company had annual sales of $2.4 million, and it normally extends 30-day credit terms to
Three companies that compete in the footwear market are Foot Locker, Finish Line, and DSW. The table below shows inventory levels and cost of goods sold for each company for the 2016, 2015, and 2014 fiscal years. Calculate the inventory turnover ratio for each company in each year and summarize
Bauman Company’s total current assets, total current liabilities, and inventory for each of the past 4 years follow:a. Calculate the firm’s current and quick ratios for each year. Compare the resulting time series for these measures of liquidity.b. Comment on the firm’s liquidity over the
Listed are the equity sections of balance sheets for years 2018 and 2019 as reported by Mountain Air Ski Resorts Inc. The overall value of stockholders’ equity has risen from $2,000,000 to $7,500,000. Use the statements to discover how and why that happened.The company paid total dividends of
Hayes Enterprises began 2019 with a retained earnings balance of $928,000. During 2019, the firm earned $377,000 after taxes. From this amount, preferred stockholders were paid $47,000 in dividends. At year-end 2019, the firm’s retained earnings totaled $1,048,000. The firm had 140,000 shares of
Hudson-Perry Recordings Inc. has one issue of preferred stock and one issue of common stock outstanding. Given their stockholders’ equity account that follows, determine the original price per share at which the firm sold its single issue of common stock.
Conrad Air Inc. reported net income of $1,365,000 for the year ended December 31, 2020. Show how Conrad’s balance sheet would change from 2019 to 2020 depending on how Conrad “spent” those earnings as described in the scenarios that appear below.a. Conrad paid no dividends during the year and
Use the appropriate items from the following list to prepare Mellark’s Baked Goods balance sheet at December 31, 2019. Value (S000) at December 31, 2019 Value ($000) at December 31, 2019 Item Item Accounts payable $ 220 $ 375 Inventories Accounts receivable Land 450 100 Accruals Long-term debts
Everdeen Mining Inc. ended 2019 with a net profit before taxes of $436,000. The company is subject to a 40% tax rate and must pay $64,000 in preferred stock dividends before distributing any earnings on the 170,000 shares of common stock currently outstanding.a. Calculate Everdeen’s 2019
Adam and Arin Adams have collected their personal income and expense information and have asked you to put together an income and expense statement for the year ended December 31, 2019. You have received the following information from the Adams family.a. Create a personal income and expense
On December 31, 2019, Cathy Chen, a self employed certified public accountant (CPA), completed her first full year in business. During the year, she charged her clients $360,000 for accounting services. She had two employees, a bookkeeper and a clerical assistant. In addition to her monthly salary
Bluestone Metals Inc. is a metal fabrication firm that manufactures prefabricated metal parts for customers in a variety of industries. The firm’s motto is “If you need it, we can make it.” The CEO of Bluestone recently held a board meeting during which he said that the company had the
Cooper Industries Inc. began 2019 with retained earnings of $25.32 million. During the year, it paid four quarterly dividends of $0.35 per share to 2.75 million common stockholders. Preferred stockholders, holding 500,000 shares, were paid two semiannual dividends of $0.75 per share. The firm had a
Near the end of each quarter, many publicly traded companies unveil performance numbers in a Wall Street ritual known as “earnings season.” Interest is high as media outlets race to report the announcements, analysts pore over the figures, and investors trade on the implications. The most
In the United States, public companies must report financial results using GAAP. However, accounting standards vary around the world, and that makes comparing the financial results of firms located in different countries quite challenging. In recent years, many countries have adopted a system of
What do the price/earnings (P/E) ratio and the market/book (M/B) ratio reveal about how investors assess a firm’s performance? What caveats must investors keep in mind when evaluating these ratios?
A firm’s ROE is typically not equal to its ROA. Why? When would a firm’s ROA equal its ROE?
A Brazilian company called Netshoes completed its IPO on April 12, 2017, and listed on the NYSE. Netshoes sold 8,250,000 shares of stock to primary market investors at an IPO offer price of $18, with an underwriting discount of 6.5%. Secondary market investors, however, were paying only $16.10 per
On April 13, 2017, Yext Inc. completed its IPO on the NYSE. Yext sold 10,500,000 shares of stock at an offer price of $11 with an underwriting discount of $0.77 per share. Yext’s closing stock price on the first day of trading on the secondary market was $13.41, and 85,489,470 shares were
In late December you decide, for tax purposes, to sell a losing position that you hold in Twitter, which is listed on the NYSE, so that you can capture the loss and use it to offset some capital gains, thus reducing your taxes for the current year. However, since you still believe that Twitter is a
Transaction costs You would like to purchase one Class A share of Berkshire Hathaway through your Scot trade brokerage account. Scot trade charges a $7 commission for online trades. You log into your account, check the real-time quotes for Berkshire Hathaway (you see a bid price of $262,850 and an
In May 2017, a federal jury convicted Doug DeCinces of insider trading for scoring nearly $1.3 million from a stock tip about a pending corporate acquisition. The tip came from a close friend who happened to be CEO of the target firm. DeCinces has already agreed to pay $2.5 million to settle the
What four ways do VCs use to organize their businesses? How do they structure and price their deals?
Describe the role of capital markets from the firm’s and investors’ perspectives. What is the efficient market hypothesis?
Describe the role of commercial banks, investment banks, and the shadow banking system within the financial market environment.
What are financial institutions? Describe the role they play within the financial market environment.
Michaels Corporation expects earnings before interest and taxes to be $50,000 for the current period. Assuming a flat ordinary tax rate of 35%, compute the firm’s earnings after taxes and earnings available for common stockholders (earnings after taxes and preferred stock dividends, if any) under
Corporate taxes Tantor Supply, Inc., is a small corporation acting as the exclusive distributor of a major line of sporting goods. During 2017, the firm earned $92,500 before taxes.a. Calculate the firm’s tax liability using the corporate tax rate schedule given in Table 1.2.b. How much are
Accrual income versus cash flow for a period Thomas Book Sales, Inc., supplies textbooks to college and university bookstores. The books are shipped with a proviso that they must be paid for within 30 days but can be returned for a full refund credit within 90 days. In 2018, Thomas shipped and
You have been made treasurer for a day at AIMCO, which develops technology for video conferencing. A manager of the satellite division has asked you to authorize a capital expenditure in the amount of $100,000. The manager states that this expenditure is necessary to continue a long-running project
During his January 11, 2017, press conference, President-elect Donald Trump berated reporter Jim Acosta and his employer, CNN, saying, “You are fake news.” For news organizations to question the validity of facts cited by politicians was nothing unusual, especially during an election year, but
In a modern corporation, shareholders rely on management to oversee dayto- day operations. In this relationship, stockholders are principals and management their agents. Accordingly, the first duty of a corporation’s management team is to maximize shareholder wealth. What role should social
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