MS Finance Skills Assessment-Accounting for Financial Analysis

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In its annual report to shareholders, Maxx Company reported that its shareholders' equity increased from $99 million as of the beginning of the year to $105 million at year-end.
Which of the following is a likely cause of this change in shareholders' equity?

The company's liabilities increased during the year

The company had an operating loss during the year

The company distributed more dividends than it earned in profit during the year

The company was profitable during the year

Assume you are a debt-holder of The Improvement Store. For what reason will you most likely use Home Improvement's financial information?

To determine the company's return for the year

To determine if the company will pay dividends during the year

To assess the financial risk of non-payment of interest or principal

To determine if the company exercises judgment in its financial statements

	Year 2	Year 1
Retained earnings (beginning)	$265,000	$125,000
Revenues	892,000	870,000
Expenses	740,000	625,000
Dividends	?	105,000

Office Products Company reported total retained earnings at December 31, Year 2 of $227,000. It provided the above information for Year 1 and Year 2. How much dividends did the company pay in Year 2?

$290,000

$152,000

$270,000

$190,000

The following information appeared in the balance sheet of the Cracker Corporation at year-end except Retained Earnings: Cash $8,000; Accounts receivable $23,000; Supplies $9,000; Equipment $158,000; Accounts payable $11,000; Capital Stock $110,000. What is the year-end balance in Retained Earnings?

$199,000

$77,000

$187,000

$87,000

Phone Co. reported the following account balances (in thousands):

Administrative expenses	$ 66,000
Accounts receivable	140,000
Sales revenue	690,000
Selling expenses	44,000
Cost of goods sold	425,000
Cash dividends paid	80,000

How much is net income for Phone Co.?

$45,000

$125,000

$265,000

$155,000

Peter Co. had net income of $160 million and sales totaling $34,600 million. Its assets at the end of the year totaled $1,550 million. Interest expense was $120 million and the income tax rate was 30 percent. What is Peter Co.'s unlevered return on assets?

9.75%

15.74%

15.10%

12.06%

	Year 1	Year 2
Receivable turnover	8.5x	7.5x
Receivable collection period	44.3 days	50.5 days
Inventory turnover	12.4x	14.0x
Inventory-on-hand period	27.0 days	23.7 days

Presented above are select ratios from the Hawthorne & Company annual report. Which statement is true concerning the above ratios?

Hayes's receivable collection period improved from Year 1 to Year 2

The company's inventory management improved over the two year period.

The company sold less inventory during Year 2 than during Year 1.

It took the company longer to collect amounts due from customers during Year 1 than it did during Year 2.

Depreciation expense	$230,000
Funds borrowed from the bank	400,000
Dividends paid to shareholders	600,000
Proceeds from sale of building	550,000
Purchase of inventories	700,000
Purchase of equipment	250,000

The Fuller's Corporation provided the above information. How much is the Cash Flow for Investing Activities?

$ 550,000

$ 300,000

($200,000)

$ 330,000

On January 1, the long-term liability section of Cracker & Company Balance Sheet showed a balance of $800 million in long-term notes payable. On December 31, the balance in that same account was $120 million. How should the company report the cash flow effect related to the change in this account on its Statement of Cash Flow?

As a cash outflow of $680 million in the financing section

As a cash outflow of $680 million in the investing section

As a cash outflow of $920 million in the financing section

As a cash outflow of $920 million in the investing section

Net Income	$520,000
Increase in Accounts Payable	$10,000
Depreciation Expense	$20,000
Payment of Dividends	$5,000
Decrease in Accounts Receivable	$15,000
Increase in Inventories	$10,000
Decrease in Income Taxes Payable	$20,000

The above information is available from the financial statements of Cracker Corporation for the year ended December 31. What are Cracker Corporation's Cash Flows from Operating Activities?

$485,000

$495,000

$535,000

$515,000

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MS Finance Skills Assessment-Accounting for Financial Analysis

Accounting for Financial Analysis Skills Assessment