Financial Accounting
3rd Edition
ISBN: 9780133791129
Author: Jane L. Reimers
Publisher: Pearson Higher Ed
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Chapter 10B, Problem 1SEA
Investments. (LO 6). In January 2010, Bowers Company had some extra cash and purchased the stock of various companies with the objective of making a profit in the short run. The cost of Bowers’ portfolio was $36,500. On December 31, 2010, the date of the
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Tibbs Inc. had the following data for the most recent year: Net income = $300; Net operating profit after taxes (NOPAT) = $460; Total assets = $2,500; Short-term investments = $200; Stockholders' equity = $1,800; Total debt = $700; and Total operating capital = $2,300. What was its return on invested capital (ROIC)?
Select the correct answer.
a. 19.40%
b. 20.00%
c. 20.30%
d. 20.60%
e. 19.70%
(Analyzing the quality of firm earnings) Kabutell, Inc. had net income of $700,000, cash flow from financing activities
of $60,000, depreciation expenses of $40,000, and cash flow from operating activities of $600,000.
a. Calculate the quality of earnings ratio. What does this ratio tell you?
b. Kabutell, Inc. reported the following in its annual reports for 2011-2013:
($ million)
2011
Cash Flow from Operations
$477
Capital Expenditures (CAPEX)
$461
(Click on the icon in order to copy its contents into a spreadsheet.)
Calculate the average capital acquisitions ratio over the three-year period. How would you interpret these results?
a. What is Kabutell's quality of earnings ratio?
% (Round to one decimal place.)
2012
$403
$447
C
2013
$471
$455
The data table shows financial statement data and stock price data for Mydeco Corp. Suppose Mydeco had purchased additional equipment for $11.7 million at the end of 2016, and this equipment was depreciated by $3.9 million per year in 2017, 2018, and 2019. Given Mydeco‘s tax rate of 35%, what impact would this additional purchase have had on Mydecco’s net income in years 2016-2019? Assume that the equipment is paid for out of cash and that Mydeco earns no interest on its cash balances.
In the table, calculate the new net income below.
**round to one decimal place**
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- See Table 2.5 E showing financial statement data and stock price data for Mydeco Corp. Suppose Mydeco had purchased additional equipment for $12.1 million at the end of 2013, and this equipment was depreciated by $4 million per year in 2014, 2015, and 2016. Given Mydeco's tax rate of 25%, what impact would this additional purchase have had on Mydeco's net income in years 2013-2016? (Assume the equipment is paid for out of cash and that Mydeco earns no interest on its cash balances.) Hhing is the Calculate the new net income below: (Round to one decimal place.) (millions) Year 2013 2014 2015 2016 question Net Income 2$ $ 2$ 2$ Additional Depreciation $ 2$ $ $ Tax Savings 2$ 2$ 2$ 2$ New Net Income $4 2$ 2$ tables Data Table 2012-2016 Financial Statement Data and Stock Price Data for Mydeco Corp. (All data as of fiscal year end; in $ millions) Total Current Assets 165.8 170.2 183.6 190.5 215.9 Income Statement 2012 2013 2014 2015 2016 313.4 346.6 Net Property, Plant & Equipment Goodwill…arrow_forward(Analyzing the quality of firm earnings) Kabutell, Inc. had net income of $650,000, cash flow from financing activities of $90,000, depreciation expenses of $60,000, and cash flow from operating activities of $550,000. a. Calculate the quality of earnings ratio. What does this ratio tell you? b. Kabutell, Inc. reported the following in its annual reports for 2011-2013: ($ million) 2011 Cash Flow from Operations $480 Capital Expenditures (CAPEX) $458 (Click on the icon in order to copy its contents into a spreadsheet.) Calculate the average capital acquisitions ratio over the three-year period. How would you interpret these results? 2012 $401 $446 2013 $468 $457arrow_forward(Analyzing the quality of firm earnings) Kabutell, Inc. had net income of $750,000, cash flow from financing activities of $50,000, depreciation expenses of $40,000, and cash flow from operating activities of $550,000. a. Calculate the quality of earnings ratio. What does this ratio tell you? b. Kabutell, Inc. reported the following in its annual reports for 2011-2013: ($ million) 2011 2012 2013 Cash Flow from Operations $479 $405 Capital Expenditures (CAPEX) $461 $447 $469 $457 (Click on the icon in order to copy its contents into a spreadsheet.) Calculate the average capital acquisitions ratio over the three-year period. How would you interpret these results? a. What is Kabutell's quality of earnings ratio? % (Round to one decimal place.)arrow_forward
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