Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 2, Problem 23QP
Net Fixed Assets and
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Which of the following formulas will correctly calculate Net Working Capital?
A. Current assets + current liabilities
B. Free cash flow + depreciation expenses
C. Incremental earnings – capital purchases
D. Current assets – current liabilities
_______ ratios are used to measure the speed in which various assets are converted into sales or cash.
A
Debt (aka Leverage)
B
Efficiency (aka working capital)
C
Profitability
C
Coverage
9.Working capital is calculated as:
Select one:
Current assets plus current liabilities
Current assets less current liabilities
Assets less current liabilities
Assets less liabilities
Chapter 2 Solutions
Fundamentals of Corporate Finance
Ch. 2.1 - Prob. 2.1ACQCh. 2.1 - What is liquidity? Why is it important?Ch. 2.1 - What do we mean by financial leverage?Ch. 2.1 - Explain the difference between accounting value...Ch. 2.2 - What is the income statement equation?Ch. 2.2 - Prob. 2.2BCQCh. 2.2 - Why is accounting income not the same as cash...Ch. 2.3 - What is the difference between a marginal and an...Ch. 2.3 - Do the wealthiest corporations receive a tax break...Ch. 2.4 - Prob. 2.4ACQ
Ch. 2.4 - Prob. 2.4BCQCh. 2.4 - Why is interest paid not a component of operating...Ch. 2 - What types of accounts are the most liquid?Ch. 2 - What is an example of a noncash expense?Ch. 2 - The marginal tax rate is the tax rate which...Ch. 2 - Prob. 2.4CTFCh. 2 - Prob. 1CRCTCh. 2 - Accounting and Cash flows [LO2] Why might the...Ch. 2 - Prob. 3CRCTCh. 2 - Operating Cash Flow [LO2] In comparing accounting...Ch. 2 - Prob. 5CRCTCh. 2 - Cash Flow from Assets [LO4] Suppose a companys...Ch. 2 - Prob. 7CRCTCh. 2 - Net Working Capital and Capital Spending [LO4]...Ch. 2 - Prob. 9CRCTCh. 2 - Prob. 10CRCTCh. 2 - Prob. 11CRCTCh. 2 - Earnings Management [LO2] Companies often try to...Ch. 2 - Building a Balance Sheet [LO1] KCCO, Inc., has...Ch. 2 - Building an Income Statement [LO1] Billys...Ch. 2 - Dividends and Retained Earnings [LO1] Suppose the...Ch. 2 - Prob. 4QPCh. 2 - Calculating Taxes [LO3] The Dyrdek Co. had 267,000...Ch. 2 - Prob. 6QPCh. 2 - Calculating OCF [LO4] Ridiculousness, Inc., has...Ch. 2 - Calculating Net Capital Spending [LO4] Bowyer...Ch. 2 - Calculating Additions to NWC [LO4] The 2014...Ch. 2 - Cash Flow to Creditors [LO4] The 2014 balance...Ch. 2 - Cash Flow to Stockholders [LO4] The 2014 balance...Ch. 2 - Prob. 12QPCh. 2 - Market Values and Book Values [LO1] Klingon...Ch. 2 - Prob. 14QPCh. 2 - Using Income Statements [LO1] Given the following...Ch. 2 - Preparing a Balance Sheet [LO1] Prepare a 2015...Ch. 2 - Prob. 17QPCh. 2 - Prob. 18QPCh. 2 - Net Income and OCF [LO2] During 2014, Raines...Ch. 2 - Prob. 20QPCh. 2 - Prob. 21QPCh. 2 - Calculating Cash Flows [LO4] Consider the...Ch. 2 - Net Fixed Assets and Depreciation [LO4] On the...Ch. 2 - Prob. 24QPCh. 2 - Use the following information for Taco Swell,...Ch. 2 - Use the following information for Taco Swell,...Ch. 2 - Prob. 1MCh. 2 - Prob. 2M
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- Net working capital is defined as:Select one:a. Fixed assets minus long-term liabilities.b. Current assets minus current liabilities.c. Total liabilities minus shareholders' equity.d. Current liabilities minus shareholders' equity.e. Total assets minus total liabilities.arrow_forwardWhile calculating Free Cash Flow (FCF), capital investment expenditure is : a Subtracted from from EBIT(1-t) +(Depreciation +Amortization) b Subtracted from EBT. c Subtracted from EBIT(1-t) d Subtracted from EBIT.arrow_forward8.-What is the meaning of current liabilities in Working Capital Management? A) Source of financing of its current assets. B) Source of financing of its fixed assets C) Source of financing of stockholders' equity D) Source of financing of its long-term liabilities. (Choose one option)arrow_forward
- 20. Weighted average cost of capital is the combined cost of capital using a capital mix. The capital mix should be measured in terms of: a. Carrying value of debt and equity b. Contribution margin ratio c. Carrying value of total assets d. Market value of debt and equityarrow_forwardDescribe how the following factors affect external capitalrequirements: (1) payout ratio, (2) capital intensity, (3) profitmargin.arrow_forwardCurrent assets - current liabilities = [A] fixed capital [B] working capital [C] opening capital [D] closing capitalarrow_forward
- Determine the formula for EVA. (WACC = Weighted-average cost of capital) After tax operating inc. Current liabilities Market value of debt Market value of equity Operating income Revenues Total assets WACC x ( )) = EVAarrow_forwardIn a DuPont analysis, what are the components of return on assets?a. Net Profit Margin Ratio and Debt Ratiob. Net Profit Margin Ratio and Leverage Ratioc. Net Profit Margin Ratio and Asset Turnover Ratiod. Asset Turnover Ratio and Leverage Ratioarrow_forwardThe cost of capital includes the cost of equity, the cost of long-term debt and the cost of accounts payable.arrow_forward
- 1. Definitions (S9.1-S9.3) Define the following terms: a. Cost of debt. b. Cost of equity. c. Company cost of capital.arrow_forward1. Which of the following is referred to as the Accounting Equation? Assets Liabilities + Equity Equity Liabilities + Assets Liabilities Assets + Equity Assets = Liabilities - Equity = 2. Which of the following make up the Finance Equation? (select all that apply) Revenues = Price x Volume Costs = Fixed + Variable Profit Revenues-Costs Income Sales - COGSarrow_forwarda. Provide a brief overview of capital structure effects. Be sure to identify the ways in which capital structure can affect the weighted average cost of capital and free cash flows.arrow_forward
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