Multiple Choice - Ratios, EVA, balance sheet
Not what you're looking for?
1. On its 1999 balance sheet, Sherman Books showed a balance of retained earnings equal to $510 million. On its 2000 balance sheet, the balance of retained earnings was also equal to $510 million. Which of the following statements is most correct?
a. The company must have had net income equal to zero in 2000.
b. The company did not pay a dividend in 2000.
c. If the company's net income in 2000 was $200 million, dividends paid must have also equaled $200 million.
d. If the company lost money in 2000, they must have paid a dividend.
e. None of the statements above is correct
2. Scranton Shipyards has $20 million in total net operating capital. The company's WACC is 10 percent. The company has the following income statement:
Sales $10.0 million
Operating costs 6.0 million
Operating income (EBIT) $ 4.0 million
Interest expense 2.0 million
Earnings before taxes (EBT) $ 2.0 million
Taxes (40%) 0.8 million
Net income $ 1.2 million
What is Scranton's EVA?
a. $ 400,000
b. -$ 800,000
c. $1,200,000
d. $2,000,000
e. $4,000,000
Please see attached for full queston.
Purchase this Solution
Solution Summary
The solution explains the calculation of EVA and the use of current ratio
Solution Preview
1.c.
If the retained earnings did not change that means no net income was transferrd to the balance sheet.The possibilites are that the net income was either zero or the entire net income was paid out as dividends. The possibility of net income being exactly zero is very less. It would be difficulty for ...
Purchase this Solution
Free BrainMass Quizzes
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations
Production and cost theory
Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.
IPOs
This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.