Chapter 2

1. Building a Balance Sheet   Rose, Inc., has current assets of $7,300, net fixed assets of $26,200, current liabilities of $5,700, and long-term debt of $12,900. What is the value of the shareholders’ equity account for this firm? How much is net working capital?

2. Building an Income Statement   Miller, Inc., has sales of $675,300, costs of $297,800, depreciation expense of $45,100, interest expense of $20,700, and a tax rate of 35 percent. What is the net income for the firm? Suppose the company paid out $62,000 in cash dividends. What is the addition to retained earnings?

4. Calculating Taxes The Alexander Co. had $315,000 in taxable income. Using the rates from Table 2.3 in the chapter, calculate the company’s income taxes. What is the average tax rate? What is the marginal tax rate?

5. Calculating OCF Timsunb, Inc., has sales of $29,200, costs of $10,400, depreciation expense of $1,800, and interest expense of $1,050. If the tax rate is 40 percent, what is the operating cash flow, or OCF?

Chapter 3

2.  Equity Multiplier and Return on Equity Locker Company has a debt-equity ratio of .65. Return on assets is 9.8 percent, and total equity is $850,000. What is the equity multiplier? Return on equity? Net income?

6.  Sustainable Growth If the SGS Corp. has a 16 percent ROE and a 25 percent payout ratio, what is its sustainable growth rate?

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