New Gestalt, Inc., a software firm had a net income of 1.7 million last year. It has 200,000 common shares and 300,000 convertible bonds with face value of 100 outstanding. The convertible bonds carry a coupon of 4% and can be converted one-for-one. The average stock price last year was 39 and the maximum price was 57. The effective interest rate on the convertible debt is 8%. New Gestalt issued 100,000 preferred shares with face value 100 and a coupon of 5% on March 31st of last year. Assume the convertible bonds are dilutive and that New Gestalt faces a 30% tax rate. Given the above, if New Gestalt had 300,000 warrants with a strike of 36 outstanding instead of the convertible bonds, its Diluted EPS would equal ________.
A. 5.94
B. 5.24
C. 6.62
D. 4.91
If a firm's asset turnover were to increase by 10% and the tax rate were to increase from 35% to 40%, leaving all else constant, the resultant change in the firm's ROE equals ________.
A. -2.3%
B. -1.9%
C. +1.5%
D. -1.1%
An entry made to recognize the cost of using an asset during the period is
A. a closing entry
B. a reversing entry
C. an opening entry
D. an adjusting entry
The weighted average method is based on the assumption that the cost of merchandise sold should be calculated using the:
A. average price of beginning inventory plus purchases during the period
B. average price per unit of ending inventory
C. average price of ending inventory plus purchases during the period
D. average price per unit of beginning inventory
When the weighted average method is used, ending inventory units are priced at the:
A. average price
B. none of these answers
C. lower of cost or market
D. earliest price
According to GAAP classification of cash flows, all of the following are financing cash flows except:
A. share repurchase.
B. interest paid on new debt.
C. losses on debt retirement.
D. dividends paid out.
New Gestalt, Inc., a software firm had a net income of 1.7 million last year. It has 200,000 common shares and 300,000 convertible bonds with face value of 100 outstanding. The convertible bonds carry a coupon of 4% and can be converted one-for-one. The average stock price last year was 39 and the maximum price was 57. The effective interest rate on the convertible debt is 8%. New Gestalt issued 100,000 preferred shares with face value 100 and a coupon of 5% on March 31st of last year. Assume the convertible bonds are dilutive and that New Gestalt faces a 30% tax rate. The number of shares used in Basic EPS equals ________.
A. 600,000
B. 575,000
C. 500,000
D. 200,000
Which of the following best describes a statement of shareholders equity?
A. A statement of shareholders equity measures a company's financial performance over a specified period of time.
B. A statement of shareholders equity details the cash inflows and outflows that are related to a company's operating, investing, and financing activities over a period of time.
C. None of these answers.
D. A statement of shareholders equity reports changes over a period of time in component accounts that comprise the ownership of a firm.
E. A statement of shareholders equity summarizes the financial position of a company at a given point in time.
The GAAP require inventory to be valued using ________.
A. Lower of market or cost
B. LIFO or FIFO
C. LIFO
D. FIFO
The classification guidelines of SFAS 95 have not created problems for analysts of the cash flow statement in the following area
A. differences due to some accounting methods.
B. noncash transactions.
C. long-term borrowings.
D. interest and dividends received.
E. interest paid.
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