Max's Tire Center Company

question 89

Multiple Choice

Max's Tire Center Company
Selected data from the financial statements of Max's Tire Center are provided below.

- Refer to the selected data provided for Max's Tire Center. Which of the following would result from a vertical analysis of Max's cash and cash equivalent in 2012?

• A) Cash and cash equivalents increased by $16,000 or 15.38% during 2012.
• B) The free cash flow is $35,000 in 2012.
• C) Cash and cash equivalents are 20.0% of total assets in 2012.
• D) Cash and cash equivalents are 8.57% of total assets in 2012.

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Definitions:

IRRs

Internal Rate of Return (IRR) is a metric used in financial analysis to estimate the profitability of potential investments, calculated as the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

NPVs

Net Present Values; the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Capital Budgeting

The process of evaluating and selecting long-term investments that are in line with the goal of a company’s wealth maximization.

Average Accounting Return

A measure of an investment's profitability, calculated as the average net income divided by the average investment.