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FIN 300 Study Guide - Final Guide: Interest, Reserve Requirement, Equity (Finance)

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School
Ryerson University
Department
Finance
Course
FIN 300
Professor
Samuel Alaguarajah

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Document Summary

Total market value=share price x outstanding shares payout ratio=dividends/net income. Additions to nwc = end nwc beginning nwc. Capex(capital spending) = end assets - beginning assets + depreciation. Additions to nwc = ocf capex cfa. Change in ni = source of cash use of cash. Debt2asset ratio=total debt/total a debt2equity ratio=lt debt/shareholders equity cash coverage ratio=ebit+deprec/interest. Inventory turnover=cogs/avg inventory day sales in inventory=365/inventory turnover. Day sales in receivables=365/receivable turnover nwc turnover = sales / nwc. Roe (dupont identity) = profit margin x asset turnover x equity multiplier. Net income=roa x total equity retention ratio=1-d payout ratio market 2 book ratio = market value per share/book value per share. Equity multiplier = 1 - debt equity ratio. Cf from assets (cfa)=ocf-additions to nwc-capex cfa=cf to creditors cf to shareholders. + asset or l/e = use of cash - asset or +l/e = source of cash. Sales increase = (projected sales - actual sales) / actual sales.

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Related Questions

E13-5 Matching Each Ratio with Its Computational Formula LO 13-4, 13-5, 13-6, 13-7
Match each definition with its related ratios or percentages by selecting the appropriate letter in the drop down provided.
Definitions: Ratios or Percentages Definitions
A. Net Income (before extraordinary items) ÷ Net Sales 1 Profit margin
B. Days in Year ÷ Receivable Turnover ratio 2 Inventory turnover ratio
C. Net Income ÷ Average Stockholders’ Equity 3 Average collection period
D. Net Income ÷ Average Number of Shares of Common Stock Outstanding 4 Dividend yield ratio
E. Return on Equity − Return on Assets 5 Return on equity
F. Quick Assets ÷ Current Liabilities 6 Current ratio
G. Current Assets ÷ Current Liabilities 7 Debt-to-equity ratio
H. Cost of Goods Sold ÷ Average Inventory 8 Price/earnings ratio
I. Net Credit Sales ÷ Average Net Receivables 9 Financial leverage percentage E
J. Days in Year ÷ Inventory Turnover Ratio 10 Receivable turnover ratio
K. Total Liabilities ÷ Stockholders’ Equity 11 Average days’ supply of inventory
L. Dividends per Share ÷ Market Price per Share 12 Earnings per share
M. Market Price per Share ÷ Earnings per Share 13 Return on assets
N. [Net Income + Interest Expense (net of tax)] ÷ Average Total Assets 14 Quick ratio
O. Cash from Operating Activities (before interest and taxes) ÷ Interest Paid 15 Times interest earned
P. Net Sales Revenue ÷ Net Fixed Assets 16 Cash coverage ratio
Q. (Net Income + Interest Expense + Income Tax Expense) ÷ Interest Expense 17 Fixed asset turnover ratio

2016 2017 2016 2017 Current assets $ 934 $ 984 Currentliabilities $ 375 $ 398 Net fixed assets 3,897 4,576 Long-term debt2,021 2,167 WESTON ENTERPRISES 2017 Income Statement Sales $ 11,770Costs 5,710 Depreciation 1,060 Interest paid 180 a. What wasowners' equity for 2016 and 2017? (Do not round intermediatecalculations.) Owners' equity 2016 $ Owners' equity 2017 $ b. Whatwas the change in net working capital for 2017? (Do not roundintermediate calculations.) Change in NWC $ c-1 In 2017, thecompany purchased $1,845 in new fixed assets. How much in fixedassets did the company sell? (Do not round intermediatecalculations.) Fixed assets sold $ c-2 In 2017, the companypurchased $1,845 in new fixed assets. What was the cash flow fromassets for the year? The tax rate is 35 percent. (Do not roundintermediate calculations.) Cash flow from assets $ d-1 During2017, the company raised $400 in new long-term debt. How muchlong-term debt must the company have paid off during the year? (Donot round intermediate calculations.) Debt retired $ d-2 During2017, the company raised $400 in new long-term debt. What was thecash flow to creditors? (Do not round intermediate calculations.)Cash flow to creditors $

Please help with question D

Last year Rattner Robotics had $5 million of operating income. Its depreciation expense was $1 million, its interest expense was $1 million, and its corporate tax rate was 40%. At year-end, it had $14 million in current asset, $3 million in accounts payable, $1 million in (expense) accrual’s, $2 million in notes payable, and $15 million in net plant and equipment. Rattner had no other current liabilities. Assume that Rattner's only noncash item was depreciation.

a. What was the company's net income?

b. What was its net operating working capitals (NOWC)?

c. What was its net working capital (NWC)?

d. Rattner had $12 million in net plant and equipment the prior year. Its net operating working capital has remained constant over time. What is the company's free cash flow (FCF) for the year that just ended?

e. Rattner had 500,000 common shares outstanding and the common stock amount on the balance sheet is $5 million. The company has not issued or repurchased common stock during last years. Last year's balance in retained earnings was $12 million and the firm paid out dividends of $1.2 million during the year. Develop Rattner's end-of-year Statement of StockHolders Equity.

What was the company's net income?

Company's net income = (operating income - interest expense)*(1-tax rate)

(5 -1)*(1-40%)

Company's net income = $ 2.40 Milliion

What was its net operating working capitals (NOWC)?

Net operating working capitals = current asset - accounts payable - accruals

14 - 3 - 1

Net operating working capitals = $ 10 Million

What was its net working capital (NWC)?

Net working capital = current asset - Current liabilty

14 - (3 + 1 + 2)

Net working capital = $ 8 Million

Rattner had $12 million in net plant and equipment the prior year. Its net operating working capital has remained constant over time. What is the company's free cash flow (FCF) for the year that just ended?

e. Rattner had 500,000 common shares outstanding and the common stock amount on the balance sheet is $5 million. The company has not issued or repurchased common stock during last years. Last year's balance in retained earnings was $12 million and the firm paid out dividends of $1.2 million during the year. Develop Rattner's end-of-year Statement of StockHolders Equity.

End of Year Statement of Stockholders Equity

Particulars

Common Stock

5,000,000.00

Retained earnings

10,800,000.00

Total Stockholders Equity

15,800,000.00

Retained earnings =last years earnings-dividend paid

12,000,000.00-1,200,000.00=10,800,000.00