FIN 322 Study Guide - Final Guide: Current Liability, Promissory Note, Retained Earnings
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1.)Company ABC has sales of $1,650,000, cost of goods sold of$600,000, EBIT of $450,000, interest expense of $70,000, and a taxrate of 27%. If the company paid $57,000 in dividends what is theaddition to retained earnings.
2.)At the beginning of the year, a firm had current assets of$121,306 and current liabilities of $124,509. At the end of theyear, the current assets were $122,418 and the current liabilitieswere $103,718. What is the change in net working capital?
3.)
Use the Income Statement and Balance Sheet below to calculatethe companies free cash flow.
Income Statement | 2017 |
Net Sales | 675 |
Cost of goods sold | 210 |
Depreciation | 50 |
EBIT | 415 |
Interest Paid | 15 |
EBT | 400 |
Taxes (30%) | 120 |
Net Income | 280 |
Dividends | 105 |
Addition to Retained Earnings | 175 |
Assets | 2016 | 2017 | Liabilities and Shareholders equity | 2016 | 2017 |
Current Assets | Current Liabilities | ||||
Cash | 100 | 125 | Accounts Payable | 200 | 250 |
Accounts Receivable | 250 | 350 | Notes Payable | 150 | 225 |
Inventory | 400 | 375 | |||
Total Current Assets | 750 | 850 | Total Current Liabilities | 350 | 475 |
Long term debt | 300 | 250 | |||
Fixed Assets | Stockholders equity | ||||
PPE | 1500 | 1700 | Common stock | 300 | 300 |
Accumulated Depreciation | 400 | 450 | Retained earnings | 900 | 1075 |
Net PPE | 1100 | 1250 | Total Shareholderâs Equity | 1200 | 1375 |
Total Assets | 1850 | 2100 | Total Liabilities & Equity | 1850 | 2100 |
4.)A firm has net working capital of $900. Long-term debt is$4,200, total assets are $8,000, and fixed assets are $4,300. Whatis the amount of the total liabilities?
Question 1:
Quantitative Problem: Rosnan Industries' 2013 and 2012 balance sheets and income statements are shown below.
Balance Sheets: | |||
2013 | 2012 | ||
Cash and equivalents | $70 | $55 | |
Accounts receivable | 275 | 300 | |
Inventories | 375 | 350 | |
Total current assets | $720 | $705 | |
Net plant and equipment | 2,000 | 1,490 | |
Total assets | $2,720 | $2,195 | |
Accounts payable | $150 | $85 | |
Accruals | 75 | 50 | |
Notes payable | 120 | 145 | |
Total current liabilities | $345 | $280 | |
Long-term debt | 450 | 290 | |
Common stock | 1,225 | 1,225 | |
Retained earnings | 700 | 400 | |
Total liabilities and equity | $2,720 | $2,195 |
Income Statements: | |||
2013 | 2012 | ||
Sales | $2,000 | $1,500 | |
Operating costs excluding depreciation | 1,250 | 1,000 | |
EBITDA | $750 | $500 | |
Depreciation and amortization | 100 | 75 | |
EBIT | $650 | $425 | |
Interest | 62 | 45 | |
EBT | $588 | $380 | |
Taxes (40%) | 235 | 152 | |
Net income | $353 | $228 | |
Dividends paid | $53 | $48 | |
Addition to retained earnings | $300 | $180 | |
Shares outstanding | 100 | 100 | |
Price | $25.00 | $22.50 | |
WACC | 10.00% |
|
The balance in the firm's cash and equivalents account is needed for operations and is not considered "excess" cash.
What is Rosnan's 2013 net operating working capital (NOWC)?
What is Rosnan's 2013 net working capital (NWC)?
Question 2:
Balance Sheet The assets of Dallas & Associates consist entirely of current assets and net plant and equipment. The firm has total assets of $2.8 million and net plant and equipment equals $2.3 million. It has notes payable of $145,000, long-term debt of $754,000, and total common equity of $1.55 million. The firm does have accounts payable and accruals on its balance sheet. The firm only finances with debt and common equity, so it has no preferred stock on its balance sheet. Write out your answers completely. For example, 25 million should be entered as 25,000,000. What is the company's total debt? $ What is the amount of total liabilities and equity that appears on the firm's balance sheet? $ What is the balance of current assets on the firm's balance sheet? $ What is the balance of current liabilities on the firm's balance sheet? $ What is the amount of accounts payable and accruals on its balance sheet? [Hint: Consider this as a single line item on the firm's balance sheet.] $ What is the firm's net working capital? $ What is the firm's net operating working capital? $ What is the monetary difference between your answers to part f and g? |