BCOR 340 Checkpoint 1

Given the following Financial Information Answer the following question: 20172018Cash5,0001,624,464Accounts Receivable7,0007,070Inventory5,0005,050Prepaid Assets8,0008,080Other Assets6,0006,060Total Current Assets31,0001,650,724Net PPE10,00010,000Intangibles6,0006,000Total Assets47,0001,666,724Accounts Payable2,0002,020Salary Payable6,0006,060Notes Payable4,0004,000Total Current Liabilities12,00012,080Long-Term Debt50,00050,000Total Liabilities62,00062,080Common Stock30,00030,000Retained Earnings-45,0001,574,644total equity15,0001,604,644 2018Sales2,877,000COGS632,940Gross Profit2,244,060SG&A23,000Other Operating Expenses15,000Depreciation1,000Interest863Taxes363,692Net Income1,840,504dividends220,861 Calculate Operating Cash Flow (OCF) given a tax rate of 16.50%:

$1,842,225.10 Compute OCF = (EBITDA - Depreciation)*(1-TaxRate) + Depreciation = ($2,206,060.00 - $1,000.00) X (1 - 16.5%) + $1,000.00 = $1,842,225.10

Forrest is a college student who has the following financial information. They would like your help in figuring their surplus for last year. AccountValueIncome from summer job$3,660.00Support from parents$3,640.00Scholarship$1,320.00Savings account balance$4,180.00Variable expenses$2,210.00Fixed expenses$4,560.00Current Liabilities$1,090.00

$1,850.00 To compute the surplus find Forrest's incomes including their family support and subtract their expenses: Surplus=3,660.00+3,640.00+1,320.00−2,210.00−4,560.00=1,850.00

Given the following Financial Information Answer the following question: 20172018Cash3,000100,143Accounts Receivable9,0009,090Inventory2,0002,020Prepaid Assets7,0007,070Other Assets9,0009,090Total Current Assets30,000127,413Net PPE20,00029,000Intangibles5,0005,000Total Assets55,000161,413Accounts Payable1,0001,010Salary Payable4,0004,040Notes Payable5,0005,000Total Current Liabilities10,00010,050Long-Term Debt60,00060,000Total Liabilities70,00070,050Common Stock60,00060,000Retained Earnings-75,00031,363total equity15,00091,363 2018Sales519,000COGS332,160Gross Profit186,840SG&A15,000Other Operating Expenses17,000Depreciation2,000Interest2,708Taxes17,495Net Income134,637dividends28,274 Calculate Operating Cash Flow (OCF) given a tax rate of 11.50%:

. $137,263.40 Compute OCF = (EBITDA - Depreciation)*(1-TaxRate) + Depreciation = ($154,840.00 - $2,000.00) X (1 - 11.5%) + $2,000.00 = $137,263.40

Roxane and Kyra would like to accumulate three times their monthly expenses in monetary assets. They currently have $1,900.00 in their money market account, and their monthly expenses are $2,900.00 How much more do they need in their money market account to reach their goal?. a. $6,800.00 b. $1,000.00 c. $2,900.00 d. $5,700.00

6,800.00

Given the following Financial Information Answer the following question: 20172018Cash10,000125,126Accounts Receivable2,0002,200Inventory4,0004,400Prepaid Assets4,0004,400Other Assets10,00011,000Total Current Assets30,000147,126Net PPE20,0009,000Intangibles8,0008,000Total Assets58,000164,126Accounts Payable6,0006,600Salary Payable4,0004,400Notes Payable3,0003,000Total Current Liabilities13,00014,000Long-Term Debt20,00020,000Total Liabilities33,00034,000Common Stock10,00010,000Retained Earnings15,000120,126total equity25,000130,126 2018Sales626,000COGS319,260Gross Profit306,740SG&A18,000Other Operating Expenses19,000Depreciation2,000Interest497Taxes84,812Net Income184,432dividends79,306 Calculate the Change in Net Operating Working Capital (NOWC)

$116,125.97 Compute Change NOWC = (Total Current Assets 2018 - Total Current Assets 2017) - (Total Current Liabilities 2018 - Total Current Liabilities 2017) = ($147,125.97 - $30,000.00) - ($14,000.00 - $13,000.00) = $116,125.97

Kientzy Inc., 's current balance sheet shows total common equity of $5,196,766.00. The company has 180,000.00 shares of stock outstanding, and they sell at a price of $14.72 per share. By how much do the firm's book value and market value per share differ? (Round your intermediate and final answer to two decimal places.)

$14.15 First solve the book-value per share which is the balance of total common equity divided by shares outstanding: BookValuePerShare=TotalCommonEquitySharesOutstandingThen take the book value per share and subtract the market value: BVpS−MVpS=14.15

Given the following Financial Information Answer the following question: 20172018Cash1,000232,879Accounts Receivable9,0009,090Inventory2,0002,020Prepaid Assets6,0006,060Other Assets4,0004,040Total Current Assets22,000254,089Net PPE50,00036,000Intangibles1,0001,000Total Assets73,000291,089Accounts Payable2,0002,020Salary Payable3,0003,030Notes Payable8,0008,000Total Current Liabilities13,00013,050Long-Term Debt90,00090,000Total Liabilities103,000103,050Common Stock40,00040,000Retained Earnings-70,000148,039total equity30,000188,039 2018Sales1,024,000COGS614,400Gross Profit409,600SG&A17,000Other Operating Expenses10,000Depreciation5,000Interest2,414Taxes5,628Net Income369,558dividends151,519 Calculate the Change in Net Operating Working Capital (NOWC)

$232,039.30 Compute Change NOWC = (Total Current Assets 2018 - Total Current Assets 2017) - (Total Current Liabilities 2018 - Total Current Liabilities 2017) = ($254,089.30 - $22,000.00) - ($13,050.00 - $13,000.00) = $232,039.30

Given the following Financial Information Answer the following question: 20172018Cash7,000239,793Accounts Receivable5,0005,050Inventory1,0001,010Prepaid Assets3,0003,030Other Assets8,0008,080Total Current Assets24,000256,963Net PPE10,00019,000Intangibles8,0008,000Total Assets42,000283,963Accounts Payable7,0007,070Salary Payable1,0001,010Notes Payable3,0003,000Total Current Liabilities11,00011,080Long-Term Debt80,00080,000Total Liabilities91,00091,080Common Stock80,00080,000Retained Earnings-129,000112,883total equity49,000192,883 2018Sales953,000COGS457,440Gross Profit495,560SG&A14,000Other Operating Expenses14,000Depreciation1,000Interest8,622Taxes167,512Net Income291,426dividends49,542 Calculate Operating Cash Flow (OCF) given a tax rate of 36.50%:

$297,265.60 Compute OCF = (EBITDA - Depreciation)*(1-TaxRate) + Depreciation = ($467,560.00 - $1,000.00) X (1 - 36.5%) + $1,000.00 = $297,265.60

Alana and Darell would like to accumulate three times their monthly expenses in monetary assets. They currently have $700.00 in their money market account, and their monthly expenses are $1,400.00 How much more do they need in their money market account to reach their goal?

$3,500.00 First compute three (3) times their monthly expense: 1,400.00×3=4,200.00 The difference between this amount and the current balance of their money market account is the answer: AdditionalFundsNeeded=4,200.00−700.00=3,500.00

Given the following Financial Information Answer the following question: 20172018Cash7,000394,736Accounts Receivable2,0002,200Inventory1,0001,100Prepaid Assets8,0008,800Other Assets1,0001,100Total Current Assets19,000407,936Net PPE90,0009,000Intangibles5,0005,000Total Assets114,000421,936Accounts Payable5,0005,500Salary Payable6,0006,600Notes Payable8,0008,000Total Current Liabilities19,00020,100Long-Term Debt50,00050,000Total Liabilities69,00070,100Common Stock100,000100,000Retained Earnings-55,000251,836total equity45,000351,836 2018Sales1,000,000COGS310,000Gross Profit690,000SG&A29,000Other Operating Expenses15,000Depreciation9,000Interest3,950Taxes73,836Net Income568,214dividends261,379 Calculate the Change in Net Operating Working Capital (NOWC)

$387,835.78 Compute Change NOWC = (Total Current Assets 2018 - Total Current Assets 2017) - (Total Current Liabilities 2018 - Total Current Liabilities 2017) = ($407,935.78 - $19,000.00) - ($20,100.00 - $19,000.00) = $387,835.78

Bullaro Inc., has current assets of $4,349.00, net fixed assets of $4,536.00, current liabilities of $4,850.00, and long-term debt of $3,571.00. What is the value of the shareholders' equity account for this firm?

$464.00 Begin with the balance sheet equation: Assets=Liabilities+Shareholders′EquitySolve for Shareholders' equity: Shareholders′Equity=Assets−LiabilitiesExpand assets: Assets = Current Assets + Net Fixed Assets, and expand liabilities: Liabilites = Current Liabilities+ Long-Term Debt Shareholders′Equity=CurrentAssets+NetFixedAssets−CurrentLiabilities−LongtermDebt Shareholders′Equity=4349.00+4536.00−4850.00−3571.00 Shareholders′Equity=464.00

The focal point of financial management in a firm is:

-the creation of value for shareholders. Financial management is focused on creating value, not generating profit at the potential expense of future value propositions. All other options are subordinate goals to creating value.-

Which of the following are considered personal possessions?

A car Personal possessions includes automobiles and other personal belongings of appreciable value. They are recorded a their current or market value (depreciated value) as they are difficult to convert to cash. Therefore: A car

Which of the following are considered real estate?

A personal home

Which of the following are considered real estate?

A personal home Real estate includes homes, condominiums, vacation property, and other physical assets. Therefore: A personal home A personal home True A car False Retirement Account Assets False Cash, Savings, Money Market Securities False

Which of the following would NOT improve the current ratio?

Borrow short term to finance additional fixed assets. Borrowing in the short-term would increase current liabilities, thereby reducing the ratio. Fixed assets are not part of current assets.

Which of the following are considered a liquid assets in personal finance?

Cash, Savings, Money Market Securities

Which of the following is the correct equation for Net Worth?

Net Worth = Assets - Liabilities NetWorth=Assets−LiabilitiesNote: Net Worth is the same account as Shareholders' Equity

Which of the following statements is CORRECT? a. The more depreciation a firm reports, the higher its tax bill, other things held constant. b. Because a firm's cash flow is shown as the lowest entry on the income statement, people often call it "the bottom line." c. Depreciation is not a cash charge, so it does not have an effect on a firm's reported profits. d. Operating income is derived from the firm's regular core business. Operating income is calculated as Revenues less Operating costs. Operating costs do not include interest or taxes.

Operating income is derived from the firm's regular core business. Operating income is calculated as Revenues less Operating costs. Operating costs do not include interest or taxes.

Which of the following are considered personal investment assets?

Retirement Account Assets Investment assets are funds which are set aside to grow overtime for future need. This includes funds held in retirement accounts which are set aside to provide funds for the future lack of employablility. Therefore: Retirement Account Assets

Which of the following are considered personal investment assets? a. A car b. Retirement Account Assets c. Cash, Savings, Money Market Securities d. A personal home

Retirement Account Assets Investment assets are funds which are set aside to grow overtime for future need. This includes funds held in retirement accounts which are set aside to provide funds for the future lack of employablility. Therefore: Retirement Account Assets

Given the following Financial Information Answer the following question: 20172018Cash9,000574,788Accounts Receivable3,0003,300Inventory4,0004,400Prepaid Assets7,0007,700Other Assets9,0009,900Total Current Assets32,000600,088Net PPE100,00012,000Intangibles8,0008,000Total Assets140,000620,088Accounts Payable3,0003,300Salary Payable1,0001,100Notes Payable6,0006,000Total Current Liabilities10,00010,400Long-Term Debt90,00090,000Total Liabilities100,000100,400Common Stock90,00090,000Retained Earnings-50,000429,688total equity40,000519,688 2018Sales2,249,000COGS877,110Gross Profit1,371,890SG&A27,000Other Operating Expenses11,000Depreciation10,000Interest8,601Taxes483,730Net Income841,558dividends361,870 Calculate Free Cash Flow, given that CAPEX is $-88,000.00:

a. $370,981.97

Tonita is a college student who has the following financial information. They would like your help in figuring their surplus for last year. AccountValueIncome from summer job$4,940.00Support from parents$4,840.00Scholarship$3,200.00Savings account balance$4,680.00Variable expenses$3,160.00Fixed expenses$3,530.00Current Liabilities$4,830.00

a. $6,290.00 To compute the surplus find Tonita's incomes including their family support and subtract their expenses: Surplus=4,940.00+4,840.00+3,200.00−3,160.00−3,530.00=6,290.00

Which of the following enjoys limited liability? (check all that apply)

a. A S-Corporation b. A limited partnership d. A C-Corporation

Which of the following statements is CORRECT? a. In the statement of cash flows, a decrease in accounts payable is subtracted from net income in the operating activities section. b. Dividends do not show up in the statement of cash flows because dividends are considered to be a financing activity, not an operating activity. c. In the statement of cash flows, a decrease in accounts receivable is subtracted from net income in the operating activities section. d. In the statement of cash flows, depreciation is subtracted from net income in the operating activities section.

a. In the statement of cash flows, a decrease in accounts payable is subtracted from net income in the operating activities section. In the statement of cash flows, a decrease in accounts payable is subtracted from net income in the operating activities section. This is because a decrease in accounts payable is considered a payment of an account-or a reduction in cash.

A company's ________ is (are) potentially the most effective instrument of good corporate governance.

a. board of directors Board of Directors provide the strongest means of corporate governance as they are a representative group of shareholders with strong monitoring capabilities. Executive officers cannot 'self-govern' as 'corporate governance' is similar in this respect to 'policing'. Line workers often lack a formal view of all components of the firm or the interworkings of executive management. Common shareholders are typically fractured and lack the monitoring capabilities of the board.

The long-run objective of financial management is to:

a. maximize the value of the firm's common stock in the long-run

According to the accounting profession, which of the following would be considered a cash-flow item from an "investing" activity? a. cash inflow from interest income. b. cash inflow from dividend income. c. cash outflow to acquire fixed assets. d. all of the above.

all of the above.

Given the following Financial Information Answer the following question: 20172018Cash1,000266,296Accounts Receivable6,0006,060Inventory2,0002,020Prepaid Assets1,0001,010Other Assets2,0002,020Total Current Assets12,000277,406Net PPE40,00032,000Intangibles5,0005,000Total Assets57,000314,406Accounts Payable6,0006,060Salary Payable9,0009,090Notes Payable3,0003,000Total Current Liabilities18,00018,150Long-Term Debt40,00040,000Total Liabilities58,00058,150Common Stock60,00060,000Retained Earnings-61,000196,256total equity1,000256,256 2018Sales1,233,000COGS542,520Gross Profit690,480SG&A12,000Other Operating Expenses18,000Depreciation4,000Interest4,131Taxes272,385Net Income383,964dividends126,708 Calculate Free Cash Flow, given that CAPEX is $-8,000.00:

b. $130,784.69 Compute FCF = OFC - CAPEX - Change NOWC = $388,040.80 - $-8,000.00 - $265,256.11 = $130,784.69

Guillot Inc., 's current balance sheet shows total common equity of $4,899,227.00. The company has 160,000.00 shares of stock outstanding, and they sell at a price of $15.31 per share. By how much do the firm's book value and market value per share differ? (Round your intermediate and final answer to two decimal places.)

b. $15.31 First solve the book-value per share which is the balance of total common equity divided by shares outstanding: B o o k V a l u e P e r S h a r e = T o t a l C o m m o n E q u i t y S h a r e s O u t s t a n d i n g Then take the book value per share and subtract the market value: B V p S − M V p S = 15.31

What are the 3 steps in computing one's net worth?

b. :(1) List items of value; (2) Determine Amounts Owed; (3) Compute Net Worth

Which of the following are considered personal possessions?

b. A car Personal possessions includes automobiles and other personal belongings of appreciable value. They are recorded a their current or market value (depreciated value) as they are difficult to convert to cash. Therefore: A car

Which of the following enjoys limited liability? (check all that apply) a. A general partnership b. A limited liability corporation (LLC) c. A S-Corporation d. A sole proprietorship

b. A limited liability corporation (LLC) c. A S-Corporation

Which of the following statements is CORRECT? a. Dividends do not show up in the statement of cash flows because dividends are considered to be a financing activity, not an operating activity. b. In the statement of cash flows, a decrease in accounts payable is subtracted from net income in the operating activities section. c. In the statement of cash flows, a decrease in accounts receivable is subtracted from net income in the operating activities section. d. In the statement of cash flows, a decrease in inventories is subtracted from net income in the operating activities section.

b. In the statement of cash flows, a decrease in accounts payable is subtracted from net income in the operating activities section. In the statement of cash flows, a decrease in accounts payable is subtracted from net income in the operating activities section. This is because a decrease in accounts payable is considered a payment of an account-or a reduction in cash.

Which of the following statements is CORRECT? a. The more depreciation a firm reports, the higher its tax bill, other things held constant. b. Operating income is derived from the firm's regular core business. Operating income is calculated as Revenues less Operating costs. Operating costs do not include interest or taxes. c. Depreciation is not a cash charge, so it does not have an effect on a firm's reported profits. d. Because a firm's cash flow is shown as the lowest entry on the income statement, people often call it "the bottom line."

b. Operating income is derived from the firm's regular core business. Operating income is calculated as Revenues less Operating costs. Operating costs do not include interest or taxes. -Operating income is derived from the firm's regular core business. Operating income is calculated as Revenues less Operating costs. Operating costs do not include interest or taxes.

A major advantage of the corporate form of organization is:

b. limited owner liability. Limited Liability is generally seen as the major benefit of incorporation or organization. Incorporation creates double-tax rather than avoids it. Incorporation is not easy and typically requires a lawyer to do so and the legal restrictions at play are not considered an advantage.

According to the Financial Accounting Standards Board (FASB), which of the following is a cash flow from a "financing" activity?

cash outflow to the government for taxes. A cash outflow to shareholders as dividends is a financing activity if the firm is not a financial passthrough firm (an investing firm whose operational perspective is to produce dividends as an ordinary course of business).

Kotts Inc., has sales of $243,852.00, operating costs (not including depreciation) of $43,893.36, depreciation expense of $34,139.28, interest expense of $10,973.34, and a tax rate of 38.00%. What is the net income for this firm?

d. $96,004.53 Follow the income equation: Revenue - Expenses NetIncome=Sales−OperatingCosts−DepreciationExpense−InterestExp−Taxes First to compute taxes we need to compute the taxable income TaxableIncome=Sales−OperatingCosts−DepreciationExpense−InterestExp And multiply that value by the tax rate to compute the taxes Taxes=TaxableIncome*TaxRate TaxableIncome=243,852.00−43,893.36−34,139.28−10,973.34=154,846.02Taxes=154,846.02*38.00%=58,841.49NetIncome=243,852.00−43,893.36−34,139.28−10,973.34−58,841.49=96,004.53 $63,011.36 False $58,841.49 False $102,808.00 False $96,004.53 True

What are the 3 steps in computing one's net worth?

d. :(1) List items of value; (2) Determine Amounts Owed; (3) Compute Net Worth

Retained earnings for the "base year" equals 100.0 percent. You must be looking at:

d. a common-size balance sheet.

Which of the following is NOT a cash outflow for the firm? a. taxes. b. dividends. c. interest payments. d. depreciation.

d. depreciation

Rent and vehicle insurance payments are examples of

fixed expenses

Rent and vehicle insurance payments are examples of

fixed expenses Rent and vehicle insurance payments are temporarily fixed payments in that they are the same value across time. They may change after the contract period has expired but in the short-run they are fixed payments.

A(n)________would be an example of a principal, while a(n)__________would be an example of an agent.

shareholder; manager