FIN 3003 - Mr. Joseph - Assignment 5

Which are examples of current liabilities? Check all that apply: Accrued wages Current portion of long-term debt Paid-in capital Accounts payable

Accounts payable ✓ Accrued wages ✓ Current portion of long-term debt ✓

Which of the following statements are correct about the statement of cash flows? Check all that apply: An increase in accounts payable is reported as a use of cash. Depreciation is reported as a source of cash. A decrease in notes payable is reported as a source of cash. An increase in accounts receivable is reported as a use of cash.

An increase in accounts receivable is reported as a use of cash. ✓ Depreciation is reported as a source of cash. ✓ An increase of current assets, such as accounts receivable, is a use of cash. An increase of current liabilities, such as accounts payable and notes payable, is a source of cash. Net income and depreciation are also sources of cash.

How do the following actions affect a company's cash balance? The company pays a dividend. Cash is unchanged Cash decreases Cash increases

Cash decreases ✓

How do the following actions affect a company's cash balance? The company issues short-term debt. Cash increases Cash decreases Cash is unchanged Submit

Cash increases ✓

How do the following actions affect a company's cash balance? The company sells a machine. Cash is unchanged Cash decreases Cash increases

Cash increases ✓

How do the following actions affect a company's cash balance? The company issues equity and uses the proceeds to pay back long-term debt. Cash decreases Cash is unchanged Cash increases

Cash is unchanged ✓

You've collected the following information about a company: Line item Value Sales 210 Costs 30 Depreciation 10 Interest 10 The company's average tax rate is 30% What is earnings before interest and taxes (EBIT) (in $)? What is net income (in $)?

EBIT = Sales - Costs - Depreciation= 210 - 30 - 10= 170 Taxable income = EBIT - Interest = 170 - 10 = 160 Taxes = Taxable income * Average tax rate = 160 * 0.3 = 48 Net income = Taxable income - Taxes = 160 - 48 = 112

Use the following information to answer the questions: Assets Liabilities and Equity Cash13,000 Accounts payable22,000 Marketable securities4,000 Notes payable8,000 Accounts receivable8,000 Current liabilities30,00 0Inventory42,000 Long-term debt80,000 Current assets67,000 Total liabilities110,000 Machines42,000 Paid-in capital30,000 Real estate60,000 Retained earnings29,000 Net fixed assets102,000 Equity59,000 Total assets169,000 Total liab. & equity169,000 Line itemValue Sales690,000 - Operating expenses565,800 - Depreciation25,000 = EBIT99,200 - Interest8,000 = Taxable income91,200 - Taxes30,096 = Net income61,104 The company has 30,000 shares outstanding, each currently trading at $20.1. What are earnings per share?

EPS=Net incomeNumber of shares outstanding=61,10430,000=EPS=Net incomeNumber of shares outstanding=61,10430,000= 2.037

8 years ago, a new machine cost $3 million to purchase. The machine was to be linearly depreciated to zero over 20 years. What is the annual depreciation (in $)? What is the current book value (in $)?

Initial book value:BV0 = Purchase price = 3,000,000 Annual depreciation:D = BV0 / N= 3,000,000 / 20= 150,000 Accumulated depreciation:AD = Number of years since purchase * Annual depreciation= 8 * 150,000= 1,200,000 Remaining book value:BV8 = BV0 - AD= 3,000,000 - 1,200,000= 1,800,000

7 years ago, a new machine cost $8 million to purchase. The machine was to be linearly depreciated to zero over 15 years. What is the annual depreciation (in $)?

Initial book value:BV0 = Purchase price = 8,000,000 Annual depreciation:D = BV0 / N= 8,000,000 / 15= 533,333

The income statement shows a company's _____. revenue and expenses at one point in time assets and liabilities over a period of time revenue and expenses over a period of time assets and liabilities at one point in time

revenue and expenses over a period of time ✓