Introduction to Financial Accounting (Wharton)

A company had EBITDA of $1000, Depreciation and Amortization Expense of $100, Interest Expense of $100, and Tax Expense of $50. What was the company's Net Income? 1. ($750) 2. $750 3. $1250 4. $1000 5. $950

$750

What are the three things that ratio is useful to assess?

(1) Profitability (2) Liquidity (3) Risk

A company has Net Income of $10, which included $2 of depreciation expense. There were no other noncash expenses in Net Income and there were no gains or losses. Accounts receivable was $20 at the beginning of the year and $25 at the end of the year. Accounts Payable was $15 at the beginning of the year and $5 at the end of the year. Inventory was $12 at the beginning of the year and $7 at the end of the year. All other balance sheet accounts were unchanged over the year. What was the company's Cash Flow from Operating Activities? 1. $12 2. $7 3. $22 4. ($2) 5. $2

5.

How to solve De-levered Net Income?

Net Income + (1-t) * Interest Expense

How to get Return on Equity? (ROE)

Net Income / Average Shareholder's Equity

During the year, a company sold $500 of inventory, paid $400 to suppliers for inventory previously purchased on account, purchased $100 of inventory for cash, acquired $75 of inventory from another company in an acquisition, and translated into US dollars the value of inventory held in foreign subsidiaries, which increased inventory by $25. Which of these Inventory transactions would show up in the operating section of the SCF? (check all that apply) 1. Purchased $100 of inventory for cash 2. The value of inventory held in foreign subsidiaries increased by $25 when translated into US dollars 3. Sold $500 of inventory 4. Paid $400 to suppliers for inventory previously purchased on account 5. Acquired $75 of inventory from another company in an acquisition

1, 3, 4

Which of the following would be shown as a negative number in the Operating section of the SCF under the indirect method? (check all that apply) 1. Gain on sale of equipment 2. Decrease in Accounts Payable 3. Capital expenditures 4. Decrease in Accounts Receivable 5. Depreciation on a building

1,2

Which of the following would be a cash flow from investing activities? (check all that apply) 1. Investing cash flow. 2. Depreciation on a building 3. Proceeds from issuing stock 4. Proceeds from selling equipment 5. Purchases of inventory

1,4

A company put together a preliminary version of its financial statements. Its Net Income was $200, its Depreciation Expense was $40, and its Cash Flow from Operations was $90. The accountant found an error in computing straight-line Depreciation Expense. It should have been $50. What is Cash from Operations after fixing this mistake? (you can ignore taxes) 1. $90 2. $100 3. $0 4. $80 5. $250

1.

A company sold PP&E for $200 cash. Prior to the sale, the net book value of the PP&E on the financial statements was $240. Thus, the company recorded a Loss on Sale of Equipment of $40 in Net Income. What is the operating cash flow in this transaction? 1. $0 2. $240 3. $200 4. $40 5. $160

1.

What are the two drivers of Return on Assets?

1. Profitability 2. Efficiency

Which of the following would be a cash flow from operating activities? (check all that apply) 1.Gain on sale of equipment 2.Payments to suppliers 3.Depreciation on a building 4.Collections from customers 5.Payments for advertising

2,4,5

A company has the following cash flows: Cash from operations (30) Cash from investing activities (45) Cash from financing activities 90 Which growth stage best describes this pattern of cash flows? 1. Fossilized 2. Early growth 3. Mature 4. Start-up 5. Decline

4. Start-up

A company bought $50,000 of inventory for $20,000 cash, with the balance due to the supplier in 30 days. What is the operating cash flow in this transaction? 1. ($30,000) 2. ($70,000) 3. ($50,000) 4. $0 5. ($20,000)

5

What is a loss on equipment?

A non-operating item resulting from the sale of this long-term asset for less than its carrying amount (or book value)

How to get Financial Leverage?

Average Assets / Average Shareholder's Equity

What is retained earnings?

Generally, retained earnings is a corporation's cumulative earnings since the corporation was formed minus the dividends it has declared since it began. In other words, retained earnings represents the corporation's cumulative earnings that have not been distributed to its stockholders.

What is DuPont Ratio Analysis Framework?

ROE = ROA * Financial Leverage

What is SG&A expense? (Selling, General & Administrative Expense)

The cost associated with selling a firm's products and the costs incurred in running the firm's daily business operations.

What is Advances from Customers?

Unearned Revenue (Liability)