lOMoARcPSD|5734770
lOMoARcPSD|5734770
FIN 3610
HOMEWORK #1
Q1. Which one of the following will increase the value of a firm's net working capital?
A. using cash to pay a supplier
B. depreciating an asset
C. collecting an accounts receivable
D. purchasing inventory on credit
E. selling inventory at a profit
Q2. Four years ago, Velvet Purses purchased a mailing machine at a cost of $176,000. This equipment
is currently valued at $64,500 on today's balance sheet but could actually be sold for $58,900. This
is the only fixed asset the firm owns. Net working capital is $57,200 and long-term debt is
$111,300. What is the book value of shareholders' equity?
A. $4,800
B. $7,700
C. $10,400
D. $222,600
E. $233,000
Book value of shareholders' equity = $64,500 + $57,200 - $111,300 = $10,400
1
, lOMoARcPSD|5734770
Q3.
Galaxy Interiors 2011 Income Statement ($ in
millions)
Net Sales $21,415
Cost of goods sold 16,408
Depreciation 1,611
Earnings before interest and taxes 3,396
Interest paid 1,282
Taxable Income $2,114
Less: Taxes 740
Net Income $1,374
Galaxy Interiors 2010 and 2011 Balance Sheets ($ in millions)
2010 2011 2010 2011
Cash $668 $297 Accounts payable $1,694 $1,532
Accounts
1,611 1,527 Accrued expenses 2,500 0
receivable
Inventory 3,848 2,947 Total $4,194 $1,532
Total $6,127 $4,771 Long-term debt 9,800 10,650
Net fixed assets 17,489 17,107 Common stock 7,500 7,000
Retained earnings 2,122 2,696
$23,616 $21,878 Total liabilities & $23,616 $21,878
Total Assets equity
Given the information from income statement and balance sheet of Galaxy Interiors, what is the
cash flow from assets for 2011?
A.$1,732
B.$2,247
C.$2,961
D.$3,915
E.$4,267
Change in net working capital = ($4,771 - $1,532) - ($6,127 - $4,194) = $1,306
Net capital spending = $17,107 - $17,489 + $1,611 = $1,229
Operating cash flow = $3,396 + $1,611 - $740 = $4,267 Cash
flow from assets = $4,267 - $1,229 - $1,306 = $1,732
2
lOMoARcPSD|5734770
FIN 3610
HOMEWORK #1
Q1. Which one of the following will increase the value of a firm's net working capital?
A. using cash to pay a supplier
B. depreciating an asset
C. collecting an accounts receivable
D. purchasing inventory on credit
E. selling inventory at a profit
Q2. Four years ago, Velvet Purses purchased a mailing machine at a cost of $176,000. This equipment
is currently valued at $64,500 on today's balance sheet but could actually be sold for $58,900. This
is the only fixed asset the firm owns. Net working capital is $57,200 and long-term debt is
$111,300. What is the book value of shareholders' equity?
A. $4,800
B. $7,700
C. $10,400
D. $222,600
E. $233,000
Book value of shareholders' equity = $64,500 + $57,200 - $111,300 = $10,400
1
, lOMoARcPSD|5734770
Q3.
Galaxy Interiors 2011 Income Statement ($ in
millions)
Net Sales $21,415
Cost of goods sold 16,408
Depreciation 1,611
Earnings before interest and taxes 3,396
Interest paid 1,282
Taxable Income $2,114
Less: Taxes 740
Net Income $1,374
Galaxy Interiors 2010 and 2011 Balance Sheets ($ in millions)
2010 2011 2010 2011
Cash $668 $297 Accounts payable $1,694 $1,532
Accounts
1,611 1,527 Accrued expenses 2,500 0
receivable
Inventory 3,848 2,947 Total $4,194 $1,532
Total $6,127 $4,771 Long-term debt 9,800 10,650
Net fixed assets 17,489 17,107 Common stock 7,500 7,000
Retained earnings 2,122 2,696
$23,616 $21,878 Total liabilities & $23,616 $21,878
Total Assets equity
Given the information from income statement and balance sheet of Galaxy Interiors, what is the
cash flow from assets for 2011?
A.$1,732
B.$2,247
C.$2,961
D.$3,915
E.$4,267
Change in net working capital = ($4,771 - $1,532) - ($6,127 - $4,194) = $1,306
Net capital spending = $17,107 - $17,489 + $1,611 = $1,229
Operating cash flow = $3,396 + $1,611 - $740 = $4,267 Cash
flow from assets = $4,267 - $1,229 - $1,306 = $1,732
2
