C214 Financial Management WGU (COMPLETE ANSWERS) Semester 1 2024 - DUE 21 February 2024

C214 Financial Management WGU (COMPLETE ANSWERS) Semester 1 2024 - DUE 21 February 2024 Trading on the NYSE is executed without a specialist T or F - ANSWER False What are 2 types of financial instruments - ANSWER Stocks and BondsM When revenue is matched with cost of sales in an income statement it is called? - ANSWER matching principle A high quality customer just purchased $500,000 worth of product from your company. The contract calls for immediate delivery of this product with a cash payment of $300,000 today and $200,000 in the next 60 days. The expense associated with the product if $300,000, of which $100, has not been paid to your supplier. Under the accrual based accounting system you will most likely report Revenues of ANSWER Revenue $500,000, Expenses of 300,000 A firm reported retained earnings of $300 12/31/2021. For 12/31/2021, the firm reports retained earnings of $400 and pays dividends of $25. What was the net income in 2023? - ANSWER Beg RE 300, NI = 125, Div -25, RE 400. A basic equation of the balance sheet is - ANSWER Assets = equity - liabilities Sales minus cost of sales minus other expenses equals what? - ANSWER Operating income or EBIT What is the balance sheet known as a permanent statement? - ANSWER Because the other statements are reset at the end of the year. How do you calculated the change in retained earning? - ANSWER Net income - dividends name four accounts that are a part of total assets - ANSWER cash accounts receivable, inventory, long term assets. Sales misnus cost of sales minuss other expenses equals what? - ANSWER Operating Income or EBIT Name 3 accounts that are part of current assets? - ANSWER Inventory, Cash, accounts receivables, short term investments name 4 accounts that re part of total liabilities - ANSWER Bonds, accounts payable, mortgage Intel reported the following for 2014: Net Income 100,000 Depreciation 20,000 Change in A/R 10,000 What is the cash flow from operating activities? - ANSWER 100 + 20 - 10 = 110 name 3 accounts that are only included in Cash Flow from Financing CFF - ANSWER Common stock, dividends paid, bonds payable Define the statement of cash flows - ANSWER calculated for the same period of time as the Income Statement is calculated based on the Income Statement and the changes in the balance sheet is one of the 3 basic accounting statements Intel reported the following for 2014: Gross Equipment (1/1/14) 50,000 Gross Equipment (12/31/14) 65,000 Net income 100,000 Depreciation 20,000 What is the cash flow from investing activities for 2014? - ANSWER 15000, depreciation is not counted when using Gross PPE What is the cash flow from operations given the following information? Net Income: 450,000 Change in accounts receivable: 120,000 Change in inventory: -90,000 Change in PP&E: 60,000 depreciation expense 110,000 Change in accounts payable: 50,000 Change is accrued expenses: -75,000 Change in common stock: 300,000 - ANSWER 450 + 110 Depn - 120 + 90 + 50 - 75 = 505,000 What is the cash flow from investing? increase in gross PP&E: 125,000 Beginning net PP&E: 750,000 Ending net PP&E: 850,000 Depreciation expense: 25,000 - ANSWER Net end 850 less Net Beg 750 plus Depn 25 = 125 Outflow, 125,000 What is the cash flow from investing? Beginning Net PP&E:250,000 Ending Net PP&E: 300,000 Depreciation expense: 40,000 Change in long term investments: 100,000 change in short term investments: 50,000 - ANSWER Net end 300 - net Beg 250 + Depn 40 + LT invest + 100 = 190 outflow, 190,000 What is the cash flow from financing? accounts payable 100,000 accrued expenses 50,000 increase in mortgage payable 300,000 decrease in bonds payable 75,000 dividends paid 80,000 - ANSWER in mortg 300 - dec bonds 75 - dividends paid 80 = 145,000 When Fixed Assets increase what happens to Cash? - ANSWER Cash decreases Last year a firm recorded Net PP&E of $4,600 while this year the same firm recorded Net PP&E of $4,500. If the depreciation expense for last year and this year are $500 and $800 respectively, what is the CFI of the company? (assume no asset disposals) - ANSWER ppe end 4500 - ppe beg 4600 + curr yr depr 800 = 700 increase/outflow Which is the purpose of the statement of cash flows - ANSWER explains the change in cash over the course of the specified timeframe Financial data for intel is given below for 2014 EBIT: 1,000,000 Depreciation: 30,000 Change in working capital: (10,000) net capital expenditures: 15,000 tax rate 40% Compute the free cash flow for 2014 - ANSWER FCFF=EBIT(1+t) + depreciation - Inc NWC - Cap ex 1000*(1-.4) + 30 + 10 - 15 = 625,000 Suppose the inventory turnover of a company is higher than the industry. Based on this observation, which of the following is most likely? - ANSWER The firm has too little inventory resulting in lost sales or stock -outs. Intel provides the following data for 2014: A/R 600 Inventory 800 Fixed Assets 1,000 A/P 500 Long term debt 900 Common Stock 400 What is the current ratio? - ANSWER 600 + 80/500 = 2.8 If a company wishes to obtain a bank loan, will it want to have a higher current ratio or a lower current ratio? - ANSWER higher A company has cash of 100, accounts receivable of 250, inventory of 300, and accounts payable of 300. what is the quick ratio? - ANSWER (100 + 250) / 300 = 1.17 A company has cash sales of 200 and credits sales of 750. It's average accounts receivable of 90. What is the ar turnover? - ANSWER 750/90 = 8.33 The OIROI (operating income return on investment) uses what elements on the income statement? - ANSWER EBIT and Total Assets Why would a company be interested in the TAT (total asset turnover) ratio? - ANSWER Who efficient assets are at producing sales If a company has current assets of 80 and fixed assets of 120, if Sales are 150 and EBIT is 35, what is the fixed income turnover? - ANSWER 150 / 120 = 1.25 If a company has current assets of 90 and fixed assets of 140, if it has a debt of 125, what is its debt ration? - ANSWER debt 125 / 140 + 90 (total assets) = .5435 A company has sales of 300, expenses if 200 and interest expense of 25, what is its Times Interest Earned Ratio? - ANSWER EBIT / Int exp (300-200)/25 = 4 suppose a firm has a financial leverage ratio of 2.50 which indicates the ratio the firm's assets are financed by debt. What is the percentage of the firm's assets is financed by equity? - ANSWER The ratio as 2.50 to 1. The amount financed by equity is a ratio of 1 to 2.5 or the inverse 1/2.5=.40 What is the present value of a stream of cash flows of $125,000 at a discount rate of 7%? - ANSWER 125,000 / .07 = 1,785,714 What is the discount rate of a stream of cash flows of 50,000 that have a present value of 450,000? - ANSWER 50,000 / 450,000 = 11.1% What is the cash flow stream for a present value 1,000,000 at 5% paid in equal installments in the future? - ANSWER 1,000 * .05 = 50,000