CORPORATE FINANCE ARITHMETIC
QUESTIONS AND ANSWERS. 2024/2025
UPDATE
1. A firm has common stock of $98, paid-in surplus of $350, total
liabilities of $450, current assets of $470, and net fixed assets of
$650. What is the amount of the shareholders' equity? SE=
current assets + net fixed assets - total liabilities 470+680-
450= 700
2. Ivan's Inc. paid 492 in dividends and 591 in interest the
past year. Common stock increased by 201 and retained
earnings decreased by 127. What is the net income for the
year? dividends paid + change in RE
492 + 365
3. Your firm has net income of 371 on total sales of 1460.
Costs are 800 and depreciation is 130. The tax rate is 30%. The
firm does not have interest expenses. What is the operating
cash flow? EBIT= 1460- 800 -130= 530 taxes= .30 x 530= 159
OCF= 530 + 130 - 159= 501
4. At the beginning of the year, a firm has current assets of
321 and current liabilities of 225. At the end of the year, the
current assets are 479 and the current liabilities are 265. What
is the change in NWC? change in NWC= (479 - 265) -
118
5. At the beginning of the year, long-term debt of a firm is
327. At the end of the year, long-term debt is 257 and total
debt is 337. The interest paid is 23. What is the amount of cash
flow to creditors? CFC= 23 - (257 - 284)= 50 6. Peggy Grey's
Cookies has net income of 380. The firm pays out 35 percent of
the net income to its shareholders as dividends. During the
year, the company sold 83 worth of common stock. What is the
cash flow to stockholders.: CFS= (.35 x 380) - 50
, CORPORATE FINANCE ARITHMETIC
QUESTIONS AND ANSWERS. 2024/2025
UPDATE
7. A company has 1392 in inventory, 4845 in net fixed assets, 676
in accounts receivable, 306 in cash, 642 in accounts payable, 1069
in long-term debt, and 5440 in equity. What are the company's total
assets? TA= 306 + 676 +1392 + 4845= 7219
8. Smashed Pumpkins Co. paid 120 in dividends and 554 in
interest over the past year. The company increased retained
earnings by 462 and had accounts payable of 570. Sales for the
year were 16195 and depreciation was 712. The tax rate was 40
percent. What was the company's EBIT? 120 + 462= 582 EBT=
970
EBIT= 970 + 554= 1524
9. A balance sheet has total assets of 1588, fixed assets of 1106,
long-term debt of 177. What is the NWC? NWC= (1588 - 1 106) -
177= 305
10. Which of the following is a source of cash? an increase in
accounts payable
1 1. Which one of the following is a use of cash? submitting
taxes to the government
12. A use of cash is associated with: both a decrease in a liability
and an increase in an asset
13. If a firm needs to increase its cash holdings it could:
increase current liabilities
14. The operating cycle can be decreased by: collecting accounts
receivable faster
, CORPORATE FINANCE ARITHMETIC
QUESTIONS AND ANSWERS. 2024/2025
UPDATE
15. Which one of these statements is correct concerning the
cash cycle? the longer the cash cycle, the more likely a firm
will need external financing.
16. Flexible short-term financial policies tend to: maintain large
cash balances
17. Last year, Wilson's had credit sales of $927,000 and cost of
goods sold of $762,000. The beginning of the year inventory
was $138,000 and the end of the year inventory was
$154,300. If the accounts receivables average $87,400, what
is the operating cycle? Inventory turnover=
762000/((138000+154300)/2)=
5.21
Inventory period= 365/5.21= 70.01 days
AR turnover= 927000/87400= 10.61
AR period= 365/10.61
Operating Cycle= 70.01 + 34.41= 104.42 days
18. Heritage Farms has sales of $1.62 million with costs of goods
sold equal to 78 percent of sales. The average inventory is
$369,000, accounts payable average $438,000, and
receivables average $147,000. How long is the cash cycle?
Inventory period= 106.59 AR period=
AP period= 365/ (.78 x
Cash cycle= 106.59 + 33.12 - 126.52= 13.19
19. A company has an inventory period of 25.7 days, an accounts
payable period of 38.3 days, and an accounts receivable of
32.3 days. What is the company's operating cycle? operating
cycle= 25.7+32.3= 58 days
20.
QUESTIONS AND ANSWERS. 2024/2025
UPDATE
1. A firm has common stock of $98, paid-in surplus of $350, total
liabilities of $450, current assets of $470, and net fixed assets of
$650. What is the amount of the shareholders' equity? SE=
current assets + net fixed assets - total liabilities 470+680-
450= 700
2. Ivan's Inc. paid 492 in dividends and 591 in interest the
past year. Common stock increased by 201 and retained
earnings decreased by 127. What is the net income for the
year? dividends paid + change in RE
492 + 365
3. Your firm has net income of 371 on total sales of 1460.
Costs are 800 and depreciation is 130. The tax rate is 30%. The
firm does not have interest expenses. What is the operating
cash flow? EBIT= 1460- 800 -130= 530 taxes= .30 x 530= 159
OCF= 530 + 130 - 159= 501
4. At the beginning of the year, a firm has current assets of
321 and current liabilities of 225. At the end of the year, the
current assets are 479 and the current liabilities are 265. What
is the change in NWC? change in NWC= (479 - 265) -
118
5. At the beginning of the year, long-term debt of a firm is
327. At the end of the year, long-term debt is 257 and total
debt is 337. The interest paid is 23. What is the amount of cash
flow to creditors? CFC= 23 - (257 - 284)= 50 6. Peggy Grey's
Cookies has net income of 380. The firm pays out 35 percent of
the net income to its shareholders as dividends. During the
year, the company sold 83 worth of common stock. What is the
cash flow to stockholders.: CFS= (.35 x 380) - 50
, CORPORATE FINANCE ARITHMETIC
QUESTIONS AND ANSWERS. 2024/2025
UPDATE
7. A company has 1392 in inventory, 4845 in net fixed assets, 676
in accounts receivable, 306 in cash, 642 in accounts payable, 1069
in long-term debt, and 5440 in equity. What are the company's total
assets? TA= 306 + 676 +1392 + 4845= 7219
8. Smashed Pumpkins Co. paid 120 in dividends and 554 in
interest over the past year. The company increased retained
earnings by 462 and had accounts payable of 570. Sales for the
year were 16195 and depreciation was 712. The tax rate was 40
percent. What was the company's EBIT? 120 + 462= 582 EBT=
970
EBIT= 970 + 554= 1524
9. A balance sheet has total assets of 1588, fixed assets of 1106,
long-term debt of 177. What is the NWC? NWC= (1588 - 1 106) -
177= 305
10. Which of the following is a source of cash? an increase in
accounts payable
1 1. Which one of the following is a use of cash? submitting
taxes to the government
12. A use of cash is associated with: both a decrease in a liability
and an increase in an asset
13. If a firm needs to increase its cash holdings it could:
increase current liabilities
14. The operating cycle can be decreased by: collecting accounts
receivable faster
, CORPORATE FINANCE ARITHMETIC
QUESTIONS AND ANSWERS. 2024/2025
UPDATE
15. Which one of these statements is correct concerning the
cash cycle? the longer the cash cycle, the more likely a firm
will need external financing.
16. Flexible short-term financial policies tend to: maintain large
cash balances
17. Last year, Wilson's had credit sales of $927,000 and cost of
goods sold of $762,000. The beginning of the year inventory
was $138,000 and the end of the year inventory was
$154,300. If the accounts receivables average $87,400, what
is the operating cycle? Inventory turnover=
762000/((138000+154300)/2)=
5.21
Inventory period= 365/5.21= 70.01 days
AR turnover= 927000/87400= 10.61
AR period= 365/10.61
Operating Cycle= 70.01 + 34.41= 104.42 days
18. Heritage Farms has sales of $1.62 million with costs of goods
sold equal to 78 percent of sales. The average inventory is
$369,000, accounts payable average $438,000, and
receivables average $147,000. How long is the cash cycle?
Inventory period= 106.59 AR period=
AP period= 365/ (.78 x
Cash cycle= 106.59 + 33.12 - 126.52= 13.19
19. A company has an inventory period of 25.7 days, an accounts
payable period of 38.3 days, and an accounts receivable of
32.3 days. What is the company's operating cycle? operating
cycle= 25.7+32.3= 58 days
20.
