Midterm Finance

Nancy Jaramillo

Midterm

1.        San Dimas Energy Inc. has total assets of $800,000 and an equity multiplier of 1.25.

What is the debt-equity ratio?

Equity multiplier-1= debt-equity ratio

1.25-1=0.25

1. 0.25
2. 0.60
3. 1.22
4. 1.68

2.        As an inventory manager in your company, you need to calculate how long on average it takes your company to sell its inventory.  Here are the data you collected: sales of $1,200,600, cost of goods sold of $900,100, and inventory of $45,000.

Inventory turnover = $900,100/ $45,000 = 20.00222;  

Days in inventory = 365 /20.00222= 18.24797=18.25

1. 2.66
2. 18.25
3. 20.00
4. 137.13

3.        La Verne Solar Inc. has sales of $500,000, cost of goods sold of $263,000, and accounts receivable of $60,000. How long on average does it take the firm’s customers to pay for their purchases?

        Accounts receivable turnover rate = $500,000/ $60,000= 8.33333

        Days’ sales in receivables = 365 / 8.33333= 43.80001752

        It takes customers an average of 43.80 days to pay for their purchases.

1. 4.66
2. 8.16
3. 8.33
4. 43.80

4.        Bonita Pizza Inc. has sales of $200,800, net profit of $36,600, fixed assets of $130,300, and current assets of $55,400. What is the total asset turnover rate?

Total asset turnover rate = $200,800 / ($130,300+ $55,400) = 1.081313947=1.08

1. 1.08
2. 3.16
3. 8.73
4. 53.20

5.        Glendora Realtor Co. is considering a project that will produce cash inflows of $36,000 year one, $54,800 in year two, and $72,900 in year three. What is the present value of these cash inflows if the company assigns the project a discount rate of 14 percent?

36000/(1.14)1= 31578.95

54,800/ (1.14)2=42166.82

72,900/(1.14)3= 49205.42

Add all = 122,951.1915

        A.        $106,713.06

        B.        $122,951.19

        D.        $131,333.33

        D.        $167,098.12

 (#6 -10) You collected your company financial data as below.

                                                                   2016                   2017

                                Sales                                $3,813                $4,019

                                Long-term debt                          1,555                     899

                                Interest paid                             121                     143

                                Owner’s equity                          3,200                  3,700

                                Accounts receivable                     498                     402

                                Depreciation                             306                     393

                                Cash                                     413                     911

                                Inventory                          1,516                  1,533

                                Accounts payable                                  387                     460

                                Cost of goods sold                  2,123                  2,609

                                Net fixed assets                          2,715                  2,213

                                Other costs                             391                     514

                                Taxes paid                             305                     126

6.  Find the operating cash flow (OCF) for 2017.

EBIT = $4019(Sales) - $2609(COGS) - $393(depreciation) = 1410-393 = $1017

Taxes paid = $126

Operating cash flow = $1017(EBIT) + $393 (depreciation) - $126 (Taxes paid) = $1284

Answer- $1284                

7.  Find the change in net working capital (NWC change).

= ($911 + $402 + $1533 - $460) – ($413 + $498 + $1516 - $387) = 2386 –2040 = $346

Answer- $346

8.  Calculate cash flow from asset (means, the free cash flow of the company)

       *Hint: you need to calculate net capital spending in addition to using the previous question results

Net Capital Spending= $2,213- $2,715 + $393 = -$109

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