# Finance Chapter 3 Review

 What is the mathematical expression to calculate net working capital? Net working capital = Total current assets – Total current liabilities If Kalium Motors has an EBIT of \$28 million, interest of \$8 million and is taxed at an average rate of 32%, what is its net income? \$13.6 million Dillinger has a taxable income of \$830,000. Calculate the company’s tax using the following tax schedule.Corporations’ Taxable IncomeMarginal Tax Rate\$0-\$50,000 ——— 15%\$50,001-\$75,000 ——- 25%\$75,001-\$100,000 ——- 34%\$100,001-\$335,000 —– 39%\$335,001-\$10,000,000 — 34% \$282,200 Interest is a tax-deductible expense. This causes firms to have a preference for financing with: bond Petra, Inc., has \$400,000 as current assets, \$1.225 million as plant and equipment, and \$250,000 as goodwill. In preparing the balance sheet, these assets should be listed in which of the following orders? Current assets, plant and equipment, and goodwill. Maddux, Inc., has completed its fiscal year and reported the following information. The company had current assets of \$153,413, net fixed assets of \$412,331, and other assets of \$7,822. The firm also has current liabilities worth \$65,314, long-term debt of \$178,334, and common stock of \$162,000. Calculate the amount of retained earnings. \$167,918 Total assets = \$153,413 + \$412,331 + \$7,822 = \$573,566Total liabilities = \$65,314 + \$178,334 = \$243,648Total stockholders’ equity = Total assets – Total liabilitiesTotal stockholders’ equity = \$573,566 – \$243,648 = \$329,918Retained earnings = Total stockholders’ equity – Common stockRetained earnings = \$329,918 – \$162,000 = \$167,918 Galan Associates prepared its financial statement for 2008 based on the information given here. The company had cash worth \$1,234, inventory worth \$13,480, and accounts receivables worth \$7,789. The company’s net fixed assets are \$42,331, and other assets are \$1,822. It had accounts payables of \$9,558, notes payables of \$2,756, common stock of \$22,000, and retained earnings of \$14,008. How much long-term debt does the firm have? \$18,334 Current assets = \$1,234 + \$7,789 + \$13,480 = \$22,503Total assets = \$22,503 + \$42,331 + \$1,822 = \$66,656Current liabilities = \$9,558 + \$2,756 = \$12,314Total stockholders’ equity = \$22,000 + \$14,008 = \$36,008Long-term debt = Total assets – Current liabilities – Total stockholders’ equityLong-term debt = \$66,656 – \$12,314 – \$36,008 = \$18,334 Tumbling Haven, a gymnastic equipment manufacturer, provided the following information to its accountant. The company had current assets of \$145,332, net fixed assets of \$356,190, and other assets of \$4,176. The firm has long-term debt of \$76,445, common stock of \$200,000, and retained earnings of \$134,461. What amount of current liabilities does this firm have? \$94,792 Total assets = \$145,332 + 356,190 + \$4,176 = \$505,698Total stockholders’ equity = \$200,000 + \$134,461 = \$334,461Current liabilities = Total assets – Long-term debt – Total stockholders’ equityCurrent liabilities = \$505,698 – \$76,445 – \$334,461 = \$94,792 Chandler Sporting Goods produces baseball and football equipment and lines of clothing. This year the company had cash and marketable securities worth \$335,485, accounts payables worth \$1,159,357, inventory of \$1,651,599, accounts receivables of \$1,488,121, short-term notes payable worth \$313,663, and other current assets of \$121,427. What is the company’s net working capital? \$2,123,612 Total current assets = \$335,485 + 1,488,121 + \$1,651,599 + \$121,427 = \$3,596,632Total current liabilities = \$1,159,357 + \$313,663 = \$1,473,020Net working capital = \$3,596,632 – \$1,473,020 = \$2,123,612 Centennial Brewery produced revenues of \$1,145,227 in 2008. It has expenses (excluding depreciation) of \$812,640, depreciation of \$131,335, and interest expense of \$81,112. It pays an average tax rate of 34 percent. What is the firm’s net income after taxes? Round your final answer to the nearest dollar. \$79,292 Earnings before taxes = \$1,145,227 – (\$812,640 + \$131,335 + \$81,112) = \$120,140Net income = \$120,140 (1 – 0.34) = \$79,292 Parrino Corporation has announced that its net income for the year ended June 30, 2008, is \$1,824,214. The company had an EBITDA of \$5,174,366, and its depreciation and amortization expense was equal to \$1,241,790. The company’s average tax rate is 34 percent. What is the amount of interest expense for the firm? \$1,168,615Amount EBITDA\$5,174,366.00 Less: Depreciation and amortization1,241,790.00 EBIT\$3,932,576.00 Less: Interest1,168,615.39** EBT\$2,763,960.61* Less: Taxes (34%)939,746.61 Net income\$1,824,214.00 *EBIT = Net income / (1 – Tax rate) = \$1,824,214 / 0.66 = \$2,763,960.61**Interest = EBIT – EBT = \$3,932,576 − \$2,763,960.61 = \$1,168,615.39 Buying and selling long-term assets are considered _____ activities in the statement of cash flows of a firm. investing Quipe Industries provided the following information for the year ending June 30, 2014.Increase in inventories \$ 42Purchased treasury stock 25Purchased property and equipment 27Net income 495Decrease in accrued income taxes 63Depreciation and amortization 168Decrease in accounts payable 15Increase in accounts receivable 39Increase in long-term debt 150What was QuipeIndustries’ cash flow from financing for the year ending June 30, 2014? \$125 The following financial data of Covise Corp. for the past fiscal year is given.Net income\$34,000Increase in accounts payable14,000Increase in accrued income taxes14,000Increase in accounts receivable16,000Depreciation22,000Calculate company’s cash flow to investors from operating activities? \$68,000 Finore Manufacturing has the following amounts on its 12/31/14 balance sheet.Cash\$150Other current assets397Property, plant,& equipment, net of depreciation538Current liabilities324Total Liabilities504What was Finore Manufacturing’s equity as on December 31, 2014? \$581
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