Finance Review Guide

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Chapter 2 HOMEWORK ASSIGNMENTS
#1. Billy’s Exterminators, Inc., has sales of $643,000, costs of $280,000, depreciation expense of $32,000, interest expense of $26,000, and a tax rate of 35 percent. What is the net income for this firm?| |

Sales : 643,000
Costs:280,000
Depreciation:32,000
Operating Income: 643,000 – 280,000 = 363,000
EBIT:363,000 – 32,000 – 26,000 = 305,000
Taxes:305,000 * .35 = 106,750
Net Income = 305,000 – 106,750 = 198,250
SOLUTION:198,250

#2. Given the following information, what is the cash flow to creditors for 2011?  | 2010| 2011|
Sales| 5831| 6423|
COGS| 3670| 4109|
Interest| 291| 280|
Depreciation| 125| 122|
Cash| 250| 313|
Accounts receivables| 1092| 1162|
Current liabilities| 717| 1051|
Inventory| 1495| 1521|
Long-term debt| 2400| 1100|
Net fixed assets| 4006| 4123|
Common Stock| 1900| 2100|
Taxes| 590| 670|

PROVIDE SOLUTION HERE:

CF to creditors = Interest paid – net new long-term-borrowing Net New Long-term Borrowing:1,100 – 2,400 = -1,300
Interest Paid:(291-280) = 9

SOLUTION = 1,309

#3. Given below is financial information for Fowler’s Flower Shop.
Fowler’s Flower Shop
Income Statement
For the Years Ended December 31, 2010 and 2011.
| 2011| 2010|
Sales| $3,550,000| $3,340,000|
Cost of Goods Sold| 1,750,000| 1,662,000|
Other Expenses| 276,500| 220,000|
Depreciation| 80,000| 66,000|
EBIT| $1,443,500| $1,392,000|
Interest Expense| 243,000| 306,500|
EBT| $1,200,500| $1,085,500|
Taxes (35%)| 420,175| 379,925|
Net Income| $780,325| $705,575|
| | |
Dividends| $108,000| $74,000|

Fowler’s Flower Shop
Balance Sheet
December 31, 2010 & December 31, 2011
Assets| 2011| 2010| Liabilities & S.E.| 2011| 2010| Current Assets| | | Current Liabilities| | |
Cash| 335,952| 210,800| Accounts Payable| 425,147| 397,382...
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