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FIN202 - Chap 3 - Selected Exercises

The document contains information from multiple sections of a finance textbook chapter on working capital, balance sheets, income statements, and cash flow statements. It provides financial information for several companies and asks calculation questions related to determining amounts such as net working capital, long-term debt, how much additional short-term debt can be taken on without violating financial ratios, and constructing basic cash flow statements.

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Thanh Thảo
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246 views2 pages

FIN202 - Chap 3 - Selected Exercises

The document contains information from multiple sections of a finance textbook chapter on working capital, balance sheets, income statements, and cash flow statements. It provides financial information for several companies and asks calculation questions related to determining amounts such as net working capital, long-term debt, how much additional short-term debt can be taken on without violating financial ratios, and constructing basic cash flow statements.

Uploaded by

Thanh Thảo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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FIN202 – CHAP 3

3.5 Working capital: Laurel Electronics reported the following information at its annual
meeting: The company had cash and marketable securities worth $1,235,455, accounts
payables worth $4,159,357, inventory of $7,121,599, accounts receivables of $3,488,121,
short-term notes payable worth $1,151,663, and other current assets of $121,455.
What is the company's net working capital? $11,966,630 - $5,311,020 = $6,655,610

3.18 Balance sheet: Tim Dye, the CFO of Blackwell Automotive, Inc., is putting together
this year's financial statements. He has gathered the following balance sheet information:
The firm had a cash balance of $23,015, accounts payable of $163,257, common stock of
$313,299, retained earnings of $512,159, inventory of $212,444, goodwill and other assets
equal to $78,656, net plant and equipment of $711,256, and short-term notes payable of
$21,115. It also had accounts receivable of $141,258 and other current assets of $11,223.
How much long-term debt does Blackwell Automotive have? $1,177,852 - ($184,372 + $825,458

3.19 Working capital: Mukhopadhya Network Associates has a current ratio of 1.60, where
the current ratio is defined as follows: Current ratio = Current assets/Current liabilities. The
firm's current assets are equal to $1,233,265, its accounts payables are $419,357, and its
notes payables are $351,663. Its inventory is currently at $721,599. The company plans to
raise funds in the short-term debt market and invest the entire amount in additional
inventory. How much can note payable increase without the current ratio falling below 1.50?

3.21 Income statement: Nimitz Rental Company provided the following information to its
auditors. For the year ended March 31, 2017, the company had revenues of $878,412,
general and administrative expenses of $352,666, depreciation expenses of $131,455,
leasing expenses of $108,195, and interest expenses equal to $78,122. If the company's
average tax rate is 34 percent, what is its net income after taxes?

3.23 Income statement: Fraser Corporation has announced that its net income for the year
ended June 30, 2017, was $1,353,412. The company had EBITDA of $4,967,855 and its
depreciation and amortization expense was equal to $1,112,685. The company's average tax
rate is 34 percent.
What was its interest expense?
3.32 Cash flows: Analysts following the Tomkovick Golf Company were given the following
balance sheet information for the years ended June 30, 2017, and June 30, 2016:

In addition, it was reported that the company had a net income of $3,155,848 and that
depreciation expenses were equal to $212,366 in 2017. Assume amortization expense
was $0 in 2017.

a. Construct a 2017 cash flow statement for this firm.


b. Calculate the net cash provided by operating activities for the statement of cash flows.
c. What is the net cash used in investing activities?
d. Compute the net cash provided by financing activities.

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