Basic Numerical Problems

1. Calculate Total Assets

Q: A company has Cash of $5,000, Accounts Receivable of $10,000, Inventory of $7,000, and
Equipment of $15,000. What is the total asset value?
A:
Total Assets = Cash + Accounts Receivable + Inventory + Equipment
= $5,000 + $10,000 + $7,000 + $15,000
= $37,000

2. Calculate Total Liabilities

Q: A company has a Loan Payable of $20,000, Accounts Payable of $5,000, and Wages Payable of
$3,000. What is the total liability amount?
A:
Total Liabilities = Loan Payable + Accounts Payable + Wages Payable
= $20,000 + $5,000 + $3,000
= $28,000

3. Compute Shareholders’ Equity

Q: If a company has total assets of $100,000 and total liabilities of $60,000, what is the shareholders’
equity?
A:
Shareholders' Equity = Total Assets - Total Liabilities
= $100,000 - $60,000
= $40,000

4. Calculate Working Capital

Q: A company has Current Assets of $50,000 and Current Liabilities of $30,000. What is the working
capital?
A:
Working Capital = Current Assets - Current Liabilities
= $50,000 - $30,000
= $20,000

5. Find Debt-to-Equity Ratio

Q: A company has Total Liabilities of $80,000 and Shareholders’ Equity of $40,000. What is the Debt-
to-Equity ratio?
A:
Debt-to-Equity Ratio = Total Liabilities / Shareholders’ Equity
= $80,000 / $40,000
= 2.0

Intermediate Numerical Problems

6. Compute Current Ratio
Q: A company has Current Assets of $120,000 and Current Liabilities of $60,000. What is the Current
Ratio?
A:
Current Ratio = Current Assets / Current Liabilities
= $120,000 / $60,000
= 2.0

7. Find Quick Ratio

Q: A company has Cash of $40,000, Accounts Receivable of $30,000, Inventory of $50,000, and
Current Liabilities of $60,000. What is the Quick Ratio?
A:
Quick Ratio = (Cash + Accounts Receivable) / Current Liabilities
= ($40,000 + $30,000) / $60,000
= 1.17

8. Calculate Retained Earnings

Q: A company has Beginning Retained Earnings of $20,000, Net Income of $15,000, and Paid
Dividends of $5,000. What is the ending retained earnings?
A:
Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends
= $20,000 + $15,000 - $5,000
= $30,000

9. Find Net Worth of a Business

Q: A business has Total Assets of $500,000 and Total Liabilities of $320,000. What is the Net Worth?
A:
Net Worth = Total Assets - Total Liabilities
= $500,000 - $320,000
= $180,000

10. Calculate Inventory Turnover Ratio

Q: If a company has Cost of Goods Sold of $90,000 and Average Inventory of $30,000, what is the
Inventory Turnover Ratio?
A:
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
= $90,000 / $30,000
= 3.0

Advanced Numerical Problems

11. Find Gross Profit Margin

Q: A company has Revenue of $200,000 and Cost of Goods Sold of $120,000. What is the Gross Profit
Margin?
A:
Gross Profit = Revenue - Cost of Goods Sold
= $200,000 - $120,000 = $80,000

Gross Profit Margin = (Gross Profit / Revenue) × 100

= ($80,000 / $200,000) × 100
= 40%

12. Compute Return on Assets (ROA)

Q: A company has Net Income of $50,000 and Total Assets of $250,000. What is the Return on
Assets?
A:
ROA = (Net Income / Total Assets) × 100
= ($50,000 / $250,000) × 100
= 20%

13. Calculate Return on Equity (ROE)

Q: A company has Net Income of $40,000 and Shareholders' Equity of $160,000. What is ROE?
A:
ROE = (Net Income / Shareholders’ Equity) × 100
= ($40,000 / $160,000) × 100
= 25%

14. Find Fixed Asset Turnover Ratio

Q: If a company has Net Sales of $500,000 and Net Fixed Assets of $250,000, what is the Fixed Asset
Turnover Ratio?
A:
Fixed Asset Turnover = Net Sales / Net Fixed Assets
= $500,000 / $250,000
= 2.0

15. Compute Earnings Per Share (EPS)

Q: A company has Net Income of $90,000 and 30,000 outstanding shares. What is EPS?
A:
EPS = Net Income / Number of Outstanding Shares
= $90,000 / 30,000
= $3.00

Challenging Numerical Problems

16. Find Book Value per Share

Q: A company has Total Equity of $500,000 and 50,000 outstanding shares. What is the Book Value
per Share?
A:
Book Value per Share = Total Equity / Number of Shares
= $500,000 / 50,000
= $10.00

17. Compute Equity Ratio

Q: A company has Shareholders’ Equity of $250,000 and Total Assets of $600,000. What is the Equity
Ratio?
A:
Equity Ratio = Shareholders' Equity / Total Assets
= $250,000 / $600,000
= 0.42 (42%)

18. Calculate Asset Turnover Ratio

Q: A company has Total Revenue of $800,000 and Total Assets of $400,000. What is the Asset
Turnover Ratio?
A:
Asset Turnover Ratio = Total Revenue / Total Assets
= $800,000 / $400,000
= 2.0

19. Compute Interest Coverage Ratio

Q: If a company has EBIT (Earnings Before Interest & Tax) of $120,000 and Interest Expense of
$40,000, what is the Interest Coverage Ratio?
A:
Interest Coverage Ratio = EBIT / Interest Expense
= $120,000 / $40,000
= 3.0

20. Find Dividend Yield

Q: A company pays a Dividend per Share of $2.50, and the Market Price per Share is $50. What is the
Dividend Yield?
A:
Dividend Yield = (Dividend per Share / Market Price per Share) × 100
= ($2.50 / $50) × 100
= 5%

 . Adjusting for Depreciation

Q: A company purchases machinery for $500,000 with a useful life of 10 years and a salvage value of
$50,000. Using straight-line depreciation, calculate the book value after 3 years.

A:
Annual Depreciation = (Cost - Salvage Value) / Useful Life
= ($500,000 - $50,000) / 10
= $45,000 per year

Book Value after 3 years = Cost - (Depreciation × Years)

= $500,000 - ($45,000 × 3) = $365,000

2. Debt-Equity Ratio with Additional Borrowing

Q: A company has total equity of $2,000,000 and total liabilities of $1,000,000. If the company
borrows an additional $500,000, calculate the new Debt-to-Equity Ratio.

A:
Old Debt-to-Equity Ratio = Liabilities / Equity
= $1,000,000 / $2,000,000 = 0.5

New Debt-to-Equity Ratio = New Liabilities / Equity

= ($1,000,000 + $500,000) / $2,000,000 = 0.75

3. Adjusting for Bad Debt Provision

Q: A company has Accounts Receivable of $200,000, but 5% is expected to be uncollectible. What is

the adjusted value of Net Receivables?

A:
Allowance for Doubtful Accounts = 5% of $200,000
= $10,000

Net Receivables = Accounts Receivable - Allowance

= $200,000 - $10,000 = $190,000

4. Revaluation of Fixed Assets

Q: A company originally purchased land for $300,000. After 5 years, its market value is $500,000.
How does this affect the balance sheet?

A:
Under historical cost accounting, land remains at $300,000 in the balance sheet.
However, under revaluation accounting, land is adjusted to $500,000, and a $200,000 revaluation
surplus is added to equity.

5. Computing Intangible Assets (Goodwill Calculation)

Q: Company A acquires Company B for $1,000,000. The net fair value of B’s assets is $850,000. What
is the goodwill recorded on the balance sheet?

A:
Goodwill = Purchase Price - Net Asset Value
= $1,000,000 - $850,000 = $150,000
6. Working Capital Turnover

Q: A company has Net Sales of $1,500,000, Current Assets of $400,000, and Current Liabilities of
$250,000. Compute the Working Capital Turnover Ratio.

A:
Working Capital = Current Assets - Current Liabilities
= $400,000 - $250,000 = $150,000

Working Capital Turnover = Net Sales / Working Capital

= $1,500,000 / $150,000 = 10 times

7. Cash Flow from Operating Activities (Indirect Method)

Q:

 Net Income = $80,000

 Depreciation = $20,000

 Increase in Accounts Receivable = $5,000

 Decrease in Accounts Payable = $10,000

Compute Cash Flow from Operating Activities.

A:
CFO = Net Income + Non-Cash Expenses - Change in Working Capital
= $80,000 + $20,000 - $5,000 - $10,000
= $85,000

8. Price-to-Book Ratio (P/B Ratio)

Q: If a company has Total Equity of $5,000,000, 100,000 outstanding shares, and a market price per
share of $80, compute the P/B Ratio.

A:
Book Value per Share = Total Equity / Shares
= $5,000,000 / 100,000 = $50

P/B Ratio = Market Price / Book Value

= $80 / $50 = 1.6

9. Adjusting Liabilities for Lease Obligations

Q: A company has $2,000,000 in long-term debt. It enters a capital lease worth $500,000. What is
the new Total Liabilities?
A:
New Total Liabilities = Existing Debt + Lease Obligation
= $2,000,000 + $500,000 = $2,500,000

10. Dividend Payout Ratio

Q: A company has Net Income of $200,000 and declares Dividends of $50,000. Compute the
Dividend Payout Ratio.

A:
Dividend Payout Ratio = Dividends / Net Income
= $50,000 / $200,000 = 25%

11-20. More Complex Problems

11. Find Return on Capital Employed (ROCE): ROCE = EBIT / (Total Assets - Current Liabilities).

12. Calculate Earnings Before Interest and Taxes (EBIT) from Net Income, Taxes, and Interest
Expense.

13. Determine Tangible Net Worth: Net Worth - Intangible Assets.

14. Find Cash Conversion Cycle: CCC = DIO + DSO - DPO.

15. Estimate Capital Structure using Debt Ratio and Equity.

16. Calculate Free Cash Flow (FCF) using Operating Cash Flow and Capital Expenditures.

17. Compute Asset Turnover Ratio using Net Sales and Total Assets.

18. Find Interest Coverage Ratio: EBIT / Interest Expense.

19. Determine Leverage Ratio: Total Debt / Total Equity.

20. Calculate Economic Value Added (EVA): EVA = NOPAT - (Capital × WACC).

📌 1. Return on Capital Employed (ROCE)

Q: A company has an EBIT of $500,000, Total Assets of $2,500,000, and Current Liabilities of
$500,000. Calculate ROCE.

A:
Formula:

ROCE=EBITTotal Assets−Current LiabilitiesROCE = \frac{EBIT}{Total\ Assets - Current\

Liabilities}ROCE=Total Assets−Current LiabilitiesEBIT

Solution:

ROCE=500,0002,500,000−500,000=500,0002,000,000=25%ROCE = \frac{500,000}{2,500,000 -
500,000} = \frac{500,000}{2,000,000} = 25\%ROCE=2,500,000−500,000500,000=2,000,000500,000
=25%
📌 2. Earnings Before Interest & Taxes (EBIT) Calculation

Q: A company has Net Income of $250,000, Taxes of $50,000, and Interest Expense of $30,000.
Calculate EBIT.

A:
Formula:

EBIT=Net Income+Taxes+Interest ExpenseEBIT = Net\ Income + Taxes + Interest\

ExpenseEBIT=Net Income+Taxes+Interest Expense

Solution:

EBIT=250,000+50,000+30,000=330,000EBIT = 250,000 + 50,000 + 30,000 =

330,000EBIT=250,000+50,000+30,000=330,000

📌 3. Tangible Net Worth Calculation

Q: A company has Total Equity of $1,000,000 and Intangible Assets of $200,000. Find Tangible Net
Worth.

A:
Formula:

Tangible Net Worth=Total Equity−Intangible AssetsTangible\ Net\ Worth = Total\ Equity - Intangible\
AssetsTangible Net Worth=Total Equity−Intangible Assets

Solution:

Tangible Net Worth=1,000,000−200,000=800,000Tangible\ Net\ Worth = 1,000,000 - 200,000 =

800,000Tangible Net Worth=1,000,000−200,000=800,000

📌 4. Cash Conversion Cycle (CCC)

Q: A company has:

 Days Inventory Outstanding (DIO) = 40 days

 Days Sales Outstanding (DSO) = 30 days

 Days Payable Outstanding (DPO) = 35 days

Find CCC.

A:
Formula:

CCC=DIO+DSO−DPOCCC = DIO + DSO - DPOCCC=DIO+DSO−DPO

Solution:

CCC=40+30−35=35 daysCCC = 40 + 30 - 35 = 35\ \text{days}CCC=40+30−35=35 days

📌 5. Capital Structure using Debt Ratio & Equity

Q: A company has a Debt Ratio of 40% and Equity of $600,000. Find Total Debt and Total Assets.

A:
Formula:

Debt Ratio=Total DebtTotal AssetsDebt\ Ratio = \frac{Total\ Debt}{Total\

Assets}Debt Ratio=Total AssetsTotal Debt Total Assets=Total Debt+EquityTotal\ Assets = Total\ Debt +
EquityTotal Assets=Total Debt+Equity

Let Total Debt = X and Total Assets = X + 600,000

Since Debt Ratio = 40%,

XX+600,000=0.4\frac{X}{X + 600,000} = 0.4X+600,000X=0.4

Solving for X:

X=0.4(X+600,000)X = 0.4 (X + 600,000)X=0.4(X+600,000) X=0.4X+240,000X = 0.4X +

240,000X=0.4X+240,000 X−0.4X=240,000X - 0.4X = 240,000X−0.4X=240,000 0.6X=240,0000.6X =
240,0000.6X=240,000 X=400,000X = 400,000X=400,000

Total Debt = $400,000

Total Assets = $400,000 + $600,000 = $1,000,000

📌 6. Free Cash Flow (FCF) Calculation

Q: A company has Operating Cash Flow (OCF) = $800,000 and Capital Expenditures (CapEx) =
$200,000. Compute FCF.

A:
Formula:

FCF=OCF−CapExFCF = OCF - CapExFCF=OCF−CapEx

Solution:

FCF=800,000−200,000=600,000FCF = 800,000 - 200,000 = 600,000FCF=800,000−200,000=600,000

📌 7. Asset Turnover Ratio

Q: A company has Net Sales of $1,500,000 and Total Assets of $500,000. Compute Asset Turnover
Ratio.

A:
Formula:

Asset Turnover Ratio=Net SalesTotal AssetsAsset\ Turnover\ Ratio = \frac{Net\ Sales}{Total\

Assets}Asset Turnover Ratio=Total AssetsNet Sales

Solution:
Asset Turnover=1,500,000500,000=3.0Asset\ Turnover = \frac{1,500,000}{500,000} =
3.0Asset Turnover=500,0001,500,000=3.0

📌 8. Interest Coverage Ratio

Q: A company has EBIT of $400,000 and Interest Expense of $50,000. Compute Interest Coverage
Ratio.

A:
Formula:

Interest Coverage Ratio=EBITInterest ExpenseInterest\ Coverage\ Ratio = \frac{EBIT}{Interest\

Expense}Interest Coverage Ratio=Interest ExpenseEBIT

Solution:

Interest Coverage=400,00050,000=8.0Interest\ Coverage = \frac{400,000}{50,000} =

8.0Interest Coverage=50,000400,000=8.0

📌 9. Leverage Ratio Calculation

Q: A company has Total Debt of $700,000 and Total Equity of $1,300,000. Compute Leverage Ratio.

A:
Formula:

Leverage Ratio=Total DebtTotal EquityLeverage\ Ratio = \frac{Total\ Debt}{Total\

Equity}Leverage Ratio=Total EquityTotal Debt

Solution:

Leverage Ratio=700,0001,300,000=0.54Leverage\ Ratio = \frac{700,000}{1,300,000} =

0.54Leverage Ratio=1,300,000700,000=0.54

📌 10. Economic Value Added (EVA) Calculation

Q: A company has:

 Net Operating Profit After Tax (NOPAT) = $500,000

 Total Capital Invested = $2,000,000

 Weighted Average Cost of Capital (WACC) = 8%

Compute EVA.

A:
Formula:

EVA=NOPAT−(Capital Invested×WACC)EVA = NOPAT - (Capital\ Invested \times WACC)EVA=NOPAT−

(Capital Invested×WACC)
Solution:

EVA=500,000−(2,000,000×0.08)EVA = 500,000 - (2,000,000 \times

0.08)EVA=500,000−(2,000,000×0.08) EVA=500,000−160,000EVA = 500,000 -
160,000EVA=500,000−160,000 EVA=340,000EVA = 340,000EVA=340,000

✅ Summary of Complex Calculations

Question Formula Used Final Answer

ROCE EBIT / (Total Assets - Current Liabilities) 25%

EBIT Net Income + Taxes + Interest $330,000

Tangible Net Worth Total Equity - Intangibles $800,000

CCC DIO + DSO - DPO 35 days

Debt Calculation Debt Ratio = Debt / Assets Debt = $400,000, Assets = $1,000,000

FCF OCF - CapEx $600,000

Asset Turnover Net Sales / Assets 3.0

Interest Coverage EBIT / Interest Expense 8.0

Leverage Ratio Debt / Equity 0.54

NOPAT - (Capital × WACC) $340,000

EVA

Practice Set 1

Problem:A company has the following financial data at the end of the year:

Cash: $50,000

Accounts Receivable: $80,000

Inventory: $120,000

Land: $200,000

Building: $500,000

Accumulated Depreciation: $100,000

Accounts Payable: $75,000

Bank Loan: $250,000

Common Stock: $300,000

Retained Earnings: ?

Prepare the balance sheet and determine the Retained Earnings.

Solution:Total Assets:Cash + Accounts Receivable + Inventory + Land + (Building - Accumulated
Depreciation)= $50,000 + $80,000 + $120,000 + $200,000 + ($500,000 - $100,000)= $850,000

Total Liabilities & Equity:Accounts Payable + Bank Loan + Common Stock + Retained Earnings =
$850,000

$75,000 + $250,000 + $300,000 + Retained Earnings = $850,000Retained Earnings = $225,000

Practice Set 2Problem:XYZ Ltd. has the following balances:

Plant and Machinery: $600,000

Cash: $40,000

Accounts Receivable: $90,000

Inventory: $150,000

Loan from Bank: $350,000

Accounts Payable: $110,000

Wages Payable: $40,000

Common Stock: $300,000

Retained Earnings: ?

Determine Retained Earnings.

Solution:Total Assets:Plant and Machinery + Cash + Accounts Receivable + Inventory= $600,000 +

$40,000 + $90,000 + $150,000= $880,000

Total Liabilities & Equity:Loan from Bank + Accounts Payable + Wages Payable + Common Stock +
Retained Earnings = $880,000

$350,000 + $110,000 + $40,000 + $300,000 + Retained Earnings = $880,000Retained Earnings =

$80,000

Practice Set 3Problem:A firm reports the following figures:

Cash: $25,000

Inventory: $130,000

Land: $350,000

Equipment: $400,000

Accumulated Depreciation: $50,000

Accounts Payable: $100,000

Short-term Loans: $150,000

Common Stock: $500,000

Retained Earnings: ?

Determine the missing Retained Earnings.

Solution:Total Assets:Cash + Inventory + Land + (Equipment - Accumulated Depreciation)= $25,000 +
$130,000 + $350,000 + ($400,000 - $50,000)= $855,000

Total Liabilities & Equity:Accounts Payable + Short-term Loans + Common Stock + Retained Earnings =
$855,000

$100,000 + $150,000 + $500,000 + Retained Earnings = $855,000Retained Earnings = $105,000

Practice Set 4Problem:A company provides the following information:

Cash: $90,000

Marketable Securities: $50,000

Accounts Receivable: $200,000

Inventory: $180,000

Equipment: $700,000

Accumulated Depreciation: $150,000

Accounts Payable: $170,000

Bank Loan: $400,000

Common Stock: $300,000

Retained Earnings: ?

Calculate Retained Earnings.

Solution:Total Assets:Cash + Marketable Securities + Accounts Receivable + Inventory + (Equipment -

Accumulated Depreciation)= $90,000 + $50,000 + $200,000 + $180,000 + ($700,000 - $150,000)=
$1,070,000

Total Liabilities & Equity:Accounts Payable + Bank Loan + Common Stock + Retained Earnings =
$1,070,000

$170,000 + $400,000 + $300,000 + Retained Earnings = $1,070,000Retained Earnings = $200,000

Practice Set 5Problem:A startup records the following:

Cash: $35,000

Investments: $90,000

Inventory: $60,000

Equipment: $250,000

Accumulated Depreciation: $30,000

Accounts Payable: $80,000

Long-term Debt: $120,000

Common Stock: $160,000

Retained Earnings: ?
Solution:Total Assets:Cash + Investments + Inventory + (Equipment - Accumulated Depreciation)=
$35,000 + $90,000 + $60,000 + ($250,000 - $30,000)= $405,000

Total Liabilities & Equity:Accounts Payable + Long-term Debt + Common Stock + Retained Earnings =
$405,000

$80,000 + $120,000 + $160,000 + Retained Earnings = $405,000Retained Earnings = $45,000