Management

MSFI 401 Orientation

Accounting

Sample Problems

1. A company’s most recent annual income statement had the following selected information:

Sales $1,000

Selling, general and administrative $200

No interest

A 50% tax rate

Cost of good sold of $400

Depreciation (broken out separately) of $100

No other expenses

What was the company’s net income?

1. A company sold $40,000 of products during the year to customers on credit.  During the year, customers paid $32,000 of their accounts receivable.  At the end of the year, accounts receivable were $12,000.  What were accounts receivable at the beginning of the year?

1. A company had sales of $25 million in 2014, operating income of $10 million and net income of $5 million.  At the beginning of the year, it had $25 million of assets and $15 million of liabilities.  If it paid $2 million in dividends and no new shares were issued or repurchased, what was the company’s ending shareholders’ equity?

1. Use the same company and same income statement in problem 1, along with the following information:

Changes in working capital required (operating) were an increase of $100

Capital expenditures of $50

Acquisitions of $150 (which it made on the last few days of the year)

On the last few days of the year, it borrowed $75 to partially pay for the acquisition

Dividends of $20

1. What was EBITDA for this year?

1. What was Free Cash Flow for this year?

1. What was the Change in Cash on the Balance Sheet for this year?

1. During 2014, a company had capital expenditures of $200.  Its beginning net fixed assets (or net plant, property & equipment) was $1,000.  Its ending net fixed assets were $1,100.  What was the company’s depreciation during the year, assuming it didn’t sell any assets?

1. A company had the following balance sheet at the end of the year:

Cash                         $145

A/R                          155

Inventories                150

Prepaid exp.                  20

Current assets         470

Net PP&E                 500

Assets                        970

Bank debt                100

A/P                        200

Wages payable         50

Taxes payable           75

Current liabilities        425

Long-term debt        245

Liabilities                670

Shareholders equity  300

Liabilities and         970        

Shareholders equity

What was the company’s working capital required (net operating working capital) at the end of the year?