Final Exam Formulas

Gino's Winery has net working capital of $29,800, net fixed assets of $64,800, current liabilities
of $34,700, and long-term debt of $23,000. What is the value of theowner’s' equity?

• $36,900

• $66,700

• $71,600

• $89,400

• $106,300

Answer explanation

Owners' equity = $29,800 + $64,800 - $23,000 = $71,600

The Good Life Store has sales of $79,600. The variable costs are $18,700. Depreciation is $8,300 and the tax rate is 34 percent. The cost of goods sold is $48,200. What is the net income?

• $2,904

• $8,382

• $11,204

• $14,660

• $16,682

Answer explanation

Net income = ($79,600 - $48,200 - $18,700 - $8,300)(1 - 0.34) = $2,904

Keyser Materials paid $7,500 in dividends and $28,311 in interest over the past year while net
working capital increased from $13,506 to $18,219. The company purchased $42,000 in net new
fixed assets and had depreciation expenses of $16,805. During the year, the firm issued $25,000
in net new equity and paid off $11,000 in long-term debt. The cash flow from assets or cash flow
of the firm or free cash flow is $_______?

Answer explanation

Cash flow from assets = ($28,311 + $11,000) + ($7,500 - $25,000) = $21,811

The Pretzel Factory has net sales of $821,300 and costs of $698,500. The depreciation expense is $28,400 and the interest paid is $8,400. What is the amount of the firm's operating cash flow if the tax rate is 34 percent?

Answer explanation

EBIT = $821,300 - $698,500 - $28,400 = $94,400
Tax = ($94,400 - $8,400)  0.34 = $29,240
Operating CF = $94,400 + $28,400 - $29,240 = $93,560

Russell's Hardware has an inventory of $218,000, equity of $421,800, total assets of
$647,700, and sales of $587,200. What is the common-size percentage for the inventory
account?

• 26.81 percent

• 33.66 percent

• 37.12 percent

• 49.09 percent

• 51.68 percent

Answer explanation

Inventory common-size percent = $218,000/$647,700 = 33.66 percent

Galaxy Sales has sales of $746,700, cost of goods sold of $603,200, and inventory of
$94,300. How long on average does it take the firm to sell its inventory?

• 6.40 days

• 7.23 days

• 48.68 days

• 57.06 days

• 61.10 days

Answer explanation

Inventory turnover = $603,200/$94,300 = 6.39661
Days sales in inventory = 365/6.39661 = 57.06 days

Wilson's Realty has total assets of $46,800, net fixed assets of $37,400, current liabilities
of $6,100, and long-term liabilities of $24,600. How much is the total debt ratio?

• 0.41

• 0.60

• 0.66

• 0.78

• 0.86

Answer explanation

Total debt ratio = ($6,100 + $24,600)/$46,800 = 0.66

One year ago, Theresa purchased 600 shares of Outland Co. stock for $3,600. The stock does not pay any regular dividends but it did pay a special dividend of $0.25 a share last week. This
morning, she sold her shares for $7.25 a share. What was the total return on this investment?

• 18.00 percent

• 20.83 percent

• 22.50 percent

• 25.00 percent

• 27.33 percent

Answer explanation

Purchase price = $3,600/600 shares = $6 a share
Total return = ($7.25 - $6 + $0.25)/$6 = 25 percent

The nominal return in your investment is 10% and the inflation has been 3%, what is your exact
real return?

• 7%

• 6.8%

• 10%

• None of the above

Answer explanation

1+ r=(1+R)/(1+i)

r=1.1/1.03-1=6.8%

Your annual return for the last 5 years are:15%, 20%, -30%, 10%, 20% respectively. What is the
standard deviation of your last 5 annual returns?

Answer explanation

Average return=7%
Standard deviation=
𝜎 = Square Root (15 ― 7)2 + (20 ― 7)2 + ( ―30 ― 7)2 + (10 ― 7)2 + (20 ― 7)2/4 = 21.09 %