FINANCIAL MANAGEMENT EXERCISES 1

FINANCIAL MANAGEMENT EXERCISES 1
CHAPTER 2: 1,2,3,8,10
EXERCISE 1: BUILDING BALANCE SHEET
PENGUIN PUCKS, INC
Balance Sheet
Current assets
Net Fixed assets

$5,100
$23,800

Total assets

$28900

Current liabilities
Long-term debt
Owner’s quity
Total liabilities and
OE

$4300
$7400
$17200
$28900

Net Working Capital = Current assets – Current Liabilities = $5,100 - 4300 = $800
EXERCISE 2: BUILDING INCOME STATEMENT
PAPA ROACH EXAMINATORS, INC
INCOME STATEMENT
SALES

Cost of goods sold
Depreciation
Earning before interests and taxes
Interest paid
Taxable income
Taxes (35%)
Net income

$586,000
247000
43000
296000
32000
264000
92400
171600

EXERCISE 3: Suppose the firm in Problem 2 paid out $73,000 in cash dividends. What is the
addition to retained earnings?
Suppose the firm in Problem 2 paid out $73000 in cash dividends, the addition to retained
earnings is:
171,600 – 73,000 = 98,600
EXERCISE 8: Calculate OCF
So Long, Inc., has sales of $27,500, costs of $13,280, depreciation expense of $2,300, and
interest expense of $1,105. If the tax rate is 35 percent, what is the operating cash fl ow, or OCF?
=Ebit + de -tax
The Operating cash flow is $11920 + 2300 – 3785.25 = $10434.75


EXERCISE 10:

Beginning net working capital (in 2008) = $2100 – 1380 = $720
Ending net working capital (in 2009) = $2250 – 1710 = $540
NWC = $540 – 720 = -$180