Question

Question 1

Trevi Corporation recently reported an EBITDA of $31,200 and $9,700 of net income. The company has $6,600 interest expense, and the corporate tax rate is 35 percent. What was the company’s depreciation and amortization expense? Round to the nearest cent.

Answer

Question 2

Working capital: Winston Electronics reported the following information at its annual meetings. The company had cash and marketable securities worth $1,236,268, accounts payables worth $4,160,826, inventory of $7,121,886, accounts receivables of $3,488,415, notes payable worth $1,151,930, and other current assets of $121,634. What is the company’s net working capital?

Answer

Question 3

The difference between FIFO and LIFO is FIFO refers to the practice of firms, when making sales, assuming that the inventory that came in last (at a higher price) is being sold first. LIFO implies that a firm is selling the lower cost, older inventory first, leaving the higher cost, newer inventory on the balance sheet.

Question 3 options:

	True
	False

Question 4

Which of the following balance sheet items generally takes the longest time to convert to cash?

Question 4 options:

	marketable securities
	accounts payable
	inventory
	accounts receivable

Question 5

A firm’s net income may be greater than its net cash flows because the firm

Question 5 options:

	sold merchandise on credit
	did not pay dividends
	deferred income taxes
	deducted depreciation expense

Question 6

The average tax rate is

Question 6 options:

	the tax rate that is paid on the last dollar of income earned
	always higher than the marginal tax rate
	calculated by dividing the total taxes paid by the taxable income
	none of the above

Answer 1

Pb 1: Trevi Corporation recently reported an EBITDA of $31,200 and $9,700 of net income. The company has $6,600 interest expense, and the corporate tax rate is 35 percent. What was the company’s depreciation and amortization expense? Round to the nearest cent.

EBTDA = EBITDA - Int

= $ 31,200 - $ 6,600

= $ 24,600

EBT = EAT / ( 1 - Tax Rate )

= $ 9700 / ( 1- 0.35 )

= 14923.08

DA = EBTDA - EBT

= 24600 - 14923.08

= 9676.92

Working capital: Winston Electronics reported the following information at its annual meetings. The company had cash and marketable securities worth $1,236,268, accounts payables worth $4,160,826, inventory of $7,121,886, accounts receivables of $3,488,415, notes payable worth $1,151,930, and other current assets of $121,634. What is the company’s net working capital?

Working Capital = Current Assets - Current Liabilities

= [ Cash and Marketable Sec + Inventory + Accounts Receivables + Other Current Assets ] - [ Accounts Payables + Notes Payable ]

= [ $ 1236268 + 7121886 + 3488415 +121634 ] - [ 4160826 + 1151930 ]

= $ 11968203 - 5312756

= $ 6655447

Pb 3:

FIFO - First in first out, The item received first will be sold first

LIFO - Item received latest will be sold first

Thus the statement in Pb 3 is False.

Pb 4:

Marketable securities and AP, AR are On demand payable/ Receivable things. Where as to Convert Inventory in to cash takes some time.

Pb 5:

Net Income May be more than Net cash received based on the below mentioned COnditions

Option A: In case of credit sales, Income is considered based on accrual basis But still cash is not collected resulting into Net Income > Cash

Option B:

Didnt pay dividend - This After Tax Item wont affect Net Income and As Dividend not paid, It wont affect Cash also

OPtion C: Deferred Income Tax, This is also after Tax Item and wont affect Net Income and Cash

OPtion D: Depreciation

It is Non cash Item considering this will reduce the Net Income and wont affect Cash.

Thus OPtion A is correct.

Pb 6:

Average Tax = Tax Paid / Total Taxable Income .

Thus Option C is correct.