Question

PLEASE SHOW YOUR WORK WITH FORMULAS.

1.At the end of the year 2017 the assets of the company X were 400 mill EUR and equity was 300 mill EUR. At the end of the year 2018 assets in the same company   were 500 mill EUR and equity was 400 mill. The net profit in 2018 was 100 mill EUR.

a)Calculate ROA and ROE for the year 2018.

b)What was indebtedness in the years 2017 and 2018?

c)What is the change in indebtedness in 2018 compared with 2017 expressed in index and index points (interpretation is required as well).

2. In the income statement of the company “Astra, Ltd.” for 2010 you have found that the company had € 40 mill of income before tax (profit before tax) and the net profit (after tax) was € 35 mill. The national income tax rate is 20%. How much was the effective income tax rate and the income tax base for this company in 2010? (4 points)

a) The effective tax rate was 12.5%, the tax base was € 40 mill.

b) The effective tax rate was 20%, the tax base was € 25 mill.

c) The effective tax rate was 12.5%, the tax base was € 35 mill.

d) The effective tax rate was 12.5%, the tax base was € 25mill.

e) The effective tax rate was 20%, the tax base was € 35 mill.

3. A company produced 50,000 products last year, but sold only 30,000 of them. The selling price of a product was € 200 and the cost per unit was € 100. How much were revenues, costs, expenses and profit? (4 points)

a) Revenues were € 6 mill., costs were € 3 mill, expenses were € 5 mill and profit was € 1 mill.

b) Revenues were € 6 mill., costs were € 5 mill., expenses were € 3 mill and profit was € 3 mill.

c) Revenues were € 10 mill., costs were € 5 mill, expenses were € 3 mill and profit was € 5 mill.

d) Revenues were € 10 mill., costs were € 3 mill, expenses were € 5 mill and profit was € 5 mill.

e) Revenues were € 6 mill., costs were 5 mill., expenses were € 5 mill and profit was € 1mill.

4.

Company Z has production capacities that allow production of 20.000 units of product per year. Market analysis showed that 8.000 products could be sold in the domestic market at 50 EUR per piece. Total fixed costs are 80.000 EUR per year, total variable costs increase proportionally up to 10.000 produced units, beyond this production limit they increase progressively. Total variable costs for 8.000 products are 240.000 EUR. Company Z could increase the capacity usage rate by exporting 2.000 products in Croatia. The problem is that the price in Croatia would have to be lower, only 35 EUR per piece.

Which of the following statement is correct?

1. A company should not accept the proposed export deal because the selling price (35 EUR) is lower than the unit cost (40 EUR).
2. A company should not accept the proposed export deal because the revenues generated in Croatian market (70,000 EUR) are not enough to cover all the variable costs (60,000 EUR) plus corresponding portion of fixed costs (16,000 EUR).
3. A company should not accept the proposed export deal because the revenues generated in Croatian market (70,000 EUR) are not enough to cover all fixed costs (80,000) and therefore the existing net income will decrease for 10,000 EUR.
4. A company should accept the proposed export deal because the revenues generated in Croatian market (70,000 EUR) are enough to cover all additional costs related to the deal (60,000 EUR) and therefore the existing net income will increase for 10,000 EUR.
5. A company should accept the proposed export deal because the revenues generated in Croatian market (70,000 EUR) are enough to cover fixed costs related to the deal (16,000 EUR) and therefore the existing net income will increase for 16,000 EUR

5. a)Derive the equation for the break-even point assuming linear variable costs, draw a corresponding graph, and explain the importance of cost management on the basis of this equation. (7 points)

b)Explain how we determine and use the break-even point in the case of heterogeneous production. (6 points)

Answer 1

doubts are welcomed

thanks