Posted: January 3rd, 2023

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1. A company had cash and marketable securities worth $100,000 accounts payables worth $60,000 inventory of $2,501,500, accounts receivables of $5,500,000 short-term notes payable worth $200,000, other current liabilities of 100,000, and other current assets of $212,800. Calculate the company net working capital and describe how managers manage the firm working capital. (2 Marks)

2. Your parents have given you $2,500 a year before your graduation so that you can take a trip when you graduate. You wisely decide to invest the money in a bank CD that pays 8% interest. You know that the trip costs $2,600 right now and that inflation for the year is predicted to be 3%. Will you have enough money in a year to purchase the trip? Show your calculations. (2 Marks)

3. If the following financial information related to XYZ Company. Total Revenues last year $870, depreciation expenses $40, costs of goods sold $350, and interest expenses $50. At the end of the year, current assets were $100 and current liabilities were $105. The company has an average tax rate of 30%. Calculate the net income for XYZ Company by setting up an income statement. (2 Marks)

4. Calculate the common-size balance sheet from the following information for the company: (2 Marks)

Cash 50,000 Accts/Pay 20,800

Acct/Rec 55,000 Accrued expenses 40,000

Inventories 300,500 Short-term N/P 9,700

Total Current assets 405,500 Current liabilities 70,500

Net fixed assets 102,000 Long-term debt 70,000

Total assets 507,500 Total liabilities 140,500

Owner’s equity 367,000

Total liabilities and owners’ equity 507,500

5. ten years ago, Amanda Cortez invested $20,000 in an account paying an annual interest rate of 5%. What is the value of the investment today? What is the interest on interest earned on this investment? (2 Marks)

6. You have just won a lottery that promises an annual payment of $130,000 beginning immediately. You will receive a total of 12 payments. If you can invest the cash flow in an investment that is paying 7% annually, what is the present value of this annuity? (2 Marks).

7. What are the five important accounting principles that company follow when writing their financial statements. Using your own words, explain each principle (3 Marks).

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