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mana 3325 exam 2 reviewbalance sheet - correct answer ✔✔estimate the firm's worth on a given date.
assets = liabilities + owner's equity
income statement - correct answer ✔✔compares expenses against revenue.
net profit = sales revenue - expenses
or
net sales - cogs = gross profit margin - operating expenses = net profit
statement of cash flows - correct answer ✔✔Financial statement that reports cash receipts and
disbursements related to a firm's three major activities: operations, investments, and financing.
pro formas - correct answer ✔✔projected or forecast financial statements
-helps owner transfer goals to reality
-built from company's history
-use industry norms if you're a new business
-statements help determine funds needed to operate new business
pro forma statement built - correct answer ✔✔1) develop a sales forecast and work down
2) set a profit target and work your way up (most use 2)
-adequate profit must show a reasonable return
-target profit must be translated into a net sales figure
net sales - cogs = gross profit margin - operating expenses = net profit
cash discount - correct answer ✔✔rate = interest/principle * time
, michelle booker's expected target income for the upcoming year is $78,500. the company's gross profit
margin should average 32.6% of sales, and its total operating expenses should be 24.7% of sales. to
achieve her target income, sales at michelle's company should be? - correct answer ✔✔sales = 100%
cogs =
margin expense = 32.6%
operating expense = 24.7%
net income = 78,500 & (margin exp - opert expense) = 7.9%
0.079(x) = 78,500 = 78,500/.079 = *$993,670*
*sales need to be $993,670 in order to get $78,500 net profit.*
arlington bait and tackle has a current ratio of 2:61:1. its owner could liquidate its current assets at ___%
of their book value and still manage to pay its current liabilities in full. - correct answer ✔✔2:61:1 =
1/2.61 = *.383 or 38.3%*
generally, it is a sound business practice to take advantage of cash discounts. the money saved by paying
invoices promptly is free to be used elsewhere. conversely, there is an implicit (opportunity) cost of
foregoing a cash discount. by forgoing a cash discount, the small business owner is, in effect, paying an
annual interest rate to retain the use of the discounted amount for the remainder of the credit period.
for example, assume that Jill anticipates she will receive invoices for $500 from the vendors offering cash
discounts of 3/10, net 45.
a) how much will Jill save by paying within the discount period?
b) what will it cost Jill to retain the use of credit for 45 days?
c) what is the annual interest rate of the "loan" (ie. what is the annual rate of 3/10, net 45)? - correct
answer ✔✔3/10, net 45 = if she pays within 10 days she gets a 3% discount. if she doesn't pay within 10
days she pays full amount $500 in 45 days.
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