Question

1.   Thomas Corp., has current assets of $8,500, net fixed assets of $32,370, current liabilities of $6,700, and long-term debt of $15,200. What is the value of the shareholders’ equity account for this firm? How much is net working capital?

2.   Freddie’s Fish Farm, Inc., has sales of $725,000, costs of $317,300, depreciation expense of $48,000, interest expense of 28,000, and a tax rate of 21 percent. What is          the net income for this firm?

3.   Deprez, Inc., has sales of $85,425, costs of$28,500, depreciation expense of $2,100,         and interest expense of $2,300. If the tax rate is 21 percent, what is the operating cash flow, or OCF?

Answer 1

1.Thomas Corp.
Assets	$	Liabilities & SH equity	$
Current assets	8500	Current liabilities	6700
Net fixed assets	32370	Long-term debt	15200
		SH Equity(Bal.fig.)	18970
Total assets	40870	Total liabilities & SH Equity	40870

Answer: SH Equity = $ 18970

ie. 8500+32370-6700-15200= 18970

Net working capital= Current assets-Current Liabilities

ie.8500-6700=

1800

2.Freddie’s Fish Farm, Inc.
	$
Sales	725000
Costs	-317300
Gross profit	407700
Depreciation	-48000
EBIT	359700
Interest expense	-28000
EBT	331700
Tax at 21%	-69657
Net Income	262043

3.Deprez, Inc.
	$
Sales	85425
Costs	-28500
Gross profit	56925
Depreciation	-2100
EBIT	54825
Interest expense	-2300
EBT	52525
Tax at 21%	-11030.25
Net Income	41494.75

OCF=EBIT-Tax expense+Depreciation

ie.54825-11030.25+2100=

45894.75