Answer:
The type of business risk that poses the greatest threat to a company's overall success is Competitive Risk.
Explanation:
Business risk threatens a company's ability to meet its target or achieve its financial goals. They could be caused by what you have control of such as operations and what you cannot control such as natural disaster and unfavorable government policy.
However, the greatest threat to a company's overall success is competitive risk.
Competitive risk is the chance that competitive forces will prevent you from achieving your overall business goal. It is often associated with the risk of declining business revenue or margins due to the actions of a competitor.
Common sense might say that a monopolist would produce more output than a competitive industry facing the same marginal costs. After all, if you’re making a profit, you want to sell as much as you can, don’t you? What’s wrong with this line of reasoning? Why do monopolistic industries sell less than competitive industries?
Explanation:
Even though a monopolist usually controls the market price of the commodity it may not be producing more because a monopolist overall goal is to achieve profit maximization.
However, producing more output would not be in their best interest despite been the market maker because it will decrease the price of the goods in the market due to over supply, leading to lower profit for them.
The reason why monopolistic industries sell less than competitive industries because:
Competitive market attracts more customers based on their competitive pricing and benefitsAccording to the given question, we can see that we need to show why a monopolist would have to produce more output in order to make profit, based on the marginal costs of both markets.
As a result of this, we can see that a monopolistic market which is one who seems to be totally dominant in the market would sell less than competitive industries because the competitive market attracts more customers based on their competitive pricing and benefits.
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The Porch Cushion Company manufactures foam cushions. The number of cushions to be produced in the upcoming three months follows:Number of foam cushions to be produced in July13,000Number of foam cushions to be produced in August19,000Number of foam cushions to be produced in September12,000Each cushion requires 2 pounds of the foam used as stuffing. The company has a policy that the ending inventory of foam each month must be equal to 30% of the following month's expected production needs. How many pounds of foam does The Porch Cushion Company need to purchase in August?
To calculate the number of pounds of foam The Porch Cushion Company needs to purchase in August, add the number of cushions planned for that month to the ending inventory of foam in August, and multiply by the foam needed for each cushion.
Explanation:To calculate the number of pounds of foam The Porch Cushion Company needs to purchase in August, we need to find the total number of foam cushions expected to be produced in the two following months (August and September) and multiply it by the amount of foam needed for each cushion.
In August, the company plans to produce 19,000 cushions. In September, they plan to produce 12,000 cushions. According to the company's policy, the ending inventory of foam in August should be 30% of the expected production in September, which is 0.3 * 12,000 = 3,600 cushions.
To find the total number of cushions for which foam needs to be purchased in August, we sum the cushions to be produced in August and the ending inventory of foam in August: 19,000 + 3,600 = 22,600 cushions.
Since each cushion requires 2 pounds of foam, the company needs to purchase 22,600 * 2 = 45,200 pounds of foam in August.
Savanna Company is considering two capital investment proposals. Relevant data on each project are as follows: Project Red Project BlueCapital investment $440,000 $640,000Annual net income $25,000 $60,000Estimated useful life 8 years 8 yearsDepreciation is computed by the straight-line method with no salvage value. Savanna requires an 8% rate of return on all new investments. The present value of 1 for 8 periods at 8% is .540 and the present value of an annuity of 1 for 8 periods is 5.747.(a) Compute the cash payback period for each project.(b) Compute the net present value for each project.(c) Compute the annual rate of return for each project.(d) Which project should Savanna select?
Answer:
(a) Cash payback period:
Project Red = 5.5 years
Project blue = 4.6 years
(b) Net present value for project Red = $19,760
Net present value for project Blue =$164,580
(c) Annual rate of return:
Project Red =11.36%
Project Blue =18.75%
(d) Project Blue
Explanation:
Given Data;
Project Blue Capital investment = $640,000
Project Red Capital investment = $440,000
Project Red Annual Net income = $ 25,000.
Project Blue Annual Net income = $ 60,000
Annual depreciation Project Red = (440000/8)
= 55,000
Annual depreciation Project Blue = (640000/8)
= 80,000
Annual cash inflow project A = $ 80,000
Annual cash inflow project B = $140,000
(a)
Cash payback period = Initial investment/cash flow per period
Project Red = 440000 /80000
= 5.5 years
Project blue = 640000/ 140000
= 4.6 years
(b)
Project Red Present value of cash inflows = 80000 ×5.747
= $459,760
Project Blue Present value of cash inflows =140000×5.747
= 804580
Net present value for project Red = $459,760 - $440,000
= $19,760
Net present value for project Blue = 804580 - $640,000
=$164,580
(c) Annual rate of return:
Project Red = $25,000 / ($440000)/2
=11.36%
Project Blue = $60000/(640000/2)
=18.75%
(d) Savanna should select Project Blue because it has a higher positive NPV and a higher annual rate of return. AND Project Blue has early cash back period also
(a) The cash payback period for project red and project blue is 5.5 years and 4.6 years.
(b) The net present value for project red and project blue is $19,760 and $164,580
(c) The annual rate of return for project red and project blue is 11.36% and 18.75%.
d. The project blue should be selected.
Calculation of cash payback period, net present value, the annual rate of return:For Project Blue
Capital investment = $640,000
Annual Net income = $ 60,000
So, Annual depreciation = (640000/8) = $80,000
Annual cash inflow = $140,000
For Project Red
Capital investment = $440,000
Annual Net income = $ 25,000
So, Annual depreciation = (440000/8) = $55,000
Annual cash inflow = $80,000
(a) The cash payback period is
= Initial investment/cash flow per period
For Project Red
= 440000 /80000
= 5.5 years
And,
Project blue
= 640000/ 140000
= 4.6 years
(b)
The net present value
For Project red
Present value of cash inflows = 80000 ×5.747
= $459,760
So,
Net present value
= $459,760 - $440,000
= $19,760
For Project Blue
Present value of cash inflows =140000×5.747
= 804580
So,
Net present value
= 804580 - $640,000
=$164,580
(c) The annual rate of return is
Project Red = $25,000 / ($440000)/2
=11.36%
Project Blue = $60000/(640000/2)
=18.75%
(d) Savanna should select Project Blue since it contains a higher positive NPV and a greater annual rate of return also a good payback period.
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DJFats Company determined that the 2019 ending inventory had been overstated by $11,200 AND that the 2019 beginning inventory was overstated by $6,600. Before the effect of these errors, 2019 pretax income had been computed as $108,000. What should be reported as the correct 2019 pretax income before taxes? 5 points: a. 103,400 b. 125,800 c. 114,600 d. 90,200 e. None of the above, the correct answer is:
Answer:
a. $103,400
Explanation:
As we know that
Cost of goods sold = Beginning inventory + purchases - ending inventory
And,
Gross profit = Sales revenue - cost of goods sold
Since in the question it is given that
The ending inventory and beginning inventory had been overstated by $11,200 and $6,600 respectively
Since overstatement in the initial inventory raises the cost of the goods sold and decreases by that amount the gross profit & net income
And, overstatement in ending inventory reduced cost of goods sold and raised gross profit & net income by that amount.
So for overstated ending inventory the amount should be deducted and for overstated beginning inventory the condition would be reverse
So, the correct amount is
= incorrect pretax net income + overstatement in beginning inventory - overstatement in ending inventory
= $108,000 + $6,600 - $11,200
= $103,400
Which of the following is deductible as interest on Schedule A? a.Interest on a loan for a 90-foot yacht (a qualified residence) with a kitchen, 3 baths and 5 bedrooms. b.Interest on loans to finance tax-exempt bonds. c.Loan fees that are not "points". d.Fees for having a new home inspected prior to purchase. e.None of these choices are deductible as interest.
Answer:
Correct option is A.
Interest on a loan for a 90-foot yacht (a qualified residence) with a kitchen, 3 baths and 5 bedrooms
Explanation:
Assesses are permitted a conclusion for unmistakable intrigue paid or collected during the expense year. Sum and sort of derivation is reliant intentionally for which cash is obtained. Enthusiasm on credit for lease, business and eminence exercises is deducted for balanced gross pay. Enthusiasm on credit if there should be an occurrence of individual utilise like speculation intrigue, qualified home intrigue, contract intrigue prepayment punishments, intrigue identified with aloof action. Enthusiasm on credit used for buying resources producing charge excluded salary isn't deductible.
Following interest is not deductible as an itemised deduction:
1. Credit investigation fees
2. Service charges
3. Premium on convertible bonds
4. Interest paid to carry single premium life insurance
A company has preferred stock that can be sold for $28 per share. The preferred stock pays an annual dividend of 5% based on a par value of $100. Flotation costs associated with the sale of preferred stock equal $1.50 per share. The company's marginal tax rate is 35%. Therefore, the cost of preferred stock is;
Answer:
18.87%
Explanation:
The computation of the cost of preferred stock is shown below:
As we know that
The cost of preferred stock = Preferred dividend ÷ (issue price per share - flotation costs per share)
where,
Preferred dividend is
= 100 × 5%
= $5
Issued price per share is $28
And, the flotation cost is $1.50
So, the cost of preferred stock is
= $5 ÷ ($28 - $1.50)
= 18.87%
We simply applied the above formula
Which of the following statements are true about duration?
a. It is a weighted average of time periods where the weights are the percentage of the bond's value coming from that period.
b. It presents the effective average maturity of the bond's cash flows.
c. It is used to assess a bond's credit risk.
d. The duration of a zero-coupon bond is equal to its time to maturity.
Answer:
b. It presents the effective average maturity of the bond's cash flows.
d. The duration of a zero-coupon bond is equal to its time to maturity.
Explanation:
Duration is the weighted average of the time periods where Time period are weighted by multiplying by the present value of its cash flow divided by the bond's price.
Honk, Inc. a U.S. corporation, purchases weight-lifting equipment for resale from HiDisu, a Japanese corporation, for 60 million yen. On the date of purchase, 110 yen is equal to $1 U.S. (¥110:$1). The purchase is made on December 15, 2018, with payment due in 90 days. Honk is a calendar year taxpayer. On December 31, 2018, the foreign exchange rate is ¥112:$1. On February 2, 2019, the invoice is paid when the exchange rate is ¥115:$1. What amount of foreign currency gain or loss, if any, mus
Answer:
2018 Foreign currency gain $9,740.26 million
2019 Foreign currency gain $13,975.16 million
Explanation:
Calculation of foreign currency gain or loss for 2018
Total amount payable as at 15th Dec $545,454.55 million ($60 million/110)
Total amount payable as at 31st Dec $535,714.29 million ($60 million/112)
Foreign currency gain $9,740.26 million ($545,454.55-$535,714.29)
The amount payable based on 31st December year end exchange rate is lesser than on date of purchase which result in a gain for the company
Calculation of foreign currency gain or loss for 2019
Total amount payable as at 31st Dec $535,714.29 million ($60 million/112)
Total amount actually paid on 02nd Feb $521,739.13 million ($60 million/115)
Foreign currency gain $13,975.16 million ($535,714.29-$521,739.13)
Analysis of an income statement, balance sheet, and additional information from the accounting records of Gadgets, Inc., reveals the following items. Required:
1. Purchase of patent
2. Depreciation expanse
3. Decrease in account receivable
4. Increase in inventory
5. purchase of equipment
Indicate on which section of statement of the cash flow each of the item shoul be reported: operating activities (indirect method), investing activities, financing activities, or a separate noncash activities note.
Answer and Explanation:
There are three categories of cash flow statement activities which are described below:
1. Operating activities: This involves all transactions that after net income impact the working capital. It will subtract the rise in current assets and a reduction in current liabilities, while adding the decline in current assets and a rise in current liabilities.
This will change those changes in working capital. For addition, the depreciation expenses are applied to the net profit and the loss on the selling of assets is added, while the gain on the sale of assets is deducted
2. Investing activities: it tracks operations that involve purchasing and selling long-term properties. Purchase is cash outflow while selling is cash inflow
3. Financing operations: it tracks transactions that have an effect on long-term debt and equity balance of shareholders. Share issue is a cash inflow while redemption and dividend are cash outflows.
Based on this, the classification are as follows
1. Purchase of patent = Investing activities
2. Depreciation expanse = Operating activities
3. Decrease in account receivable = Operating activities
4. Increase in inventory = Operating activities
5. purchase of equipment = Investing activities
If these transactions are held in cash
1) The three main categories of government outlays are A) net interest payments, government investment, and government consumption expenditures. B) net government subsidies, the government deficit, and government purchases. C) government purchases, transfer payments, and net interest payments. D) government consumption expenditures, government investment, and transfer payments.
Answer: D) government consumption expenditures, government investment, and transfer payments.
Explanation:
What does the Government do with all the taxes it keeps collecting?
That's a question a lot of people want to know the answer to.
Option D encapsulates this.
Government consumption Spending is a major component of government spending and is done mainly for the direct satisfaction of individual citizens in the Nation. It includes things like Education, Health and Defense.
Another important component is Government Investment. This comprises of all goods and services acquired by the government for the benefit of the nation in future. They include infrastructure spending like roads and bridges as well as research spending.
Finally we have Transfer Payments. This portion of government spending has been on the up and up because it comprises of Social Security benefits and Unemployment insurance. Essentially these are payments that the government receives nothing in return for but underscores the care it has for citizens.
Answer:
D) government consumption expenditures, government investment, and transfer payments.
Explanation:
Government spending or expenditure is made up of consumption, investment, and transfers.
When government obtains goods and services for current use of satisfying its citizens. This is called government expenditure.
When the government is involved in infrastructure investment and research spending, they are looking at the future benefit. This is called investment.
Transfer of funds not meant to obtain goods and services like social security payments is referred to as government transfers.
Galaxy Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the Conquistador and Hurricane, from a single manufacturing facility. The manufacturing facility operates at 100% of capacity. The following per-unit information is available for the two products:
Conquistador Hurricane
Sales price............................................. $6,000 $11,500
Variable cost of goods sold................. (3600) (5750)
Manufacturing margin.......................... $2400 $5750
Variable selling expenses..................... (900) (1150)
Contribution margin............................. $1500 $4600
Fixed...................................................... (750) (1000)
Operating income................................. $750 $3600
In addition, the following sales unit volume information for the period is as follows:
Conquistador Hurricane
Sales unit volume 10,000 4,000
Requried:
a. Prepare a contribution margin by product report. Compute the contribution margin ratio for each.
b. What advice would you give to the management of Galaxy Sports Inc. regarding the profitability of the two products?
The Conquistador has a contribution margin of 25% while the Hurricane has a contribution margin of 40%. Despite the greater volume of Conquistadors sold, the Hurricane would return more profit per dollar of sales if resources were limited to only producing one type.
Explanation:The contribution margin ratio is calculated by dividing the contribution margin by the sales price. Therefore, the contribution margin ratio for Conquistador is $1500 / $6000 = 0.25 or 25%, and for Hurricane, it's $4600 / $11500 = 0.40 or 40%.
Conquistador ATV:
Selling Price per unit: $6,000
Variable Cost per unit: $3,600
Contribution Margin per unit: $1,500 (25%)
Total Contribution Margin: $1,500 * 10,000 = $15,000,000
Hurricane ATV:
Selling Price per unit: $11,500
Variable Cost per unit: $5,750
Contribution Margin per unit: $4,600 (40%)
Total Contribution Margin: $4,600 * 4,000 = $18,400,000
Advice: Although the Hurricane makes a higher contribution margin per unit and has a higher contribution margin ratio, the Conquistador sells more volume. However, if resources are limited to only producing one type, the company should produce the Hurricane model as it has a higher contribution margin ratio and thus will generate more profits per dollar of sales.
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The Conquistador has a contribution margin of $1,500 and ratio of 25%, whereas the Hurricane has a margin of $4,600 and a ratio of 40%. Management is advised to focus on the Hurricane for higher profitability, although other factors like demand and capacity should be considered.
Explanation:Contribution Margin Report and Advice
The contribution margin for a product is calculated by subtracting the variable costs from the sales price. The contribution margin ratio is the contribution margin divided by the sales price. For the Conquistador and Hurricane ATVs, the contribution margin and ratio can be calculated as follows:
Conquistador: Contribution Margin = $6,000 - $3,600 - $900 = $1,500 Contribution Margin Ratio = $1,500 / $6,000 = 0.25 or 25%
Hurricane: Contribution Margin = $11,500 - $5,750 - $1,150 = $4,600 Contribution Margin Ratio = $4,600 / $11,500 = 0.4 or 40%
Advice to management: Based on the provided data, the Hurricane has a higher contribution margin and contribution margin ratio compared to the Conquistador. Hence, focusing on the production and sales of the Hurricane may lead to higher profitability. It is also essential to consider the demand, production capacity, and any potential changes in fixed costs when making this decision.
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Carl puts $10, 000 into a bank account that pays an annual effective interest rate of 4% for ten years. If a withdrawal is made during the first five and one-half years, a penalty of 5% of the withdrawal amount is made. Carl withdraws K at the end of each of years 4, 5, 6, and 7. The balance in the amount at the end of year 10 is 10, 000. Calculate K.
Answer:
K=$980
Explanation:
10,000*(1.04)^10=1.05K(1.04^6+1.04^5)+K(1.04^4+1.04^3)+10,000
K=14,802-10,000/1.05(1.04^6+1.04^5)+1.04^4+1.04^3
K=4,802.4/4.91=$980
A copy machine cost $ 45 comma 000 when new and has accumulated depreciation of $ 44 comma 000. Suppose Print and Photo Center sold the machine for $ 1 comma 000. What is the result of this disposal transaction? A. Loss of $ 1 comma 000 B. Gain of $ 1 comma 000 C. Loss of $ 44 comma 000 D. No gain or loss
Answer:
The disposal resulted was at D. No gain or loss
Explanation:
The gain or loss on disposal on a fixed asset is calculated by comparing the sales proceeds from disposing off the asset and the carrying value of the asset.
The carrying value of the asset is its net book value which is calculated as follows,
Carrying value = Cost - Accumulated depreciation
If the carrying value is equal to the sales proceeds from disposal, there is no gain or loss.
The carrying value of copy machine was = 45000 - 44000 = $1000
The sales proceeds were also $1000
Thus, gain/loss on disposal = 1000 - 1000 = $0
Thus, there was no gain or loss on disposal.
Sun Inc. factors $6,000,000 of its accounts receivables without recourse for a finance charge of 3%. The finance company retains an amount equal to 10% of the accounts receivable for possible adjustments. If it were a transaction with recourse, Sun would have estimated the fair value of the recourse liability at $300,000. What would be recorded as a gain (loss) on the transfer of receivables
Answer:
Loss $180,000
Explanation:
Accounts Receivable $6,000,000
Factor fees 3%*6,000,000 $180,000
Loss of $180,000 will be recorded for transfer of receivable without recourse to the factor.
Special interest group Q receives a 1/10,000th slice of the economic pie. Its net benefit from either an economic growth policy or a transfer policy is $50,000. In order for group Q to be indifferent between the two policies, the economic growth policy would have to make the size of the economic pie (Real GDP) growth by _________________. This type of analysis is used to show that special interest groups tend press government for _____________ instead of ________________.
Answer:
(A) $500 million
(B) This type of analysis is used to show that Special Interest Groups tend to press the government for TRANSFERS instead of ECONOMIC GROWTH.
Explanation:
1/10,000 of the real GDP is = $50,000
RGDP = 50,000 ÷ 1/10,000
RGDP = 50,000 × 10,000 = $500,000,000
If special interest group Q would have to be indifferent (not care which policy is applied at the given time) between the 2 policies, then the economic growth policy would have to increase the size of the RGDP (the economic pie) by an amount sufficient enough for them to get their net benefit of $50,000.
The RGDP figure above ($500 million) is the amount by which RGDP (real gross domestic product) should grow, if Group Q will still get their net benefit when only the economic growth policy (EGP) is applied.
In this case, the EGP applied in place of the TP (transfer policy) would still fetch Group Q the minimum net benefit of $50,000
(B) This type of analysis is used to show that Special Interest Groups tend to press the government (policy makers and enforcers) for TRANSFERS instead of ECONOMIC GROWTH.
Use the following data: Purchase Costs Leasing Costs Down payment: $2,400 Security deposit: $800 Loan payment: $720 for 48 months Lease payment: $720 for 48 months Estimated value at end of loan: $4,300 End-of-lease charges: $645 Opportunity cost interest rate: 2 percent Calculate the costs of buying versus leasing a motor vehicle.
Answer:
Cost of buying option is $32,852
Cost of leasing option is $35,424
Explanation:
Buy option Lease option
down-payment $2,400 $800
monthly repayment($720*48)($720*48) $34,560 $34,560
residual value at end of loan ($4,300) -
end of lease charges - $645
Opportunity of down-payment($2400 or$800)*2%*4)) $192 $64
Total costs of buying/leasing a motor vehicle $32,852 $35,424
By buying the overall of cost of the motor vehicle is reduced by $2,572 ( $32,852 -$35,424)
Conclusively ,the buying is preferable to leasing option since the business would want to save costs in order to improve bottom-line
Final answer:
Calculating the total costs, buying costs $32,660 considering down, loan payments, and final value, while leasing costs $36,005 with security deposit, payments, and end-of-lease charges. Interest rates and depreciation affect the real-world comparison.
Explanation:
To calculate the costs of buying versus leasing a motor vehicle, we need to consider both the initial and ongoing expenditures, as well as the opportunity cost of using the finances for these purposes. Buying involves a down payment and loan payments over 48 months, with an estimated vehicle value at the end of the loan, while leasing includes a security deposit, lease payments for the same duration, as well as end-of-lease charges. Here, we will not take into account the varying depreciation rates of different vehicle models or the opportunity cost interest rate as provided by the student.
Here is the breakdown of costs when buying:
Down payment: $2,400Total loan payment: $720 x 48 months = $34,560Estimated value at end of loan: - $4,300Total cost of buying: $2,400 (down payment) + $34,560 (loan payments) - $4,300 (value at end of loan) = $32,660
Total cost of leasing: $800 (security deposit) + $34,560 (lease payments) + $645 (end-of-lease charges) = $36,005
In this example, without considering the opportunity cost of capital or varying interest rates, the total cost of buying the car is lower than leasing the car. However, in real-world scenarios, the interest rates on automobile purchases or leases should be taken into account, which often follow the 5-year U.S. Treasury Bill rate, and the vehicle's depreciation should also be factored in for a more accurate assessment.
The efficient frontier of risky assets is A. the portion of the investment opportunity set that lies above the global minimum variance portfolio. B. the portion of the investment opportunity set that represents the highest standard deviations. C. the portion of the investment opportunity set which includes the portfolios with the lowest standard deviation. D. the set of portfolios that
Answer:
C. The portion of the investment opportunity set which includes the portfolios with the lowest standard deviation.
Explanation:
Standard deviation is the criterion used in measuring risky assets. Harry Markowitz proposed the Efficient Frontier in the year 1952. Through a graph, portfolios which have the highest potential for returns can be depicted.
For securities to be considered worthy, their standard deviation ought to be lower than the standard deviation of individual securities. When a portfolio measures up to this criterion, then it can be represented on the efficient frontier.
GM Corporation ($ in millions) 2017 2016 BALANCE SHEETS ASSETS Cash & marketable securities $40,000 $50,000 Accounts receivable 260,000 200,000 Inventories 500,000 450,000 Total current assets 800,000 700,000 Net fixed assets 400,000 300,000 Total assets $1,200,000 $1,000,000 LIABILITIES & EQUITY Accounts payable $170,000 $130,000 Bank loan 90,000 90,000 Accruals 70,000 50,000 Total current liabilities 330,000 270,000 Long-term debt 400,000 300,000 Other liabilities 0 0 Common stock 350,000 350,000 Retained earnings 120,000 80,000 Total liabilities & equity $,1200,000 $1,000,000 INCOME STATEMENTS 2017 2016 Sales $1,500,000 $1,300,000 Cost of goods sold 900,000 780,000 Gross profit 600,000 520,000 Operating expenses: Selling, general & admin, 150,000 150,000 Marketing 150,000 130,000 Depreciation 53,000 40,000 Interest 57,000 45,000 Earnings before taxes 190,000 155,000 Income taxes 76,000 62,000 Net income $114,000 $93,000 Which of following is False? a. Accounts receivable rose, in part because of higher 2017 sales and in part because of customers’ faster payments. b. Inventory management apparently improved as inventory turnover rose in 2017. c. The dollar amount of net working capital rose in 2017 but the quick ratio fell, indicating that current liability rose faster than current assets. d. The dollar amount of net working capital rose in 2017 but the current ratio fell, indicating that current liability rose faster than current assets.
Answer
GM Corporation
We will prove the individual points using financial ratios.
1. Accounts receivables increased by $60,000. Why?
In 2017.
Receivables turnover ratio = net credit sales divided by Average Receivables
= 1,500,000 / (260,000)
=5.77 times
And Account receivables days = number of days in period divided by AR turnover ratio
= 360 / 5.77 = 62.4 days
In 2016
AR turnover ratio = 1,300,000/200,000
= 6.5 times
And Account receivable days = 56.2days
[ yes indeed AR has increased as a result of increase in Sale and increase in average credit days]
2. What's driving improvement in inventory management.
Inventory turnover = cost of good sold divided by average inventory
In 2017
900,000/500,000
= 1.8
In 2016
780,000/450,000
=1.73
[Inventory is actually still at the same level. Thus management of inventory is consistent hover the 2 years of operations)
3. Net working Assets
Current Assets - Current liability
In 2017
800,000 - 330,000 = $470,000
In 2016
700,000 - 260,000 = $440,000
Quick ratio.
(Current Assets - inventory) divided by Current liability
In 2017
(800,000 - 500,000)/ 330,000 = 0.91
In 2016
(700,000 - 450,000)/260,000 = 0.96
[This indicates that current assets improvement is driven by not liquid assets ]
Suppose that the economy enters a recession and real GDP falls we would expect * the money demand curve to shift to the left. the money demand curve to shift to the right. an upward movement along a fixed money demand curve. a downward movement along a fixed money demand curve. no impact on the money demand curve.
Answer:
the money demand curve to shift to the right
Explanation:
A recession is defined as a significant reduction in economic activities that can last for months. An economy is usually said to be in recession when for two consecutive quartets there is general economic decline.
Demand for money increases (shift to the right) when the level of output decreases. In recession people earn less so there is increased demand for money to meet their needs.
Supply of money is low. Demand for goods goes down because there is not enough money in circulation to buy them.
During a recession, as real GDP falls, the money demand curve is expected to shift to the left due to decreased economic activity and hence reduced demand for transactions and money.
If an economy enters a recession and real GDP falls, we would generally expect the money demand curve to shift to the left. This is because, during a recession, the overall economic activity is lower, and businesses and consumers typically need less money for transactions. As a result, the demand for money decreases, and thus, the money demand curve shifts to the left. A shift to the left indicates that at each interest rate, the quantity of money demanded is lower.
Conversely, an increase in money demand due to changes in expectations, preferences, or transactions costs that make people want to hold more money at each interest rate would actually shift the money demand curve to the right. In such a scenario, if everything else remains unchanged, the increase in money demand would lead to higher interest rates, depressing investment and net exports, which could then cause the aggregate demand curve to shift to the left, leading to a decrease in real GDP and the price level.
Blanchard Company manufactures a single product that sells for $190 per unit and whose total variable costs are $150 per unit. The company’s annual fixed costs are $635,000. The sales manager predicts that annual sales of the company’s product will soon reach 40,500 units and its price will increase to $205 per unit. According to the production manager, variable costs are expected to increase to $145 per unit, but fixed costs will remain at $635,000. The income tax rate is 20%. What amounts of pretax and after-tax income can the company expect to earn from these predicted changes?
Answer:
The amounts of pretax and after-tax income can the company expect to earn from these predicted changes are $1,795,000 and $1,436,000 respectively.
Explanation:
The sales less the variable cost gives the contribution margin.
The contribution margin less the fixed cost gives the net operating income. Furthermore, net income is the difference between the total sales and the total costs (fixed and variable).
Both sales and variable cost are dependent on the number of units sold.
with these expected changes,
Pretax Income
= 40,500($205 - $145) - $635,000
= $1,795,000
After tax income
= 80% * $1,795,000
= $1,436,000
The American Cancer Society has been sending letters soliciting donations for years. When they added pre-printed address labels personalized as a gift to the receiver of the solicitation, donation levels went up by 30%. Which principle of social influence explains this phenomenon best? (choose only one answer) Note your answers on scratch paper in case your browser or internet crashes.
A. Reciprocity
B. Social proof
C. Authority
D. Liking
E. Scarcity
Answer:
The answer is option option A) The principle of social influence explains this phenomenon best is the principle of Reciprocity.
Explanation:
The principle of reciprocity is a popular social law of psychology that portrays the need to give to get.
It states that "in many social situations we pay back what we received from others".
Every body has a need. even the potential donors with all their wealth need validation every now and then
Therefore, taking on a reciprocity approach by the American Cancer Society by adding pre-printed address labels personalized as a gift to the receiver of the solicitation met the need for validation among potential donors which made their donation levels go up by 30%.
Answer:
Reciprocity
Explanation:
Reciprocity is defined as the act of giving a thing of value to someone which in turn results in the other party giving back also.
For example when a person recieves a gift he will naturally want to reciprocate the gesture.
The American Cancer Society added pre-printed address labels personalized as a gift to the receiver of the solicitation, donation levels went up by 30%.
This is an action that pushed recipients of solicitation to donate more.
One of Modular Products (MP) customers would like to obtain a 6-month option to purchase 500,000 tables for $119 each. These tables currently sell for $110 each. Assume u equals 1.0994 and d equals .9096. What price should MP charge for this option if the annual risk-free rate is 3.2 percent
Group of answer choices
a. $338,400
b. $421,900
c. $598,100
d. $479,900
e. $533,600
Answer:
Option E is correct one.
$533,600
Explanation:
% increase = u − 1
% increase = 1.0994 − 1
% increase = .0994, or 9.94%\large % increase = u − 1
% decrease = d − 1
% decrease = .9096 − 1
% decrease = −.0904, or −9.04%
Price with increase = $110(1.0994)
Price with increase = $120.934
Price with decrease = $110(.9096)
Price with decrease = $100.056
rf = Probability of rise(Increase percent) + (1 − Probability of rise)(Decrease percent)
.032(6/12) = Probability of rise(.0994) + (1 − Probability of rise)(−.0904)
Probability of rise = .5606, or 56.06%
Probability of fall = 1 − .5606
Probability of fall = .4394, or 43.94%
Payoff if price increases = $120.934 − 119
Payoff if price increases = $1.934
Payoff if price decreases = $0
Expected payoff = .5606($1.934) + .4394($0)
Expected payoff = $1.0842
Option value = $1.0842/[1 + .032(6/12)]
Option value = $1.0671
Contract value= Option to purchase*Option value
Contract value = 500,000($1.0671)
Contract value = $533,600
Sales Mix and Break-Even Analysis Michael Company has fixed costs of $2,313,840. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products follow: Product Selling Price Variable Cost per Unit Contribution Margin per Unit QQ $640 $380 $260 ZZ 460 280 180 The sales mix for Products QQ and ZZ is 85% and 15%, respectively. Determine the break-even point in units of QQ and ZZ. If required, round your answers to the nearest whole number. a. Product QQ units b. Product ZZ units
Answer:
a.
Break even in units of QQ is 7930 units
b.
Break even in units of ZZ is 1400 units
Explanation:
To calculate the break even in units of each product, we first need to find out the overall break even point in units for the company. The over all break even point in units for a two product company is,
Overall Break even in units = Total Fixed costs / Weighted average contribution margin per unit
Where,
Weighted average contribution margin per unit = Weight of Product A in sales mix * Contribution per unit of Product A + Weight of Product B in sales mix * Contribution per unit of Product B
Weighted average CM per unit = 0.85 * 260 + 0.15 * 180
Weighted average CM per unit = $248 per unit
Over all break even in units = 2313840 / 248 = 9330 units
a.
Break even in units Product QQ = 9330 * 0.85 = 7930.5 rounded off to 7930 units
b.
Break even in units Product ZZ = 9330 * 0.15 = 1399.5 rounded off to 1400 units
A local bank pays 100% of its earnings out in dividends. If earnings continue to grow at 2% per year and the most recent annual dividend is $0.88. How much would you be willing to pay for this stock if you expect the return on the market portfolio to be 10%, the risk-free rate to be 3%, and the company’s beta to be 0.7?
Answer:
The maximum price per share that should be paid today is $15.21
Explanation:
We first need to calculate the required rate of return (r) on this stock. The required rate of return can be calculated using the CAPM approach.
r = rRF + Beta * (rM - rRF)
Where,
rRF is the risk free raterM is return on marketr = 0.03 + 0.7 * (0.1 - 0.03) = 0.079 or 7.9%
The fair price per share of this stock can be calculated using the constant growth model of DDM as the earnings, which will all be paid out as dividend, are expected to grow at a constant rate of 2%. The formula for price per share today under this model is,
P0 = D0 * (1+g) / (r - g)
P0 = 0.88 * (1+0.02) / (0.079 - 0.02)
P0 = $15.21
LCD Industries purchased a supply of electronic components from Entel Corporation on November 1, 2016. In payment for the $25.0 million purchase, LCD issued a 1-year installment note to be paid in equal monthly payments at the end of each month. The payments include interest at the rate of 24%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Required:
1. & 2.
Prepare the journal entries for LCDâs purchase of the components on November 1, 2016 and the first installment payment on November 30, 2016. (Enter your answers in whole dollars. If no journal entry is required for a transaction, select "No journal entry required" in the first account field.)
3.
What is the amount of interest expense that LCD will report in its income statement for the year ended December 31, 2016?. (Enter your answers in whole dollars.)
Answer:
We will use the following equations for this problem
a. (Initial cost Estimated output) × Actual yearly output
b. (Depreciable cost Yearly output) × Estimated output
c. Depreciable cost Yearly output
d. (Depreciable cost Estimated output) × Actual yearly output
Journal entries are used to record the purchase and payment transactions of electronic components by LCD Industries. The initial purchase creates a liability, and installment payments include both interest and principal. The annual interest expense is calculated based on monthly installments.
The transaction for purchasing electronic components and issuing an installment note can be recorded through journal entries. On November 1, 2016, when LCD Industries purchases the components, the journal entry would debit Inventory (or the appropriate asset account for the electronic components) and credit Notes Payable for the full purchase amount of $25.0 million, reflecting the liability created by the note. The first installment payment, however, requires a more complex entry because it includes both principal repayment and interest expense.
The amount of the monthly installment can be calculated using the formula for an installment loan:
monthly payment = P x [i(1+i)^n] / [(1+i)^n - 1]. Here, P is the principal amount ($25 million), i is the monthly interest rate (24% annual rate divided by 12 months, or 0.02 monthly), and n is the total number of payments (12). We would calculate the monthly payment and then for the first payment on November 30, 2016, debit Notes Payable and Interest Expense and credit Cash for the total payment amount. As the payment includes both the principal and interest, the specific amounts need to be calculated.
For the interest expense in the income statement, we would calculate the monthly interest component of each installment and then multiply by the number of payments made within the year, to get the annual interest expense for 2016.
Wood Designs Company, a custom cabinet manufacturing company, is setting standard costs for one of its products. The main material is cedar wood, sold by the square foot. The current cost of cedar wood is $ 5 per square foot from the supplier. Delivery costs are $ 0.25 per board foot. Carpenters' wages are $ 20 per hour. Payroll costs are $ 3.00 per hour and benefits are $ 7 per hour. How much is the direct materials cost standard (per square foot)?
Answer:
$5.25 per unit
Explanation:
The reason is that the direct cost are those costs that can be calculated very easily and are directly attributable to a single unit. In this case, we are finding direct material cost which would include all the material costs that are used to make a single unit which includes delivery of material $0.25 and material purchase cost of $5 per square foot. So the total direct material cost is $5.25.
Given the acquisition cost of product ALPHA is $24, the net realizable value for product ALPHA is $23, the normal profit for product ALPHA is $1.00, and the market value (replacement cost) for product ALPHA is $21, what is the proper per unit inventory value for product ALPHA applying LCM? $23.00. $24.00. $21.00. $22.00.
Answer:
$22
Explanation:
Given that,
Acquisition cost of product ALPHA = $24
Net realizable value for product ALPHA = $23
Normal profit for product ALPHA = $1.00
Market value (replacement cost) for product ALPHA = $21
By applying LCM, the per unit inventory value is determined by deducting the normal profit from the Net realizable value for product.
Per unit inventory value:
= Net Realizable Value - Normal Profit
= $23 - $1.00
= $22
Therefore, the proper per unit inventory value for product ALPHA applying LCM is $22.00.
Suppose the market price is $5. The buyer who buys the first unit of output has a willingness-to-buy equal to $10; the buyer who buys the second unit of output has a willingness-to-buy equal to $9; and the buyer who buys the third unit of output has a willingness-to-buy equal to $8. Total consumer surplus is: $10. $5. $27. $12.
Answer:
Option D is correct one.
$12
Explanation:
Consumer surplus is the difference between willingness to pay and market price.
Consumer surplus= (10-5) + (9-5) + (8-5)
= 5+4+3= 12
Final answer:
The total consumer surplus for the three units sold, with market price at $5 and each buyer's willingness to pay at $10, $9, and $8 respectively, is $12.
Explanation:
Consumer surplus is the difference between what consumers are willing to pay for a good or service and what they actually pay. In the scenario provided, the market price is $5. The consumer surplus for each buyer can be calculated as the difference between their willingness to pay and the market price.
First buyer: $10 (willingness to pay) - $5 (market price) = $5 surplusSecond buyer: $9 (willingness to pay) - $5 (market price) = $4 surplusThird buyer: $8 (willingness to pay) - $5 (market price) = $3 surplusAdding these surpluses together gives us the total consumer surplus for the three units sold:
$5 (first buyer) + $4 (second buyer) + $3 (third buyer) = $12 total consumer surplus.
Stevenson Company purchased equipment for $250,000 on January 1, 2010. The estimated salvage value is $50,000, and the estimated useful life is 5 years. The straight-line method is used for depreciation. On July 1, 2013 Stevenson sold the equipment for $100,000. Calculate the gain or loss on the sale of the equipment
Answer:
The answer is loss of $10,000 on the sale of the equipment
Explanation:
The formula for straight-line depreciation is:
(Cost of asset - salvage value) ÷ number of useful life.
Cost of asset is $250,000
Salvage value is $50,000
Useful life is 5 years
So depreciation for the year is:
($250,000 - $50,000) ÷ 5 years
$200,000 ÷ 5 years
=$40,000
January 1 2010 through June 30 2013 is 3 years and 6months
Accumulated depreciation will be:
3.5 years( 3 years + 6months/12 months) x $40,000
$140,000
Carrying value or net book value at this date is $250,000 - $140,000
=$110,000.
The equipment was sold for $100,000.
Selling price - carrying value
=$100,000 - $110,000
= - $10,000
We have a loss of $10,000 on the sale of equipment
On December 31, 2013, Stable Company sold a piece of equipment that was purchased on January 1, 2008. The equipment originally cost $910,000 and has an estimated useful life of eight years. Stable uses the straight-line method of depreciation. What is the gain/loss on the sale of equipment that Stable will recognize if the equipment was sold for $257,000?
Answer:
The company should recognize a gain on disposal of $29500
Explanation:
The straight line depreciation method charges a constant depreciation expense per year through out the estimated useful life of the asset.
The straight line depreciation expense per year is,
(Cost - salvage value) / estimated useful life
Depreciation expense = (910000 - 0) / 8 = $113750
The number of years till 31 December 2013 = 6 years
The accumulated depreciation till December 31, 2013 = 113750 * 6 = $682500
The carrying value of the asset at 31 December 2013 = 910000 - 682500 = $227500
The gain/loss on sale = 257000 - 227500 = $29500 gain