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MGT 181 Exam 1 Answers

MGT 181 Exam 1 Answers - MGT181 Enterprise Finance Test 1...

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MGT181 Enterprise Finance – Test 1 January 28, 2008 Question 1 (40 Points): Just like there is a CSI: Crime Scene Investigations on TV, maybe there should be a new show called FSI: Financial Statements Investigations. In the pilot, you are brought in as a key FSI investigator to reconstruct last year’s Balance Sheet for Bad Luck Enterprises after a horrific fire. Sifting through the debris, you have been able to ascertain from charred remnants that the Total Assets of the firm at the end of last year was $1,500 and the Cost of Goods Sold for the year was $800. Bad Luck’s banker tells you that the company’s Long Term Debt was $300 and that he happens to know that the Debt/Equity ration was 0.50. Bad Luck’s Operations head proudly tells you she was working with an Inventory Turns figure of 4.0. A key vendor also offers that during a credit check he had run a Quick Ratio of 2.0 for Bad Luck. Bad Luck’s book keeper remembers a Cash Ratio of 12.5%. With these pieces of information you feel you can confidently fill in the following Balance Sheet: Bad Luck Enterprises Balance Sheet as of 12-31-07 Cash $ 25 Current Liabilities $ 200 A/R 375 Inventory 200 Long Term Debt 300 Fixed Assets 900 Equity 1000 Total Assets $1500 Total Liab & Owners’ Equity $1500
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