{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Ch12(6th)Post - Chapter F12 Chapter F12 Analysis of...

Info icon This preview shows pages 1–14. Sign up to view the full content.

View Full Document Right Arrow Icon
Analysis of Analysis of Investing Investing Activities Activities Chapter Chapter F12 F12
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
12-2 1. Explain why investing decisions are important to a company and how they can affect its profits. 2. Explain how operating leverage affects a company’s risk and profits. 3. Use financial statements to evaluate investing activities for various companies. Objectives Objectives
Image of page 2
12-3 4. Explain how investing activities affect company value, and use accounting information to measure value-increasing activities. 5. Identify ways in which a company can use its assets to improve effectiveness and efficiency. 6. Explain why accounting information about long-term assets is useful for creditors. Objectives Objectives
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
12-4 Exhibit 1 Exhibit 1 The Production Process for Favorite Cookie Company Obj - 1
Image of page 4
12-5 Exhibit 2 Exhibit 2 An Alternative Production Process for Favorite Cookie Company Obj - 1
Image of page 5

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
12-6 If we select manual equipment, we can start with less investment and add equipment as demand increases. Investing Decisions and Profit Investing Decisions and Profit Obj - 1
Image of page 6
12-7 If we select automated equipment, we must invest more initially, but we will have the capacity to expand. Also, we will be able to produce a higher quality product because the automated process is more reliable. Investing Decisions and Profit Investing Decisions and Profit Obj - 1
Image of page 7

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
12-8 What effect do the choices have on our expected profits if we anticipate sales of $3,000,000? Investing Decisions and Profit Investing Decisions and Profit Obj - 1
Image of page 8
12-9 (in thousands) Manual Automated (in thousands) Manual Automated Assets: Current assets $1,000 $1,000 Plant assets 3,500 4,000 Total assets $4,500 $5,000 Sales $3,000 $3,000 Cost of ingredients (800) (800) Depreciation (250) (300) Wages and benefits (780) (700) Other operating expenses (1,000 ) (1,000 ) Operating income 170 200 Interest expense (170 ) (170 ) Pretax income --- 30 Income taxes --- (9 ) Net income $ --- $ 21 Sales of $3.0 Million Obj - 1
Image of page 9

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
12-10 In the second year of operations we anticipate sales of $3.6 million. What would be our projected net income if our expectations are correct? Investing Decisions and Profit Investing Decisions and Profit If we select manual equipment, we will have to purchase an additional $250,000 of equipment to meet the higher demand. Obj - 1
Image of page 10
12-11 (in thousands) Manual Automated (in thousands) Manual Automated Assets: Current assets $1,200 $1,440 Plant assets 3,750 4,000 Total assets $4,950 $5,440 Sales $3,600 $3,600 Cost of ingredients (960) (960) Depreciation (275) (300) Wages and benefits (936) (700) Other operating expenses (1,000 ) (1,000 ) Operating income 429 640 Interest expense (170 ) (170 ) Pretax income 259 470 Income taxes (78 ) (141 ) Net income $ 181 $ 329 Sales of $3.6 Million Depreciation for Depreciation for manul increases manul increases due to additional due to additional equipment required equipment required costing $250,000 costing $250,000 Obj - 1
Image of page 11

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
12-12 (in thousands) Manual Automated (in thousands) Manual Automated Assets: Current assets $ 900 $ 900 Plant assets 3,400 4,000 Total assets $4,300 $4,900 Sales $2,800 $2,800 Cost of ingredients (747) (747) Depreciation (233) (300) Wages and benefits (728) (700) Other operating expenses (1,000 ) (1,000 ) Operating income 92 53 Interest expense (170 ) (170 ) Pretax income (78) (117) Income taxes 23 35 Net income $ (55) $ (82) Sales of $2.8 Million Obj - 2
Image of page 12
12-13 Exhibit 6 Exhibit 6 A Comparison of the Effects of Investment Decisions on Profits of Mom’s Cookie Company Obj - 2
Image of page 13

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 14
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern