vv - Chapter 2 Answers 1. 2. Earnings before interest and...

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Chapter 2 Answers 1. Earnings before interest and taxes (EBIT). Also called operating profit. 2. Operating income – financing is assumed not to impact revenue or cost of goods sold and operating expenses. However, it will impact interest expense and taxes. Working capital is defined as CA-CL and is not a stream of income. 3. All equity accounts are owned by the shareholders – they are the owners of the firm. 4. Income Before Taxes: Revenue 50,250,000 -COGS 35,025,000 =Gross Profit 15,225,000 -Operating exp 10,115,000 =Operating profit 5,110,000 -interest 750,000 =EBT 4,360,000 5. Depreciation. Income taxes and salaries both involve cash outflows. 6. Balance Sheet Cash $ 15,550 Accounts receivable 8,750 Inventory 7,000 Current assets 31,300 Plant, property and equipment 199,750 Less: Accumulated depreciation (45,225) Total Assets 185,825 Accounts payable 5,675 Notes payable 700 Common stock 100,000 Retained earnings x Total liabilities and equity 185,825 Retained earnings= 185,825 – 5,675 – 700 – 100,000 = 79,450 Income statement Net sales 13,500 Cost of goods sold 5,250 Gross profit 8,250
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This note was uploaded on 04/07/2011 for the course BUS M 301 taught by Professor Jimbrau during the Winter '11 term at BYU.

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vv - Chapter 2 Answers 1. 2. Earnings before interest and...

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