# Midterm_Answers - York University Course AS/Econ 4400 Fall...

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York University Course: AS/Econ 4400, Fall 2007 Midterm Answers: 1(a) 1(b) 1(c) 2(a) Informally speaking, a company’s cash flow in a given period is the net change in balance of the company’s monetary holdings, before anything is paid out to investors. In accounting terms, represent is an accounting statement of cash flows. 40 40 25 25 40 25 65 04 . 1 * 1000 ) 1 ( 1 1 S years. of number T rate interest r dollars 25 age in savings of lue present va S where, ) 1 ( * S FV 65 age at disposal at Wealth A r r r C r = + = = = = + = = 20 20 45 45 20 45 65 04 . 1 * 1000 ) 1 ( 1 1 S years. of number T rate interest r dollars 45 age in savings of lue present va S where, ) 1 ( * S FV 65 age at disposal at Wealth A r r r C r = + = = = = + = = () () 1 ) 1 ( 1 1 1 20 04 . 1 1 20 25 20 1 20 25 A C r S r r r C r S = + + = +

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This is calculated by adding non-cash charges (such as depreciation) to net income after taxes and subtracting Net income is a company's total earnings (or profit) calculated by taking revenues and adjusting for the cost of doing business, depreciation, interest, taxes and other expenses. 2(b,c) Depreciation, investment in new assets, asset sale, deferred taxes, deferred payments, investment into net working capital are all items that count towards one of NI, CF but not the other. 2(d) Cash Flow vs Net Income
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Midterm_Answers - York University Course AS/Econ 4400 Fall...

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