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Corporate Finance Math Problem
Pages 8 (2008 words)
Ans 1): After comparing the financial records of both years, we observe that the expansion didn't come up with a positive result because the company envisaged a big loss after it enjoyed profit a year before.
On the contrary, profit & loss account of Computron's company showed a net loss of $(95136) FY 2007 as compared to a net profit a year before of $87960, merely because of the increase in cost of good sold, which were $2864000 in the year 2006, which increased by $2.11 million or 73%, which suppressed the company to declare a net loss in the year 2007.
Liabilities on the other side also increased due to the expansion, while the equity deteriorated little bit in the year 2007 by 0.106 million because of the net loss of the company.
Ans-2): Cash flow statement shows that the account receivable head of the company was increased with a rapid pace in the year 2007, which showed that the company was involved in credit sales. Cash flow statement also showed that the company spent $0.711 million to acquire the fixed assets during expansion of their network.
The cash flow available to be distributed among the shareholders after the company has made all the investment in working capital and fixed assets to enhance the ongoing operation is called free cash flow (FCF).
Ans-4): The assets which are used in the operation of the business like inventory, long term operation assets and plant & Equipment are known as operating current assets. By contrast, the fund which comes from the suppliers and reported as account payable, accrued wages and accrued taxes are referred to as operating current liabilities.
Since both the ...
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