Fundamentals of Corporate Finance
What is market value of total assets today? =Book Value of Total Assets$7,115,000 Book Valye of Klingon’s total assets today: $7,115,000 Market Valye of Total Assets +Market Value of Current Assets$1,250,000 +Market Value of Net Fixed Assets$5,300,000 =Market Value of Total Assets$6,550,000 Market Value of Klingon’s total assets today: $6,550,000 16. Cornell Corp. Balance Sheet AssetsLiabilities and Owner’s Equity 20112011 Current AssetsCurrent Liabilities Cash$127,000Accounts Payable$210,000 Accounts Receivable$105,000Notes Payable$160,000.
$293,000Total$370,000 Total$525,000 Fixed AssetsLong Term Debt$845,000 Net Fixed Assets$1,620,000 Intangible Fixed Assets (Patents, Copyrights)Owner’s Equity $630,000Owner’s Equity $282,000 Total$2,250,000Retained Earnings$1,278,000 Total$1,560,000 Total Assets$2,775,000Total Liabilities and Owner’s Equity$2,775,000 19. Raines Umbrella Corp. 2010 Income StatementNet Sales Net Sales$740,000+Total Sales$850,000Notes Cost of Goods Sold$610,000-Selling/Admin Expense$110,000Raines Umbrella Corp 2010x Depreciation$140,000=Net Sales$740,000Sales = $850000x.
Before Interest and Taxes-$10,000COGS = 610000x Interest Paid$85,000Admin/Selling Exp = 110000x Taxable Income-$95,000Deprec = 140000x Taxes (35%)$0** No tax on negative incomeInt exp: 85000x Net Income-$95,000Tax rate 35% (pretty high! )x No carry back/forward provisions 2010 Net Income: -$95,000? Net income for 2010 ? Operating cash flow Operating Cash Flow? Explain results 2010 Earnings Before Interest and Taxes-$10,000 +Depreciation$140,000 -Taxes$0** No tax on negative income Operating Cash Flow$130,000 2010 Operating Cash Flow: 0,000.
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Net income for this company is a large negative number because it includes non-cash deprecation. In actuality, the company operates in a positive cash flow position and is able to pay all costs as well as interest on financing activities. This is a good example of how book numbers may include items that do not effect day to day operations. Page 87-88, Chapter 3 26. Smolira Golf Corp Short Term Solvency Ratios:Notes: a. Current Ratio1. 24current assets/current liabilities b. Quick Ratio0. 73(current assets-inventory)/current liabilitiesc. Cash Ratio0. 45cash/current liabilities Asset Utilization Ratios: d. Total Asset Turnover0. 85Sales/Total Assets e. Inventory Turnover9. 32COGS/Inventory f. Receivables Turnover24. 09Sales/AR Long Term Solvency Ratios: g. Total Debt Ratio0. 34(total assets-total equity)/total assets h. Debt-Equity Ratio0. 52total debt/total equity i. Equity Multiplier1. 52total assets/total equity j. Times Interest Earned Ratio5. 71EBIT/InterestEBIT = Earnings Before Interest & Taxes k. Cash Coverage Ratio7. 96(EBIT+Depreciation)/Interest Profitability Ratios.