1. GEK2507 Compound & Prosper GEK2507 Frederick H. Willeboordse frederik@chaos.nus.edu.sg

2. GEK2507 Exercises for Test 1 - Answers

3. GEK2507 Important note: The sample questions provided here are for your reference only. The questions asked during the test will be similar in style but can be very different otherwise. The questions cover the materials presented in Lectures 1 to 6 and lab sessions 1 to 4.

4. GEK2507 Examples of MC questions What does a Balance sheet balance: A) Owner’s Equity and Assets B) Owner’s Equity and Liabilities C) Assets and Liabilities D) Assets and Depreciation Depreciation is similar to: A) Amortization B) Owner’s Equity C) Interest D) Profit

5. GEK2507 A ‘$A$1’ in an Excel formula means: A) An absolute reference to cell A1 B) A relative reference to cell A1 C) The number in A1 refers to money D) Nothing – this syntax is invalid The quick ratio is: A) A quick way to calculate a companies’ profit B) Not really a ratio but a shortcut C) Multiplied by the current liabilities equal to Current Assets minus inventories D) Current Liabilities minus Inventory divided by Current Assets

6. GEK2507 The ‘T’ in EBITDA stands for: A) Total Assets B) Transaction C) Taxes D) Treasury Gross Profit Equals: A) Sales minus cost of Sales B) Net Profit C) The ‘144’ profit method D) EBITDA

7. GEK2507 What is Golden Dragon’s Cost of Sales? ? Examples of short questions $6,000.-

8. GEK2507 True or false: Owners Equity is an asset. False. I set up a (wholly owned) company with $20,000 in cash. Since then, I made a profit of $562 and paid out $400 in dividends. What are the retained earnings? $162.- Is it possible to find the Net Cash Flow (which is the sum of the cash flows in the Cash Flow Statement) from the Balance Sheet(s) of a company. YES True or False: Dividends do not appear on the Income Statement and hence not on the Cash Flow Statement either. FALSE ?

9. GEK2507 What is Aunt Petunia’s Gross Profit Margin? It is: (Sales – Cost of Sales)/Sales = 54.9% A company has sales of $300,000 and a gross margin of 38%. What should be the (average) inventory level so that the company has an inventory turnover ratio of 8? ANSWER= 300,000*0.62/8 = 23,250.-

10. GEK2507 A company has sales of $123,000. Its cost of sales is 52%. The company pays $1,800 in rent a month and has two employees earning $1,200 and $1,500 a month respectively. The company is fairly cash rich having $391,000 in a savings account earning 1.5% interest a year. This company doesn’t do much and its other expenses are only $240 a year. Assuming that there are no other relevant financial data for this company, i.What is the Gross Profit of this company? 59,040 ii.What is the Net Profit of this company? 10,665

11. GEK2507 We have a company which has been and is growing sales at 5% per month. 33% of the sales are paid during the month following the sale. Except for 3% unrecoverables, the remainder is paid during the second month after the sale. Manpower and other costs are 21% of sales and inventory purchases are 39% of the following month’s sales. Assume that the company has sales of $9,901 in April. There are no investing activities and the company is assumed to have an unlimited 0% credit line. i.What is the net cash flow in the month of May if $1000 of dividends were paid in April? 2,862.- ii.What is the ending Cash balance in May if the starting cash balance is $2980 in the beginning of April? 7,567.-