By NEAS - 8/1/2018 9:58:14 PM
FA Module 6 Cash flow indirect method practice exam questions
(The attached PDF file has better formatting.)
A firm’s financial statements show the following amounts:
Calendar Year 20XX-1 Calendar Year 20XX
Cost of goods sold 438 416
Net revenue 823 869
Depreciation expense 77 87
Net income 251 287
December 31, 20XX-1 December 31, 20XX
Accounts receivable 183 140
Inventory
119 182
Accounts payable 173 143
60% of the firm’s sales are on credit. The current accounts on the balance sheet are cash and marketable securities, accounts receivable, accounts payable, and inventory.
Question 6.2: Receivables turnover
What is the receivables turnover for 20XX?
Answer 6.2: (869 × 60%) / ( (183 + 140) / 2) = 3.228
(receivables turnover = credit sales / average accounts receivable)
Question 6.3: Cash received from customers
What is the cash received from customers in 20XX?
Answer 6.3: 869 – (140 – 183) = 912
(cash received from customers = net revenue – Δ(accounts receivable) )
Question 6.4: Gross profit margin
What is the gross profit margin for 20XX?
Answer 6.4: 1 – 416 / 869 = 52.13%
(gross profit margin = 1 – cost of goods sold / net revenue)
Question 6.5: Inventory turnover
What is the inventory turnover for 20XX?
Answer 6.5: 416 / ( (119 + 182) / 2) = 2.764
(inventory turnover = cost of goods sold / average inventory)
Question 6.6: Inventory bought
What is the inventory bought in 20XX?
Answer 6.6: 416 + (182 – 119) = 479
(inventory bought = cost of goods sold + Δ(inventory) )
Question 6.7: Cash paid to suppliers
What is the cash paid to suppliers in 20XX?
Answer 6.7: 479 – (143 – 173) = 509
(cash paid to suppliers = inventory bought – Δ(accounts payable) )
Question 6.8: Payables turnover
What is the payables turnover for 20XX?
Answer 6.8: 479 / ( (173 + 143) / 2) = 3.032
(payables turnover = inventory bought / average accounts payable)
Question 6.9: Operating cash flow
What is the operating cash flow for 20XX? (Assume shareholder dividends are a financing cash flow.)
Answer 6.9: 287 + (912 – 869) + (416 – 509) + 87 = 324
(operating cash flow = net income + (cash received from customers – net revenue) + (cost of goods sold – cash paid to suppliers) + depreciation expense)
Question 6.10: Retained earnings
What is the change in retained earnings during 20XX?
Answer 6.10: 287 – 58 = 229
(Δ(retained earnings) = net income – shareholder dividends)
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