B. travelers checks that have been issued C. currency in the vaults of commercia

Question

B. travelers checks that have been issued C. currency in the vaults of commercial banks. D demand deposits at commercial banks. 12. The primary concern of current critics of fiat money is that A. fiat money is too costly to produce. B. governments issue too much money threatening its value C. fiat money is too easy to counterfeit D. government will issue too little threatening economic growth Section 2. MINI-TASKS (max 15 points, 5 points each) 1. Company A had the following operating results: sales EUR 19 900; cost of goods sold EUR 14 200; depreciation expense EUR 2 700; interest expense EUR 670; dividends paid EUR 650. At the beginning of the year, net fixed assets were EUR 15 340, current assets were EUR 4 420, and current liabilities were EUR 2 470. At the end of the year, net fixed assets were EUR 16 770, current assets were EUR 5 135, and current liabilities were EUR 2 535. The tax rate for was 40 percent. What is net income? What is the operating cash flow? 2. Diana wants to have EUR 2 000 in spending money to take on a trip to Paris in three years. How much must she deposit now in a savines account that navs 5% to have the

Explanation / Answer

Amount ( in euros) Sales 19900 COGS -14200 Earnings below Interest, depreciation 5700 Depreciation -2700 Interest expense -670 Dividend -650 Net income 1680 Tax rate 40% 672 Profit after tax 1008 BALANCES Opening Closing Net fixed assets 15340 16770 Current assets (A) 4420 5135 Current liabilities ( B) 2470 2535 Working capital (A-B) 1950 2600 Operating Cash Flow (OCF) = Operating Income (revenue – cost of sales) + Depreciation – Taxes +/- Change in Working Capital Operating cash flow Net income 1680 Add : Dividend 650 Add : Interest 670 Add : Depreciation 2700 Cash from Operating activities 5700 Less : Taxes -672 Add : Change in working cap 650 Operating cash flow 5678 Notes : 1. Working capital is current assets minus current liabilities on the balance sheet. This is the amount of money it takes to run the operations of the business. 2. Investing activities (i.e. capital expenditures (CAPEX)) are excluded or separate from the Operating Cash Flow calculation.

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