Foundations of Financial Management
16th Edition
ISBN: 9781259277160
Author: Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Publisher: McGraw-Hill Education
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Question
Chapter 2, Problem 10P
Summary Introduction
To calculate:The
Introduction:
Income statement:
The income statement shows the financial performance of a business entity. It takes into account all the transactions related to the expenditures as well as revenues for a reporting time period. The outcome for that reporting period is computed by deducting the total expenditures incurred from the revenues earned and is termed as net profit or loss.
Depreciation:
A method of systematically reducing the value of a fixed asset over its useful life is termed as depreciation. It is charged due to the general wear and tear of a fixed asset that takes place with the passage of time.
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Consider the following income statement:
Sales
Costs
Depreciation
Taxes
Calculate the EBIT.
EBIT
$748,168
486,752
110,700
Net income
23%
Calculate the net income.
Precision System had sales of $820,000, cost of goods of $510,000, selling and administrative expense of $60,000, and operating profit of $103,000. What was the value of depreciation expense? Set up this problem as a partial income statement and determine depreciation expense as the “plug” figure required to obtain the operating profit.
Fill in the missing numbers for the following income statement, and find the OCF and depreciation tax shield.
Answer
Sales
$658,400
OCF =
Costs
419,400
Depreciation
98,600
EBIT
Taxes (22%)
Depreciation tax shield =
Net income
Chapter 2 Solutions
Foundations of Financial Management
Ch. 2 - Discuss some financial variables that affect the...Ch. 2 - What is the difference between book value per...Ch. 2 - Explain how depreciation generates actual cash...Ch. 2 - What is the difference between accumulated...Ch. 2 - How is the income statement related to the balance...Ch. 2 - Prob. 6DQCh. 2 - Explain why the statement of cash flows provides...Ch. 2 - What are the three primary sections of the...Ch. 2 - Prob. 9DQCh. 2 - Why is interest expense said to cost the firm...
Ch. 2 - Frantic Fast Foods had earnings after taxes of...Ch. 2 - Sosa Diet Supplements had earnings after taxes of...Ch. 2 - a. Swank Clothiers had sales of $383,000 and cost...Ch. 2 - Prob. 4PCh. 2 - Prob. 5PCh. 2 - Given the following information, prepare an income...Ch. 2 - Prob. 7PCh. 2 - Prob. 8PCh. 2 - Prepare an income statement for Virginia Slim...Ch. 2 - Prob. 10PCh. 2 - Stein Books Inc. sold 1,900 finance textbooks for...Ch. 2 - Lemon Auto Wholesalers had sales of $1,000,000...Ch. 2 - Prob. 13PCh. 2 - Fill in the blank spaces with categories 1 through...Ch. 2 - Arrange the following items in proper balance...Ch. 2 - Elite Trailer Parks has an operating profit of...Ch. 2 - Quantum Technology had $669,000 of retained...Ch. 2 - Botox Facial Care had earnings after taxes of...Ch. 2 - Stilley Corporation had earnings after taxes of...Ch. 2 - Prob. 20PCh. 2 - The Rogers Corporation has a gross profit of...Ch. 2 - Nova Electrics anticipates cash flow from...Ch. 2 - Prob. 23PCh. 2 - Prob. 24PCh. 2 - Prob. 25PCh. 2 - Prob. 26PCh. 2 - For December 31, 20X1, the balance sheet of Baxter...Ch. 2 - Refer to the following financial statements for...Ch. 2 - Scroll all the way down to “Financials� and...Ch. 2 - Now click on “Balance Sheet� and compute the...Ch. 2 - Prob. 4WE
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