QUESTIONS 1) A company has a 75% gross profit margin, cost of sales of 40,000 and receivables turnover of 60 days !

hat is the value of the company"s accounts receivable# $) %f a company reports profit of &00, after charging depreciation of $00, '() e*pense of +00, and an impairment loss of 100, and if accounts receivable increase by 100, accounts payable decrease by $00, and inventory decreases by 50, ,hat is operating cash flo,# -) A company has a 75% gross profit margin, inventory of 500 and inventory turnover of -6 5 days !hat is the company"s revenue# 4) %f a company reports profit of 600, after charging depreciation of 400, advertising e*pense of 1,$00, stoc. compensation e*pense of $00 and a good,ill impairment loss of 100, and if accounts payable increase by 100, ,hat is operating cash flo,# 5) A company has a $0% operating profit margin, 70% gross profit margin, inventory of 1$,000 and inventory turnover of 45 days !hat is the value of the company"s operating e*penses /e*cluding cost of sales)# 6) At its current level of output, a company ,ith revenue of 1,000 has a $0% operating profit margin and a 60% gross profit margin %f cost of sales is variable and all other operating e*penses are fi*ed, ,hat is operating leverage if revenue increases to $,000# 7) %f a company reports profit of $,000, after charging depreciation of 500, '() e*pense of 1,$00, and an impairment loss of 400, and if accounts receivable increase by 100, ,hat is operating cash flo,# +) A company has a 75% gross profit margin, gross profit of 1$,000, and accounts receivable of 1,500 !hat is the company"s accounts receivable turnover# &) A company has a 75% gross profit margin, revenue of 1$,000, and inventory of 500 !hat is the company"s inventory turnover#

ANSWERS 1) A company has a 75% gross profit margin, cost of sales of 40,000 and receivables turnover of 60 days !hat is the value of the company"s accounts receivable# If gross margin is 75% and cost of sales 40,000, revenue = revenue = 160,000 (AR/revenue !"65 = 60 da#s, so AR = $6,"01% $) %f a company reports profit of &00, after charging depreciation of $00, '() e*pense of +00, and an impairment loss of 100, and if accounts receivable increase by 100, accounts payable decrease by $00, and inventory decreases by 50, ,hat is operating cash flo,# &rofit (e)reciation Im)airment Increase accounts receiva*le (ecrease accounts )a#a*le (ecrease inventor# +)erating cas, flo'00 $00 100 (100 ($00 50 '50

-) A company has a 75% gross profit margin, inventory of 500 and inventory turnover of -6 5 days !hat is the company"s revenue# Inventor#/cost of sales = "6%5 da#s, so cost of sales = 5000 If gross margin is 75%, cost of sales/revenue = $5%, so revenue = $0000 4) %f a company reports profit of 600, after charging depreciation of 400, advertising e*pense of 1,$00, stoc. compensation e*pense of $00 and a good,ill impairment loss of 100, and if accounts payable increase by 100, ,hat is operating cash flo,# &rofit Add *ac. non/cas, e0)enses (e)reciation 1toc. com)ensation 2ood-ill im)airment Increase accounts )a#a*le +)erating cas, flo600 400 $00 100 100 1400

5) A company has a $0% operating profit margin, 70% gross profit margin, inventory of 1$,000 and inventory turnover of 45 days !hat is the value of the company"s operating e*penses /e*cluding cost of sales)# Revenue % 100

3ost of sales 2ross )rofit +)erating e0)enses +)erating )rofit

"0 70 50 $0

Inventor#/cost of sales = 45 da#s, so cost of sales = '7""" 1o, o)erating e0)enses = '7""" ! 50/"0 = 16$$$$ 6) At its current level of output, a company ,ith revenue of 1,000 has a $0% operating profit margin and a 60% gross profit margin %f cost of sales is variable and all other operating e*penses are fi*ed, ,hat is operating leverage if revenue increases to $,000# Revenue 3ost of sales 2ross )rofit +)erating e0)enses +)erating )rofit 1000 400 600 400 $00 $000 400 1$00 400 400

+)erating leverage = fi0ed cost/total cost = ""% 7) %f a company reports profit of $,000, after charging depreciation of 500, '() e*pense of 1,$00, and an impairment loss of 400, and if accounts receivable increase by 100, ,hat is operating cash flo,# 0rofit plus non1cash e*penses 2 $,000 3 500 3 400 2 $,&00 4ess increase in receivables of 100 2 operating cash flo, of $,+00

+) A company has a 75% gross profit margin, gross profit of 1$,000, and accounts receivable of 1,500 !hat is the company"s accounts receivable turnover# 5ales 2 gross profit6margin 2 1$,000675% 2 16,000 A' turnover 2 /receivables6sales)7-65 days 2 -4 $ days &) A company has a 75% gross profit margin, revenue of 1$,000, and inventory of 500 !hat is the company"s inventory turnover# 8ost of sales 2 revenue 9 gross profit 2 -,000 %nventory turnover 2 /inventory6cost of sales)7-65 days 2 61 days /$ months)