# BUSN379 Homework Week 1

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BUSN379 Homework Week 1
The income statement starts with revenues and subtracts costs to arrive at EBIT…

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## BUSN379 Homework Week 1

BUSN379 Homework Week 1

A+

Chapter 2: 8, 14, and 19

Instructions:

• If you used excel for your calculations, please fill in your results in this template and submit along with your Excel sheet.
• If you used a financial calculator, provide your inputs.
• If you used an online calculator, provide a snapshot at all possible.
• If you used a formula, write down your step-by-step calculations.
• Please complete all items highlighted in yellow.
• Note: you will not receive credit for items without calculations.

Chapter 2 Assignment

1. The income statement starts with revenues and subtracts costs to arrive at EBIT. We then subtract out interest to get taxable income, and then subtract taxes to arrive at net income.

Please calculate by completing the Income Statement below:

Income Statement

 Sales \$34,630 Costs \$10,340 Depreciation \$2520 EBIT \$21,770 Interest \$1,750 Taxable income \$20,020 Taxes \$7,007 Net income \$13,013
1. a. To calculate the OCF, we need to create an income statement. The income statement starts with sales (revenues) and subtracts costs to arrive at EBIT. We then subtract out interest to get taxable income, and then subtract taxes to arrive at net income.

Please calculate by completing the Income Statement below:

Income Statement

 Sales \$167,000 Costs \$88,600 Other Expenses \$4,900 Depreciation \$11,600 EBIT \$61,900 Interest \$8,700 Taxable income \$53,2000 Taxes \$18,620 Net income \$34,580
1. The cash flow to creditors is the interest paid, minus any new borrowing. We know that \$4,000 of debt were “redeemed”, so we know net borrowing changed by \$4,000 (This is your net new borrowing). Since the company redeemed long-term debt, the net new borrowing is negative. So, the cash flow to creditors is:….
2. a. The income statement starts with revenues and subtracts costs to arrive at EBIT. We then subtract interest to get taxable income, and then subtract taxes to arrive at net income. Doing so, we get:

Income Statement

 Sales \$2,600,000 Cost of goods sold \$1,535,000 Other expenses \$465,000 Depreciation \$520,000 EBIT \$80,000 Interest \$245,000 Taxable income -\$165,000 Taxes (35%) \$0 Net income -\$165,000
1. The operating cash flow for the year was:…