Answer:
The correct answer is d) It was deducted as an expense on the income statement, but does not require cash.
Explanation:
The indirect method involves the adjustment of net income with changes in balance sheet accounts to arrive at the amount of cash generated by operating activities.
It depends on the account if it is added or subtracted to net income. Depreciation is added to net income because it was deducted as an expense on the income statement, but does not require cash.
Explanation:
The computation of inventory turnover and the days sales in inventory is shown below:
Inventory turnover ratio equals to
= Cost of goods sold ÷ average inventory
where,
Average inventory = (Opening balance of inventory + ending balance of inventory) ÷ 2
For 2017, it would be
= $(578,825) ÷ {($102,900 + $93,250) ÷ 2}
= $(578,825) ÷ ($98,075)
= 5.90 times
For 2016, it would be
= ($361,650) ÷ {($98,000 + $93,250) ÷ 2}
= ($361,650) ÷ ($95,625)
= 3.78 times
Now the days sales in inventory is
= Total number of days in a year ÷ inventory turnover ratio
For 2017, it would be
= 365 days ÷ 5.90 times
= 61.86 days
For 2016, it would be
= 365 days ÷ 3.78 times
= 96.56 days
We assume there are 365 days in a year
Answer: Option C
Explanation: The unemployment rate refers to the proportion of the unemployed workforce, calculated as a percentage.
This is considered as a lagging indicator, which means this normally goes up or down in the midst of response to changing circumstances instead of predicting them. The unemployment rate could be expected to increase when the economic situation is in bad condition and job opportunities are scarce.
In order to evaluate the jobless rate, the amount of unemployed individuals is measured by the number of working and unemployed individuals in the total labor force.
Answer:
The discount rate assign to a new project with a Beta of 1.25 is 13.94%
Explanation:
The applicable formula is the Capital Asset Pricing Model formula of Miller and Modgliani quoted below:
Ke = Rf + (Market risk premium x Beta)
Currently Ke=14.945%
Beta =1.38
Risk free rate of return (Rf) is 4.25%
Market risk premium is the unknown
14.945%=4.25%+(Market Risk Premium)*1.38
14.945%-4.25%=Market Risk Premium*1.38
10.70%
=Market Risk Premium*1.38
10.70%/1.38=Market Risk Premium
Market Risk Premium =7.75%
However, the new project cost of equity has to be determined due to having a different Beta factor of 1.25(a different risk appetite)
Using the above formula, we have
Ke=4.25%+(7.75%
*1.25)
Ke =13.94%