Answer:
$2,300,000
Explanation:
The formula to compute the operating cash flow is shown below:
= EBIT + Depreciation - Income tax expense
where,
EBIT = Sales - operating expenses - depreciation expense
= $7,000,000 - $4,000,000 - $1,000,000
= $2,000,000
And, the income tax expense is
= $2,000,000 × 0.35
= $700,000
So, the value would equal to
= $2,000,000 + $1,000,000 - $700,000
= $2,300,000
We simply applied the above formula
Answer:
D
Explanation:
Equilibrium means a state of equality or balance between market demand and supply. Refers to a price at which both parties producers and consumers are agreed to exchange.
Prices where demand and supply are out of balance are called points of disequilibrium.
If the selling prices is over the equilibrium price, means that there is a surplus of excess supply, so the prices would go down to returned to the equilibrium price.
Answer:
The journal entry for recording the original sale is shown below:
Explanation:
The journal entry for recording the original sale is as follows:
Accounts receivable A/c................................Dr $735
Sales Tax A/c...................................................Cr $35
Sales A/c............................................................Cr $700
As sales is made on credit so the accounts receivable account will be debited against the Sales account, which is credited. And there is sales tax charged on selling necklaces, which is credited to the sales tax account.
Computation of Sales Tax as:
Sales tax = Selling amount × Tax
where
Selling amount = Number of Necklaces × Price
= 20 × $35
= $700
So,
Sales tax = $700 × 5%
Sales tax = $35
Answer: Decrease the company's use of debt capital because it will decrease the equity multiplier (TRUE)
Reduce the company's operating expenses, its cost of goods sold, and/or the interest rate on its borrowed funds because this will increase the company's net profit margin (TRUE)
Decrease the amount of debt financing used by the company which will decrease the total asset turnover ratio (FALSE)
Use more debt financing in its capital structure and increase the equity multiplier (TRUE)
Explanation:
EQUITY MULTIPLIER is given as (Total Asset)/(Total shareholders equity). It measures how much of a company's asset is financed by shareholders. A company finances its assets through the combination of shareholder equity and DEBT (liability). Thus, the greater the percentage of debt used in financing asset, the lower the proportion of equity used. In order words, if debt decreases, asset decreases and therefore equity multiplier decreases.
NET PROFIT MARGIN is given as (Net Profit)/(Sales Revenue). Net profit increases when operating expenses, cost of goods sold, and interest rate deceases. This will lead to an increase in net profit margin.
TOTAL ASSET TURNOVER RATIO is given as (Net sales)/(Total Asset). It measure the effectiveness of an organisation to produce and make sales using its assets. If debt financing is decreased, it lead to a decrease in total asset and then increase (not decrease) in asset turnover ratio (assume net sales does not change)
We had defined equity multiplier above. If we use more debt financing, the proportion of equity in asset reduces, leading to an increase in equity multiplier.
