Question

1.Trevi Corporation recently reported an EBITDA of $32,200 and $9,700 of net income. The company has $6,800 interest expense, and the corporate tax rate is 35 percent. What was the company’s depreciation and amortization expense? Round to the nearest cent.

2. Working capital: Winston Electronics reported the following information at its annual meetings. The company had cash and marketable securities worth $1,235,816, accounts payables worth $4,159,580, inventory of $7,122,481, accounts receivables of $3,489,573, notes payable worth $1,151,694, and other current assets of $121,685. What is the company’s net working capital?

3.

The difference between FIFO and LIFO is FIFO refers to the practice of firms, when making sales, assuming that the inventory that came in last (at a higher price) is being sold first. LIFO implies that a firm is selling the lower cost, older inventory first, leaving the higher cost, newer inventory on the balance sheet.

Question 3 options:

	True
	False

Answer 1

Answer to Question 1:

Net Income = Taxable Income * (1 - tax)
$9,700 = Taxable Income * (1 - 0.35)
Taxable Income = $14,923

Taxable Income = EBIT - Interest Expense
$14,923 = EBIT - $6,800
EBIT = $21,723

EBIT = EBITDA - Depreciation and Amortization Expense
$21,723 = $32,200 - Depreciation and Amortization Expense
Depreciation and Amortization Expense = $10,477

Answer to Question 2:

Current Assets = Cash and Marketable Securities + Inventory + Accounts Receivable + Other Current Assets
Current Assets = $1,235,816 + $7,122,481 + $3,489,573 + $121,685
Current Assets = $11,969,555

Current Liabilities = Accounts Payable + Notes Payable
Current Liabilities = $4,159,580 + $1,151,694
Current Liabilities = $5,311,274

Net Working Capital = Current Assets - Current Liabilities
Net Working Capital = $11,969,555 - $5,311,274
Net Working Capital = $6,658,281