Exam 4: Preparing and Using Financial Statements

"Variable expenses" are costs that are expected to remain constant over a range of revenues for a specific time period.

In its first year,Joe's Start-Up Company had revenues of $125,000 and cost of goods sold of $81,250,which was the only variable cost.Depreciation was $20,000,and cash costs were $5,000 in financing costs,admin expenses of $50,000,and $45,000 in marketing expenses - all of which were fixed.What is the survival breakeven revenue?

GAAP stands for "General American Accounting Principles."

During the development stage in a new venture's life cycle,the income statement typically shows no sales but expenses such as rent,utilities,and a subsistence salary for the entrepreneur.

Find the NOPAT breakeven revenues (NR)given the following information:total operating fixed costs = $75,000; variable costs = $150,000; and sales = $200,000.

The reduction in value of a fixed asset over its expected life intended to reflect the usage or wearing out of the asset is called accumulated depreciation.

How quickly an asset can be converted into cash is called liability.

Last year a firm had sales of $200,000.Its cost of goods sold was $75,000,and administrative and marketing expenses were $25,000 each.Depreciation expense was $10,000,while interest expense was $15,000.If the tax rate is 30%,what was the firm's NOPAT last year?

Use the following information to determine the cash fixed costs: Administrative expenses = $200,000; Marketing expenses = $180,000; Depreciation expenses = $100,000; and Interest expenses = $20,000.

Assets are financial and physical items controlled or owned by the business.

Find the NOPAT given the following information:sales = $520,000,earnings before interest = $100,000; interest = $20,000; and the tax rate = 30%.

Cash or other assets that are expected to be converted into cash in less than one year are known as current liabilities.

"Variable expenses" are costs or expenses that vary directly with revenues.

Find the "survival revenues" (SR),also known as the EBDAT breakeven)based on the following information:cash fixed costs = $60,000; variable costs = $70,000; and sales = $100,000.

During the development stage in a new venture's life cycle,the balance sheet reflects the acquisition of initial assets and the obtaining of seed financing.

The balance sheet equation is: Total Assets = Total Liabilities + Net Income.

Economic Value Added (EVA)is calculated as:

EBDAT is earnings before interest,taxes,depreciation,and amortization.

Net income,or profit,is the bottom line measure of what's left from the firm's net sales after operating expenses,financing costs,and taxes have been deducted.

Production assets (e.g.,inventories and equipment to produce products and give credit to customers)usually occurs during the development stage in a new venture's life cycle.