Discuss the below:
Long Income and Cashflow
Question 1
How would taking out a 10k loan at 10% in year zero and then paying it of in year one show up on an income and cash flow statement? Assume a simple loan with a single payment.
Question options:
Decrease in cash from finance in year one of 10k.
Interest expense of 1k in year one.
Increase in revenue of 11k in year one.
Increase in cash from finance in year zero of 10k.
Increase in revenue of 10k in year zero.
Increase in expense of 11k in year one.
Decrease in cash from finance of 11k in year one.
Question 2
Suppose that your average accounts receivable was 10k in year zero. In year one this increased to 15k and then decreased to 10k in year three.
How would you represent this change in working capital?
Question options:
Increase in cash from working capital of 5k in year two.
Increase in cash from working captial of 5k in year three.
Decrease in cash from working capital of 5k in year one.
Decrease in cash from working captial of 5k in year three.
Increase in cash from working capital of 5k in year one.
Decrease in cash from working capital of 5k in year two.
Question 3
How would you represent both the purchase of a car for 20k and the increase in sales from 40k to 45k, because of the fancy new car, in an income and cash flow statement?
Question options:
Decrease in owner equity of 20k.
Increase in revenue of 5k.
Decrease in cash from investment of 20k.
Increase in revenue of 45k.
Increase in cash from operations of 5k
Increase in cash from investments of 20k
Increase in cash from investment of 20k.
Question 4
Suppose you purchase a five-year asset that costs 16k in year zero and your tax rate is 50%. Assuming no other changes in revenue or costs, what is the year zero net cash flow?