# Capstone Assignment

1. Please utilize the following terms to match each term to the proper description.

2. Utilize the below comparative balance sheets to calculate the net cash flow provided by  operating activities (utilizing the indirect method) for 2010.  Please show all of you work.   You do not need to complete an entire statement of cash flows, simply provide the net    cash provided by operating activities and show how you arrived at that answer.

3. Utilizing the information from problem 2 for 2010, compute the ratios below.  Assume that sales were \$850,000 for the year, all on credit.  Please show all of your work, including the formulas you use.
Profit Margin
b.   Return On Assets
c.   Return On Equity
d.   Receivables Turnover
e.   Inventory Turnover
f.   Current Ratio
g.   Quick Ratio

4. In four to seven sentences, explain LIFO and FIFO and their impact on both cost of goods sold for a particular period and ending inventory costs.

5. Assume the Watson Corporation projects to sell 350,000 units in May, 200,000 units in June, and 300,000 units in July.  They maintain an ending inventory equal to 20% of the following month’s sales.  What are the production requirements for June?  Please show your work in arriving at your answer.

6. Operating leverage primarily affects what part of the balance sheet?  (You may provide a simple answer with one or a few words.)

a.   Break-Even Point In Units
b.   Degree of Operating Leverage
c.   Degree of Financial Leverage
d.   Degree of Combined Leverage

8. In one to three sentences define an economic ordering quantity and explain why it is             useful.

9. The Watson Corporation has projected to sell 300,000 spools of thread this month.  They have a ordering cost of \$.50 per order and carrying costs of \$.25 per spool.   What is the economic ordering quantity for the month?  Please show your work in arriving at your  answer.

10. The Watson Corporation needs to borrow \$100,000 for one year. (Please show your work.)
What is the effective rate on a loan with no fees and an interest rate of 9%?
9%
What is the effective rate on a loan with a 6% interest rate and a compensating balance requirement of 20%?

11. Compute the cost of not taking the following cash discounts.  Please show your work.
2/10, net 60
2/10, net 30
2/20, net 90

12. If you invest \$10,000 today, how much will your investment be worth in 5 years at an interest rate of 6%?  Please show your work in arriving at your answer.

13. In a brief paragraph (ten to fifteen sentences) please explain some of the most important aspects of solid financial management as you have learned them from this course.