AGRICULTURAL FINANCE AND CREDIT II (ABAP4107)
Agribusiness Technology - ABT
Semester: First Semester
Level: 400
Year: 2019
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COLLEGE OF TECHNOLOGY
DEPARTMENT OF AGRIBUSINESS TECHNOLOGY
AGRICULTURAL FINANCE AND CREDIT 11 LEVEL 3
TIME: 2hrs 30mins
1.
Consider the following financial statement of Chinedu’s company:
INCOME STATEMENT FOR CHINEDU, INC, 2008 (figures in millions of dollars)
Net sales
$22,348
Cost of goods sold
9,330
Other expenses
291
Selling, general, and administrative expenses
8,912
Depreciation
1,234
Earnings before interest and taxes (EBIT)
2,581
Net interest expense
321
Taxable income
2,260
Taxes 270
Net income
1,990
Allocation of net income
Addition to retained earnings
1,233
Dividends 757
BALANCE SHEET FOR CHINEDU, INC. (figures in millions of dollars)
Assets
2008
2007
Current assets
Cash and equivalents 311 1,928
Marketable securities 83 955
Receivables 2,453 2,150
Inventories 1,016 732
Other current assets 499 486
Total current assets 4,362 6,251
Fixed assets
Property, plant, and equipment 13,110 11,294
Less accumulated depreciation 5,792 5,033
Net fixed assets 7,318 6,261
Intangible assets 8,996 5,855
Other assets 1,984 1,734
Total assets 22,660 20,101
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Liabilities and Shareholders’ Equity Current
liabilities
2008 2007
Debt due for repayment 3,921 0
Accounts payable 3,870 3,617
Other current liabilities 123 640
Total current liabilities 7,914 4,257
Long-term debt 4,028 4,946
Other long-term liabilities 4,317 3,962
Total liabilities 16,259 13,165
Shareholders’ equity
Common stock and other paid-in capital 1,195 1,343
Retained earnings 5,206 5,593
Total shareholders’
equity 6,401 6,936
Total liabilities and shareholders
’
equity 22,660 20,101
i) Prepare a common size balance sheet and a common size income statement.
ii) Calculate the following financial ratios:
a.
Long-term debt ratio
b.
Total debt ratio
c.
Times interest earned
d.
Cash coverage ratio
e.
Current ratio
f.
Quick ratio
g.
Net profit margin
h.
Inventory turnover
i.
Days in inventory
j.
Average collection period
k.
Return on equity
l.
Return on assets
m. Payout ratio
2.
Earning interest on interest is called _______________ In contrast, if the bank calculated the
interest only on your original investment, you would be paid ___________________
3.
What will be the monthly payment if you take out a $100,000 fifteen-year mortgage at an
interest rate of 1 percent per month? How much of the first payment is interest and how much is
amortization?
a.
How much can sales expand without any further investment in fixed assets?
b,
How much investment in fixed assets would be required to support a 50 percent expansion in
sales?
4.
Suppose you retire at age 70. You expect to live 20 more years and to spend $55,000 a year
during your retirement. How much money do you need to save by the age 70 to support this
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consumption plan? Assume an interest rate of 70%
5.
Financial planning is a process consisting of: _____________ , ___________ and __________
6.
What are the alternate business plans that can be proposed by a division at the beginning of
planning season to cover five years?
7.
What are the three basic requirements for financial planning?
8.
Carter Tools has $50 million invested in fixed assets and generates sales of %60 million.
Currently the company is working at only 80% of capacity.
a) How much can sales expand without any further investment in fixed assets
b) How much investment in fixed assets would be required to support a 50 percent expansion
in sales?
9.
Which of the following questions will a financial plan help to answer? a. Is the firm’s
assumption for asset growth consistent with its plans for debt and equity issues and dividend
policy? b. Will accounts receivable increase in direct proportion to sales? c. Will the contemplated
debt-equity mix maximize the value of the firm?
10.
Would the following activities increase or decrease the firm’s cash balance?
a.
Inventories are increased
b.
The firm reduces its accounts payable
c.
The firm issues additional common stock
d.
The firm buys new equipment
11.
What are the average and marginal tax rates for a single taxpayer with a taxable income of
$70,000? What are the average and marginal tax rates for married taxpayers filing joint returns if
their joint taxable income is also $70,000?
12.
Fill-in the blank spaces
The _____________ provides a snapshot of the firm’s assets and liabilities. The difference
between the assets and the liabilities represents the amount of the ________________________
shows the difference between revenues and expenses.__________________________________
____________________ measures the sources and uses of cash during the year. The change in the
company’s ________________ is the difference between sources and uses.
13.
What are the usual steps in credit management? B) How do firms assess the probability that a
customer will pay?
14.
What happens when firms cannot pay their creditors?
15.
List the procedures adopted in preparing capital budget. B) what are the significance of
capital budgeting
Good luck!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
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