Financial Analysis Questions and Exercises - Essay Example

In the context of teaching an accounting class, the direct cost will be the salary of the teacher while indirect costs include the rent of the building, utility expenses, etc. Out-of-pocket costs and opportunity costs can be applied to our personal financial decisions in almost every situation where an outlay of cash is involved.

Whenever we spend cash on something, we forgo the potential earnings i.e. interest if we were to hold this cash with the bank or any other investment opportunity. Practice Exercise 15-8 Fixed Costs and Variable Costs Correct answer: 3. Wood used to make custom tables 15-13 Direct and Indirect Costs Best answer: 1. To evaluate business segments based on only those costs directly traceable to each segment practice Exercise 15-15 Out-of-Pocket Costs and Opportunity Costs Correct Answer: 1.

Revenue lost from the sale of cakes by deciding to sell only cookiesExercise 15-8 Cost Classifications 1. Product(MOH), Variable 2. Period, Variable 3. Product(Labor), Fixed4. Period, Variable 5. Product (MOH), Variable 6. Period, Fixed7. Period, Fixed8. Product (MOH), Fixed9. Period, Variable10. Product (DM), Variable11. Period, Fixed12. Period, Variable13. Product (DM), Variable14. Product (DM), Variable Chapter 19: Quiz Problem 1 1. Paying out a $2 million cash dividend. Cash and net working capital will decrease by $2 million.2. A customer paying a $2,500 bill resulting from a previous sale.

Cash and Net working capital increase3. Paying $5,000 previously owed to one of its suppliers. Cash decreases and Net working capital remains unchanged4. Borrowing $1 million long-term and investing the proceeds in inventory. Cash remains unchanged and Net working capital increases5. Borrowing $1 million short-term and investing the proceeds in inventory. Cash and Net working capital remain unchanged6. Selling $5 million of marketable securities for cash. Cash and Net working capital increase chapter 19: Quiz Problem 5 The working Capital requirements will be reduced because of a lower inventory level (a Current asset), and as we know, Net working capital = Current assets - Current liabilities.

The cash conversion cycle will shorten as lesser cash will be 'trapped' in inventory. Chapter 18: Discussion Question 3Present value of money is important in Capital budgeting decisions because these are usually longer-term decisions and cash inflows and outflows occur at different points in time. To calculate the true profitability of an investment, the time value of money should be taken into consideration at all times and in all methods used.