Summerfuel finance 2016 class 10 7 21

Summerfuel FinanceClass 10: 7-21-2016

TodayStock ReportsQuiz GameQuizWork on Projects

Stock Reports Today 1.Rafael2.Soraya3.Bea4.Pablo5.Aboud6. Ben

1.The 4 ”P” s of the Marketing mix is: P_____________________________ P_____________________________ P_____________________________ P_______________________________ 

2 – 2 pointsIn your own words describe what a

“value proposition” means in terms of product design?

3When designing a product which of the following should be considered:a.  The value proposition that product offersb. Whether there can be sufficient demand for

the productc. That providing the product a company can

be profitable after is costs and expenses.d. All of the above

4

If assets are is $400,000 and liabilities are $250,000, then equity equals:

a. $108,000.

b. $150,000.

c. $300,000.

d. $492,000.

e. $792,000.

7

5Wages paid to employees shows on the a. Balance sheet as as an assetb. On the balance sheet as a liabilityc. On the income statement as an

expense

6- Wild Card !A free KMAC Buck- No question

7If the company leases it’s work space this shows on which financial statement and how?a. On the balance sheet as an assetb. On the balance sheet as a liabilityc. On the income statement as an

expense

8If a company owns the building

that it uses for its work space it shows on which financial statement and how

a.On the balance sheet as an asset

b.On the balance sheet as a liability

c. On the income statement as an expense

For The Next 3 Questions Consider:

Company XYZ is a start up company making gizmos.

It costs XYZ $1 to make a gizmo including parts and labor

XYZ has invested fixed costs for machinery and a factory of $300 that it wants to cover in the 1st two years of business and then become profitable

9XYZ expects to sell 100 gizmos

in year 1 and 200 gizmos in year 2.

What does XYZ need to charge for each gizmo to meet its goal of covering its fixed costs in two years?

10In year 3 after XYZ has covered

its start up costs and is charging $2 for a gizmo that costs $1 what is the profit margin per product?

11In year 3, XYZ sold 400 gizmos. Complete the top portion of its income statement as provided: (2 points) Sales _______________________ Minus Cost of Goods Sold _________Gross Profit Margin (before expenses, interest, and taxes: ______________ 

12XYZ issued a bond (debt) for $100 paying 5% interest. Which of the following is true about the impact of this liability on the financial statements of XYZ Company.

a.  A $ 100 bond will show as an asset on the balance sheet

b. A $100 bond will show as a liability on the balance sheet

c. A $105 bond will show as a liability on the balance sheet

d. Interest expense of $5 will show on the income statement

e. Both a and c

f. Both b and d

13The portion of a company that is paid for

by ownership stake in the company shows on the balance sheet as:

a. Assets.

b. Revenues.

c. Liabilities.

d. Owner's Equity.

e. Expenses

17

14A prolonged market period where investment prices rise, usually accompanied by widespread optimism usually as a result of the expectations of economic prosperity is called a.A Bull Marketb.A Bear Marketc.A Good Time

15 The accounting equation for Wing Ding Company shows a no change in its total assets, liabilities and equity. Which of the following transactions could have caused that no effect?

a. Cash was received from providing services to a customer.

b. The company paid with cash an amount due on credit.

c. Equipment was purchased for cash.

d. A utility bill was received for the current month, to be paid in the following month.

e. Advertising expense for the month was paid in cash. 19

16A debit:

a. Always increases an account.

b. Is the right-hand side of a T-account.

c. Always decreases an account.

d. Is the left-hand side of a T-account.

20

17True or False:

Equity is typically more expansive way to raise capital than Debt

18- 2 pointsXYZ issued a bond (debt) for $100 paying 5% interest and has a tax rate of 20%. What is XYZ’s cost of debt

19- 3 pointsUse the following information to calculate the cost of equity for XYZ Company: (2 points; 1 is bonus)Risk free rate: 10 year US Treasury = 1.6 %XYZ ‘s Beta is 1.2The market rate=- S&P 500 index ytd = 6%  

The Cost of Equity / DebtDebt:

Cost of Debt= Rate*( 1- tax rate) :.05 x (1-.2) = .04 or 4%Equity:

Cost of Equity = rfr + beta * ( emr – rfr)The risk free rate + the company’s beta x (the expect market rate – the risk free rate

1. Risk free rate : 10 year US Treasury = 1.6 %2. Beta of 1.2 for a start up / more volatile 3. The market rate=- S&P 500 index ytd = 6%

1.6% + (1.2 X (6%-1.6%)) = 8.77%

Balance Sheet1. Make a complete list of the stuff that you need to

run your business

2. Start with an assumption that you need 10% to 20% $ of your total assets as cash

Liabilities and Equity

3. Assume that you have 25% of your total assets to put into your company

4. You need to raise the other 75% though either debt or equity

Business Plan Outline1. Executive Summary2. Part I: The Organizational Plan3. Part II: The Marketing Plan4. Part III: Financial DocumentsWork on In Class : Tuesday & Wednesday

this week, Monday next weekPresent next Tuesday and Wednesday

You will get out of this what you put into it !