Unit 01 · Homework

Homework — Finance, the Firm, and the Statements

Finance, the Firm, and the Statements · Ghana · GH₵

One required question per video, turned in to the TAs. The optional extras are on the practice problems page.

Homework for Week 1. Each set belongs to the video of the same number. One question in each set is required; answer it and turn it in to the TAs. The rest are optional practice, and worked answers to those are published alongside the set. A full set takes about twenty minutes. Work them before the case session.

Homework · 1.1

1. Explain, in three sentences, why equity holders are described as having a "residual" claim, and why that makes their required return higher than a lender's.

Homework · 1.2

1. Classify each as a stock or a flow: cash at 31 December; cost of goods sold for the year; inventory at 31 December; dividends paid during the year; total debt outstanding.

Homework · 1.3

1. A business reports revenue of GH₵14.0 million, cost of goods sold of GH₵8.4 million, operating expenses of GH₵3.2 million, depreciation of GH₵600,000, interest of GH₵500,000, and tax at 25%. Build the income statement down to net income and compute all three margins.

Homework · 1.4

1. A company reports net income of GH₵3.0 million and depreciation of GH₵1.2 million. Receivables fell by GH₵800,000, inventory rose by GH₵1.5 million, and payables fell by GH₵400,000. Compute cash flow from operating activities, and state in one sentence why it differs from net income.

Homework · 1.5

1. A company reports net income of GH₵5 million every year for three years. Over the same three years its operating cash flow is negative GH₵1 million, negative GH₵3 million, and negative GH₵6 million, while its debt rises steadily. Write four sentences describing what is most likely happening and what you would ask management.