İŞLETME FİNANSI I - Deneme Sınavı - 6

The main objective of a statement of financial position is to disclose fairly what a company owns and means used to get them at a certain date. It can be thought as a selfie of the company at a point in time. Thus, Balance Sheet provides a snapshot of the financial condition of the firm at a particular time.

Total assets = Total liabilites and equity, hence Equity = Total assets  -Total liabilities 

Total assets = Current assets + Long term assets = TL 500,000 + TL 300,000 = TL 800,000

Total Liabilites = Current liabilities + Long term liabilites =TL 400,000 +TL 150,000 = TL 550,000. 

Equity = TL 800,000 -TL 550,000 = TL 250,000

Income statement is a performance statement for a given period with a bottom line figure of profit or loss. Hence, Income Statement provides profitability of the firm over a period of time such as a year.

Free cash flow describes the cash remaining from operations after adjustment for capital expenditures and dividends. Thus, it ows the ability of the company to generate cash after investing in new operating assets and making cash dividend payments to stockholders.

In vertical (or common size analysis), the items in the financial statements are expressed as a percentage of total assets or sales. In case of vertical analysis of income statement,  the items in the income statement  are expressed as a percentage of sales.

If the sales revenues of a firm had increased compared to last year while the cost of sales had decreased,  gross profit  must have increased, since gross profit is the difference between sales revenues and cost of sales.

The sales price per unit is also constant, it does not change over time.

One of the component of the CVP equation is operating profit, not net profit

The difference between the sale price per unit and the variable costs per unit gives the unit contribution margin

Break-even point=5,250,000/(250-100)=37,500 units

First we need to calculate contribution margin ratio as:

($2-$1.2)/$2=0.4

Then we need to divide total fixed cost by contribution margin ratio as:

$50,000/0.4=$125,000

First we need to calculate margin of safety in dollars as:

$820,000-$615,000=$205,000

Then we need to divide it by expected sales to find margin of safety ratio as follows:

$205,000/$820,000=25%

Break-even point: $150,000/($10-$5) = 30,000

Break even sales: 30,000*$7 = $210,000

The variable costs directly change in proportion to the level of activity while the fixed costs are the same within a specific activity range.

Break-even point = Fixed cost / (Price - Variable cost)

= $540,000 / ($15 - $9) = 90,000

Price per unit = $400,000 / 20,000 = $20

Contribution margin per unit=Price - VC /Price

= $20 - $10 / $20 = 0.5

Contribution margin ratio of the company: (0.60*0.50)+(0.40*0.60) = 0.54

Overall break-even sales: $540,000/0.54 = $1,000,000

Break-even sales for gloves: $1,000,000*0.60 = $600,000

$300,000 - ($10 * $12) = $180,000

$180,000 / $300,000 = 0.6

The margin of safety is the cushion amount that the actual or budgeted sales can drop by, still enabling the business to break even. It is the difference between actual/budgeted sales and the break-even sales. The margin of safety can be stated in units, dollars or in a ratio form.

The degree of operating leverage is a concept widely used to assess the operating risk of a business stemming from its cost structure. Basically, the degree of operating leverage shows how much the operating income of the business changes with a relative change in its sales. In fact it is a multiple depicting how many times the operating income of a business changes in relation to a percentage change in the sales.

Degree of OperatingLeverage(DOL) = %ΔEBIT / %ΔSales