UBC COMM 370
Corporate Finance
Financial Analysis
Practice Questions
COMM 370
1
, Practice Q #1:
The following balance sheet and income statement
should be used for questions 1-6:
: Financial Analysis – Practice Questions 2
, Nabors, Inc.
2010 Income Statement
($ in millions)
Net sales $9,610
Less: Cost of goods sold 6,310
Less: Depreciation 1,370
Earnings before interest and taxes 1,930
Less: Interest paid 630
Taxable Income $1,300
Less: Taxes 455
Net income $ 845
Nabors, Inc.
2009 and 2010 Balance Sheets
($ in millions)
2009 2010 2009 2010
Cash 310 405 Accounts payable 2,720 2,570
Accounts Rec. 2,640 3,055 Notes payable 100 0
Inventory 3,275 3,850 Total 2,820 2,570
Total 6,225 7,310 Long-term Debt 7,875 8,100
Net fixed Assets 10,960 10,670 Common Stock 5,000 5,250
Retained Earnings 1,490 2,060
Total assets 17,185 17,980 Total liab. & equity 17,185 17,980
: Financial Analysis – Practice Questions 3
, Practice Q #1:
i. What is the amount of the non-cash expenses for 2010?
e.g. with straight line depreciation.
a. $570
b. $630 If we buy a machinery that costs $1000 with a 5-year life.
c. $845 The cash flow accrues at t=5 but accrual assumes that the
d. $1,370 cost is expensed during the 5 years of the life of the machinery.
e. $2,000
Depreciation: the allocation of the cost of assets to periods
in which the assets are used.
ii. What is the amount of the net capital spending for 2010?
a. -$290
b. $795 Net capital spending = Ending net fixed Asset
c. $1,080 - Beginning net fixed assets
d. $1,660 + Depreciation
e. $2,165 = 10,670 – 10,960 + 1,370
= -290 + 1,370 = 1,080
Financial Analysis – Practice Questions 4
Corporate Finance
Financial Analysis
Practice Questions
COMM 370
1
, Practice Q #1:
The following balance sheet and income statement
should be used for questions 1-6:
: Financial Analysis – Practice Questions 2
, Nabors, Inc.
2010 Income Statement
($ in millions)
Net sales $9,610
Less: Cost of goods sold 6,310
Less: Depreciation 1,370
Earnings before interest and taxes 1,930
Less: Interest paid 630
Taxable Income $1,300
Less: Taxes 455
Net income $ 845
Nabors, Inc.
2009 and 2010 Balance Sheets
($ in millions)
2009 2010 2009 2010
Cash 310 405 Accounts payable 2,720 2,570
Accounts Rec. 2,640 3,055 Notes payable 100 0
Inventory 3,275 3,850 Total 2,820 2,570
Total 6,225 7,310 Long-term Debt 7,875 8,100
Net fixed Assets 10,960 10,670 Common Stock 5,000 5,250
Retained Earnings 1,490 2,060
Total assets 17,185 17,980 Total liab. & equity 17,185 17,980
: Financial Analysis – Practice Questions 3
, Practice Q #1:
i. What is the amount of the non-cash expenses for 2010?
e.g. with straight line depreciation.
a. $570
b. $630 If we buy a machinery that costs $1000 with a 5-year life.
c. $845 The cash flow accrues at t=5 but accrual assumes that the
d. $1,370 cost is expensed during the 5 years of the life of the machinery.
e. $2,000
Depreciation: the allocation of the cost of assets to periods
in which the assets are used.
ii. What is the amount of the net capital spending for 2010?
a. -$290
b. $795 Net capital spending = Ending net fixed Asset
c. $1,080 - Beginning net fixed assets
d. $1,660 + Depreciation
e. $2,165 = 10,670 – 10,960 + 1,370
= -290 + 1,370 = 1,080
Financial Analysis – Practice Questions 4
