Exam I Review
New Venture Development
Spring 2013
Question 7
• Looking at the horizontal analyses for the four
restaurants, which one seems to be having
issues managing its cash and current
liabilities?
a.
b.
c.
d.
Panera
McDonald’s
Ruby Tuesday
Chipotle
Question 7
Question 10
• Where on Panera’s debt and stockholders’
equity section might we see the effect of a 7%
decrease in cash?
– Increase in current liabilities
– Increase in retained earnings
– Decrease in capital surplus
– Increase in treasury stock
Question 10
Decrease in one current asset may lead to increase in another (e.g., cash to inventory),
but question wants matching decrease on L + SE side of balance sheet.
Question 10
• Where on Panera’s debt and stockholders’
equity section might we see the effect of a 7%
decrease in cash?
– Increase in current liabilities
– Increase in retained earnings
– Decrease in capital surplus
– Increase in treasury stock
None of the other answers matches what is happening on the
balance sheet
Questions 12 and 13
• Al’s VC = $5, VR = $10, fixed costs = $50,000
• BEQ = FC/(VR-VC) = $50,000/($10-$5) =
10,000
• BE$ = FC/gross profit margin = $50,000/50% =
$100,000 in sales
Or
• BE$ = BEQ X VR = 10,000 X $10 = $100,000
Question 14
• Decrease in accounts receivable and inventory
with an increase in accounts payable. What’s
the effect on operating activities cash flow?
– Decrease in AR and inventory means less $ tied up
in non-cash current assets
– Increase in AP means less $ going out to pay
suppliers
Question 15
• Build-A-Bear receives inventory that is
unfinished and provides employees in store to
help finish stuffed animals. Compared to other
stores selling finished stuffed animals, we
would expect to see on income statement:
– Lower COGS
– Higher operating expenses
Example
• Schmidt Enterprises sells mass-manufactured
koozies on game days
• Schmidt management learns it can get higher
sales price by customizing koozies in-house with
own employees
• Now employees receive unfinished koozies from
Asia and customize silk-screening
– COGS goes down (lower variable cost because
unfinished)
– Operating costs go up (because you’re paying
employees a fixed wage)
Question 16
• Calculate BBW’s BE$
• BE$ = FC/gross profit margin
• = $162,881/.406 = $410,105
What about Carl?
• See Carl’s Trucks Excel file with interactive
graph
NVD Exam I Distribution of Scores
14
100.00%
90.00%
12
80.00%
Frequency
10
70.00%
60.00%
8
50.00%
Frequency
6
40.00%
Cumulative %
30.00%
4
20.00%
2
10.00%
0
0.00%
73
76
79
82
85
88
Score
91
94
97
100
μ = 91
sd = 7