1. During the last year of operations, accounts receivable increased by $10,000, accounts payable increased by $5,000, and inventories decreased by $2,000. What is the total impact of these changes on the difference between profits and cash flow?

2. The year-end 1999 balance sheet of Brandex Inc. lists common stock and other paid-in capital at $1,100,000 and retained earnings at $3,400,000. The next year, retained earnings were listed at $3,700,000. The firm’s net income in 2000 was $900,000. There were no stock repurchases during the year. What were dividends paid by the firm in 2000?

3. Sheryl’s Shingles had sales of $10,000 in 2000. The cost of goods sold was $6,500, general and administrative expenses were $1,000, interest expenses were $500, and depreciation was $1,000. The firm’s tax rate is 35 percent.

a. What is earnings before interest and taxes?

b. What is net income?

c. What is cash flow from operations?

4. The founder of Alchemy Products, Inc., discovered a way to turn lead into gold and patented this new technology. He then formed a corporation and invested $200,000 in setting up a production plant. He believes that he could sell his patent for $50 million.

a. What are the book value and market value of the firm?

b. If there are 2 million shares of stock in the new corporation, what would be the price per share and the book value per share?