CMA Study Group

Hey Guys ..

How you doing ? I Hope your CMA Studies are going well ..

I do have a doubt in CMA Part 2

1) While Calculating the Turnover Ratios ,( say Asset Turnover Ratio )

If 3 years of balance sheet are given , ( 2007 , 2008 ,2009 )

but the comparision is only done between 2008 & 2009 ,

So should i calculate Average Asset based on all 3 years or only 2 years ?

2) While Calculating Cash flow Statement 

An increase in cash of 10,000 has been shown in the question

will that apper in the Cash Flow Statement ? If No, Whats the significance of it ?

please do reply .. 

And If you have any doubts from your side ,, Feel free to ask

Take care

Peace

Hi Anesh,

We calculate average asset amount (e.g. inventory, receivables, total asset, etc) by adding the beginning and ending balances of the asset divided by 2. Therefore, to get average amount to be used for 2008 we will add the ending 2007 and 2008 divided by 2. Ending 2009 will be used only when adding ending 2008 to it, again the sum to be divided by 2.

Cash flow statements explain the change in the cash and cash equivalents (US$10,000 increase in your example) during a given period, like one year in your example. The accumulated total of the net cash provided (or applied) in the 3 sections of the cash flow statement (namely operating, investing and financing activities) would add up to the net change (whether increase or decrease) in cash, and is shown conspicuously as an integral item in the Cash Flow Statement where beginning cash balance is added (or subtracted if net change is a decrease) to arrive at the ending cash balance. The significance of the US$10,000 increase given in the problem tells you that your Cash Flow statement should be able to explain where and why the company's cash balance increased by US$10,000 compared to last year's, as the case may be.

Mahmoud is correct. Think about it like this. When finding average asset you are finding the average for the year. So the 2008 balance is really the 2009 beginning balance. So you add beginning balance to ending balance to find the average for the year.

In regards to the cash flow statement. The $10,00o is the amount of new cash generated in the current year. So $10,000 will be the sum of the cash flow from operations, investing and financing. When this number ($10000) is added to the prior year ending balance (or current year beginning balance), the result is the current year ending balance.

Hope this helps.

Hey

Thanks guys ( Mahmud , Angel & Nancy ) , That was quick

Anyways .. I do have some more doubts hope you guys can clarify

1) While Calculating NPV

IF the initial Investment is 160,000 and after 3 years the asset will have a Salvage value 10,000

And the Depreciation is calculated on a straight-line basis ,So Should i calculate Depreciation on 160,000 or 150,000 ?

2) While Calculating BEP ,( Break Even point )

Should " Selling fixed cost " be included in the Fixed cost used to calcuate Break point ?

Hope You guys understood my questions ..

And Again , Feel Free to express your doubts too

Thanks ..

hi Mahmud

I was trying to solve this Question , I think they are using the entire intial investment for the calculation

The Answer is B

This Question was taken from the Gleim CMA Part 2 ,

Su - 10

Question - 3