Business Mathematics Flashcards

If a company's total assets are $500,000 and total liabilities are $200,000, what is the equity?

Answer: $300,000

Equity = Total Assets − Total Liabilities = 500,000 − 200,000 = $300,000.

What is the net present value (NPV) of a project with initial investment $5,000, single year cash flow of $6,000, and discount rate 10%?

Answer: $454.5

NPV = −5,000 + 6,000/1.10 = −5,000 + 5,454.5 = $454.5.

Operating profit margin = 15% and revenue = $800,000. What is the operating profit?

Answer: $120,000

Operating Profit = 15% × 800,000 = $120,000.

If inflation is 6% and nominal interest rate is 9%, what is the real interest rate (approximate)?

Answer: 3%

Real interest rate ≈ Nominal rate − Inflation rate = 9% − 6% = 3%.

A firm's inventory turnover is 6 and COGS is $300,000. What is the average inventory?

Answer: $50,000

Average Inventory = COGS / Inventory Turnover = 300,000 / 6 = $50,000.

Contribution margin = $40 per unit, fixed costs = $200,000. What profit is made at 7,000 units?

Answer: $60,000

Profit = Contribution Margin × Units − Fixed Costs = (40 × 7,000) − 200,000 = 280,000 − 200,000 = $80,000.