Net Working capital
2012
2011
Change
Cash
$1,561
$1,800
($239)
Short term investment
$1,052
$3,010
-1958
Accounts receivable
$3,616
$3,129
487
Inventories
$1,816
$1,543
273
$707
$601
106
$8,752 $10,083
-1331
current Assets
other current Assets
Total current Assets
current Liabilities
Accounts Payable
$5,173
$5,111
62
$288
$277
11
other current liabilities $1,401
$1,098
303
Total current liabilities $6,862
$6,486
376
Net Working capital
$3,597
-1707
Short term Debt
$1,890
The net working capital for 2012 is 1890 dollars calculated by deducting the total currents
liabilities from total currents asset for the year 2012.
The Net working capital in 2011 was 3,597 which is 1,707 higher than 2012.The change in net
working capital states that the requirement of net working capital in 2012 has been decreased by
1,707 from 2011.
Cash flow from Assets
Operating cash flows
7,155
Net capital spending
(2,372)
Addition to Net working
capital
1,707
Cash flow from Assets
6,490
The cash flow from assets is being calculated by deducting the total net capital spending and
additions to working capital from operating cash flows. In our case study the additions to
working capital is negative showing a decrease of 1707 in working capital that’s why it is added
in operating cash flows to calculated cash flow from assets.
http://www.investopedia.com/terms/w/workingcapital.asp
http://www.zenwealth.com/BusinessFinanceOnline/FCF/CashFlowFromAssets.html
Answer B
The amount will calculated by finding future value of annuity for 17 years at 9.5% by using the
FVIF = (1.095^17-1)/.095 = 38.7135, the amount after 17 years will be 38.7135*3000 =
$116140. Now use the future value formula to calculate the amount accumulated at the end of
15 years will be 116140*1.095^15 = $453101. If the deposit would have been made at the start
of the year, it is annuity due, which can be calculated by multiplying the future value by 1.095 *
116140 = $127173. The amount after 15 years for annuity due will be 127173*1.095^15 =
$496144.
http://www.financeformulas.net/Future_Value_of_Annuity.html
Answer C
The possible range for the correlation coefficient would be from -1 to + 1, where correlation
coefficient of +1 states a perfect upward sloping of (+)linear relationship between two variables
however the -1 states a perfect downward sloping of (-) linear relationship between two
variables.
Investors Diversify their portfolio in order to minimize the risk .The correlation coefficient for
diversified portfolios would be the one where investors will invest in securities which have an
inverse relations for example if security A will rise by 500 then security B will decline by 500 so
in order to minimize the loss of one investment with the return of the other investment.
The statement can be justified by the fact that investors are risk averse which means that
investors do not wanted to take risk .Risk averse investors are those investors which agree on
lower return in exchange for lower risk rather than going for higher return in exchange of higher
reward.This can also be proved from the above example that investors diversify their portfolio in
such a manner that if one of their investment will occur losses then other investments will incur
profits and hence the overall loss for the portfolio will be minimized .
http://www.investing-in-mutual-funds.com/correlation.html
http://highered.mcgraw-hill.com/sites/dl/free/0070997594/918724/Peirson11e_Ch07.pdf