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Bus 521 Midterm

This document contains a midterm exam for a business course. It includes 4 multiple choice questions: [1] Identifying components of an income statement; [2] Discussing why sustainable growth without increasing debt is important; [3] Calculating present value to determine if receiving $800 today or $1000 in 2 years is preferable; [4] Explaining what a downward sloping yield curve indicates about the economy. The student is asked to email their answers to the listed instructor.

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Avidan Kadiroglu
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43 views

Bus 521 Midterm

This document contains a midterm exam for a business course. It includes 4 multiple choice questions: [1] Identifying components of an income statement; [2] Discussing why sustainable growth without increasing debt is important; [3] Calculating present value to determine if receiving $800 today or $1000 in 2 years is preferable; [4] Explaining what a downward sloping yield curve indicates about the economy. The student is asked to email their answers to the listed instructor.

Uploaded by

Avidan Kadiroglu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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BUS 521 MIDTERM EXAM

Lecturer: OKAN AYBAR

Student: AVİDAN KADİROĞLU

Student Number: 122604053

Please answer the following questions. E mail me at [email protected] . Each question 25


points.

1- Show main components of income statement until Net profit.

Sales xxx

Less: Sales Discount (xxx)

Less: Sales Return (xxx)

Net Sales xxx

Less: COGS (Costs of goods sold) (xxx)

Gross Profit xxx

Less: Operating Income xxx

Net Operating Expenses (xxx)

Other Revenue and Expenses (Non-operating


ones) xxx

Income Tax xxx

Income Before Tax (xxx)

Net Income XXX

2- Sustainable growth refers to expansion of corporate production potential without increasing


debt to equity ratio. Discuss why sustainable growth is important for a corporation. No more
than 250 words.

It is very important for a company to grow without using external resources as much as possible. For
a sustainable growth a company should focus on using its own revenues.
In a word we can state that it is a sustainable growth if its achieved by the partners, investors
without having financial dept or making additional capitals to the company so there is a good
correlation between terms of sales and profitability and sustainable growth.

Also Dept to Equity is a really important factor for sustainable growth. If Dept/Equity Ratio increases
it will mean that the company’s dept is increased comparing to its internal capital and in that case we
can’t say that the company has a sustainable growth.

In order to have a sustainable growth it must be provided by the profitability and we must avoid
increasing Dept to Equity Ratio.

3- Assuming that interest rate is stable at 10%, would you prefer to receive 800 USD today or
1000 USD in two years later? Note: You need to calculate the present value of 1000 USD.

Considering that I don’t have a liquidity problem at this moment, then I will prefer 1000$ two
years later because;

Present Value of 1000$ in two years after = 1000/1.1^2 = 826.44 > 800

4- Explain very briefly, what downward sloping yield curve means. Does it refer to economic
slowdown or economic growth?

Yield Curve diagram helps us to see the yields, of bonds with different maturity dates and ie interest
rates.

It provides us a knowledge regarding to the future economic possibilities. For example if rates will fall
in the future the yield curve will look downward sloping.

If an economic recession happens in a country, the central bank will lower the interest rates to end
the recession and if there is an expected recession for the future then we will see downward –
sloping yield curve. (Based on General Economic Principles)

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