Hi everyone,
Were there any changes made to question 51 from last year’s mock? The answer given does not seem to be correct.
There are two issues:
1) In the solution, net increase in working capital is calculated as CA-CL.
Aren’t you supposed to use (CA-Cash) - (CL-Notes Payable-Current portion of Long Term Debt) instead?
2) In the solution, net borrowing is calculated as (157.5-150) - (20-15).
Shouldn’t it be the change in LT Debt + the change in Notes Payable instead?
Side question: When asked to calculate the interest coverage ratio on the exam, should we use EBIT/(interest expense+capitalized interest)?
Please clearify these if you are 100% sure.
Thanks in advance!
G
