Third call written test and solutions 1

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ACCOUNTING, FINANCE AND CONTROL (Prof. P . Maccarrone) 2023/24 THIRD CALL WRITTEN TEST – 14 June, 2024 QUESTION 1 – PART A – 3 POINTS As of 31st December 2023, Alpha Ltd, an automobile manufacturer company, reports the following data: • Asset Turnover Ratio: 1.25 • ROE: 15% • Market capitalization: 1,600,000 k€ • Total Equity: 1,500,000 k€ • Selling, general, and administrative expenses: 350,000 k€ • Financial debts: 600,000 k€ • Non-financial liabilities: 400,000 k€ • Interests paid: 25,000 k€ • Cost of debt (referred to the financial debt only): 6% • Cost of goods sold 2,500,000 k€ • Other operating income: 150,000 k€ • Other operating expenses (not included in SGA expenses): 100,000 k€ • D&A: 35,000 k€ • Financial income: 20,000 k€ • Taxes paid: 100,000 k€ • Period costs other than selling, general, and administrative expenses are negligible • Financial expenses other than interest expenses are negligible Given the available data, which of the following statements is CORRECT: A. Effective tax rate is around 17.88% and EBIT margin is around 9.28% B. Effective tax rate is around 31.25% and EBIT margin is around 10.40% C. Effective tax rate is around 44.70% and EBIT margin is around 13.85% D. Effective tax rate is around 27.18% and EBIT margin is around 10.40% SOLUTION A. Wrong, because D&A is subtracted from revenues when computing EBIT. B. Wrong, because interests paid are considered when calculating EBT, and taxes paid are considered when calculating the tax rate. C. Wrong, because market capitalization is used instead of equity for the calculation of total assets and net income D. Correct Total Assets = D + Non-financial Liabilities + Equity = 1,500,000 k€ + 600,000 k€ + 400,000 k€ = 2,500,000 k€ Revenues = ATR * TA = 1.25 * 2,500,000 k€ = 3,125,000 k€ EBIT = Revenues…