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Business Finance EBK HEALTHCARE FINANCE: AN INTRODUCTION

a. To compute : Total expenses for the period. Introduction: ‘Income Statement’ shows the revenue earned and expenses incurred over a period of time. It is used to evaluate the net income generated in a particular period. $27.6 million Given: Net income = $2.4 million Total revenues = $30 million Net Profit is money earned from sales or rendering services less the expenses incurred to perform such business operations whereas net loss is the scenario where such expenses exceed the revenue earned from sales or rendering of services in a particular period. Total expenses can be computed using the following formula: Net income = Total revenues − Total expenses $2.4 million = $30 million − Total expenses Total expenses = $30 million - $2.4 million Total expenses = $27.6 million b. To compute : Total cash expenses for the period. Introduction: ‘Income Statement’ shows the revenue earned and expenses incurred over a period of time. It is used to evaluate the net income generated in a particular period. $26.6 million Given: Depreciation = $1 million Total expenses = $27.6 million [calculated in (a) part] Net Profit is money earned from sales or rendering services less the expenses incurred to perform such business operations, whereas net loss is the scenario where such expenses exceed the revenue earned from sales or rendering of services in a particular period. Depreciation: It is a decrease in the value of asset due and tear of a fixed asset over its useful life. Thus, it is a non-cash expense. Total expenses includes cash as well as non-cash expenses i.e., any expense incurred during the financial year, whether paid or not. Total cash expenses can be computed as: Total expenses = Cash expenses + Non-cash expenses Total expenses = Cash expenses + Depreciation expense $27.6 million = Cash expenses + $1 million Cash expenses = $27.6 million - $1 million Cash expenses = $26.6 million c. To compute : Total cash expenses for the period. Introduction: ‘Income Statement’ shows the revenue earned and expenses incurred over a period of time. It is used to evaluate the net income generated in a particular period. $3.4 million Given: Net income = $2.4 million Depreciation expense = $1 million Net Profit is money earned from sales or rendering services less the expenses incurred to perform such business operations, whereas net loss is the scenario where such expenses exceed the revenue earned from sales or rendering of services in a particular period. Depreciation: It is a decrease in the value of asset due and tear of a fixed asset over its useful life. Thus, it is a non-cash expense. It is deducted from net income as an expense but is added back to it while computing cash flow because depreciation is non-cash expense (it doesn’t lead to inflow or outflow of cash). Total cash flow for the period can be computed as: Cash flow = Net income + Depreciation Cash flow = $2.4 million + $1 million Cash flow = $3.4 million

a. To compute : Total expenses for the period. Introduction: ‘Income Statement’ shows the revenue earned and expenses incurred over a period of time. It is used to evaluate the net income generated in a particular period. $27.6 million Given: Net income = $2.4 million Total revenues = $30 million Net Profit is money earned from sales or rendering services less the expenses incurred to perform such business operations whereas net loss is the scenario where such expenses exceed the revenue earned from sales or rendering of services in a particular period. Total expenses can be computed using the following formula: Net income = Total revenues − Total expenses $2.4 million = $30 million − Total expenses Total expenses = $30 million - $2.4 million Total expenses = $27.6 million b. To compute : Total cash expenses for the period. Introduction: ‘Income Statement’ shows the revenue earned and expenses incurred over a period of time. It is used to evaluate the net income generated in a particular period. $26.6 million Given: Depreciation = $1 million Total expenses = $27.6 million [calculated in (a) part] Net Profit is money earned from sales or rendering services less the expenses incurred to perform such business operations, whereas net loss is the scenario where such expenses exceed the revenue earned from sales or rendering of services in a particular period. Depreciation: It is a decrease in the value of asset due and tear of a fixed asset over its useful life. Thus, it is a non-cash expense. Total expenses includes cash as well as non-cash expenses i.e., any expense incurred during the financial year, whether paid or not. Total cash expenses can be computed as: Total expenses = Cash expenses + Non-cash expenses Total expenses = Cash expenses + Depreciation expense $27.6 million = Cash expenses + $1 million Cash expenses = $27.6 million - $1 million Cash expenses = $26.6 million c. To compute : Total cash expenses for the period. Introduction: ‘Income Statement’ shows the revenue earned and expenses incurred over a period of time. It is used to evaluate the net income generated in a particular period. $3.4 million Given: Net income = $2.4 million Depreciation expense = $1 million Net Profit is money earned from sales or rendering services less the expenses incurred to perform such business operations, whereas net loss is the scenario where such expenses exceed the revenue earned from sales or rendering of services in a particular period. Depreciation: It is a decrease in the value of asset due and tear of a fixed asset over its useful life. Thus, it is a non-cash expense. It is deducted from net income as an expense but is added back to it while computing cash flow because depreciation is non-cash expense (it doesn’t lead to inflow or outflow of cash). Total cash flow for the period can be computed as: Cash flow = Net income + Depreciation Cash flow = $2.4 million + $1 million Cash flow = $3.4 million

EBK HEALTHCARE FINANCE: AN INTRODUCTION

EBK HEALTHCARE FINANCE: AN INTRODUCTION

6th Edition

ISBN: 9781567937428

Author: Gapenski

Publisher: YUZU

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Chapter 3 Solutions

EBK HEALTHCARE FINANCE: AN INTRODUCTION

Ch. 3 - Prob. 1.1STQ Ch. 3 - Prob. 1.2STQ Ch. 3 - Prob. 2.1STQ Ch. 3 - Prob. 2.2STQ Ch. 3 - Prob. 2.3STQ Ch. 3 - Prob. 3.1STQ Ch. 3 - Prob. 3.2STQ Ch. 3 - Prob. 3.3STQ Ch. 3 - Prob. 3.4STQ Ch. 3 - Prob. 3.5STQ

Ch. 3 - Prob. 4.1STQ Ch. 3 - Prob. 4.2STQ Ch. 3 - Prob. 4.3STQ Ch. 3 - Prob. 5.1STQ Ch. 3 - Prob. 5.2STQ Ch. 3 - Prob. 5.3STQ Ch. 3 - Prob. 6.1STQ Ch. 3 - Prob. 6.2STQ Ch. 3 - Prob. 7.1STQ Ch. 3 - Prob. 7.2STQ Ch. 3 - Prob. 7.3STQ Ch. 3 - Prob. 8.1STQ Ch. 3 - Prob. 8.2STQ Ch. 3 - Prob. 8.3STQ Ch. 3 - Prob. 8.4STQ Ch. 3 - Prob. 9.1STQ Ch. 3 - Prob. 9.2STQ Ch. 3 - Prob. 9.3STQ Ch. 3 - Prob. 10.1STQ Ch. 3 - Prob. 10.2STQ Ch. 3 - Prob. 11.1STQ Ch. 3 - Prob. 11.2STQ Ch. 3 - Prob. 12.1STQ Ch. 3 - Prob. 12.2STQ Ch. 3 - Prob. 12.3STQ Ch. 3 - Prob. 13.1STQ Ch. 3 - Prob. 13.2STQ Ch. 3 - Prob. 13.3STQ Ch. 3 - Prob. 13.4STQ Ch. 3 - Prob. 14.1STQ Ch. 3 - Prob. 14.2STQ Ch. 3 - Prob. 14.3STQ Ch. 3 - Prob. 15.1STQ Ch. 3 - Prob. 15.2STQ Ch. 3 - Prob. 16.1STQ Ch. 3 - Prob. 16.2STQ Ch. 3 - Prob. 3.1Q Ch. 3 - Prob. 3.2Q Ch. 3 - Prob. 3.3Q Ch. 3 - Prob. 3.4Q Ch. 3 - Prob. 3.5Q Ch. 3 - Prob. 3.6Q Ch. 3 - Prob. 3.7Q Ch. 3 - Prob. 3.8Q Ch. 3 - Prob. 3.9Q Ch. 3 - Prob. 3.1P Ch. 3 - Prob. 3.2P Ch. 3 - Prob. 3.3P Ch. 3 - Prob. 3.4P Ch. 3 - Prob. 3.5P Ch. 3 - Prob. 3.6P Ch. 3 - Prob. 3.7P Ch. 3 - Prob. 3.8P Ch. 3 - Prob. 3.9P

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