Financial Accounting Assignments With Solution

Running head: ACCOUNTING AND FINANCE
Accounting and Finance
Name of the Student:
Name of the University:
Author’s Note:

1
ACCOUNTING AND FINANCE
Table of Contents
Task 1:.............................................................................................................................................2
Task 2:.............................................................................................................................................3
Task 3:.............................................................................................................................................4
Task 4:.............................................................................................................................................5
References and bibliography:..........................................................................................................6

2
ACCOUNTING AND FINANCE
Task 1:
Earnings before interest, tax, depreciation and amortization is the measure profitability in
real terms before providing for the depreciation, amortization, finance costs and provision for
tax. Various models can be used for determination of the value of the business such as
discounted cash flow technique, capitalization of cash flow and net assets approach (Pinto 2020).
For applying the discounted cash flow model for valuation of a business determination of
maintainable profit or determination of expected cash flow is important. In the given case study,
the earnings before interest, tax, depreciation and amortization have been calculated using the
weighted average method from the earnings of the last four years. To calculate the weighted
average earnings, first the interest expense, depreciation and amortization have been added with
the profit before tax. Then all the expenses losses and incomes which are expected not to occur
in future have been adjusted (Pinto 2020). Based on the adjusted earnings before interest, tax,
depreciation and amortization and applying the respective weights the expected maintainable
earnings have been calculated as follows. Please refer to the excel spreadsheet for detailed
calculations.
Particulars 2019 2018 2017 2016
Earnings before tax (EBT) $ 634 $ 598 $ 579 $ 18
Add: Interest expense $ 150 $ 152 $ 154 $ 20
Earnings before interest and tax (EBIT) $ 784 $ 750 $ 733 $ 38
Add: Depreciation and amortization $ 445 $ 411 $ 396 $ 414
Earnings before interest, tax, depreciation
and amortization (EBITDA) $ 1,229 $ 1,161 $ 1,129 $ 452
Adjustments for abnormal expenses:
Additional overhead expenses $ 175
Oversight monitoring and administrative
support $ 80 $ 80 $ 80 $ 40
Loss for theft $ 75
Total adjustment $ 80 $ 155 $ 80 $ 215