Question

Use the following to answer questions 7-15:

1999 2000

Sales $2900 $3300

Cogs $2030 $2310

Interest $410 $420

Dividends $56 $79

Depreciation $290 $330

Cash $250 $150

Receiviables $242 $412

Current liabilities $900 $1100

Inventory $1015 $900

Long Term Debt $3200 $3100

Net Fixed Assets $6000 $5700

Tax Rate 34% 34%

      7.   What are earnings before interest and taxes for 2000?

            A) $112

            B) $158

            C) $580

            D) $660

            E)   $780

 

 

      8.   What is net income for 2000?

            A) $112

            B) $158

            C) $580

            D) $660

            E)   $780

 

 

      9.   What is operating cash flow for 2000?

            A) $   248

            B) $   662

            C) $   908

            D) $1.072

            E)   $1,375

 

 

    10.   What is net working capital for 2000?

            A) $   362

            B) $   473

            C) $   519

            D) $   607

            E)   $1,060

 

 

    11.   What is cash flow to stockholders for 2000?

            A) $ 79

            B) $189

            C) $445

            D) $524

            E) $603

 

 

    12.   What is cash flow to creditors for 2000?

            A) $100

            B) $320

            C) $420

            D) $520

            E)   $720

 

 

    13.   What is net capital spending for 2000?

            A) -$ 10

            B) $ 30

            C) $300

            D) $530

            E)   $630

 

 

    14.   What is the change in net working capital during 2000?

            A) -$245

            B) -$125

            C) $362

            D) $607

            E)   $904

 

 

    15.   What is cash flow from assets for 2000?

            A) $   428

            B) $   540

            C) $   633

            D) $   923

            E) $1,123

 

 

Answer 1

(7) EBIT= SALES - COGS - DEPRICIATION

=3300-2310-330

=660

(8). NET INCOME= PROFIT AFTER TAX

= EBIT -INTEREST - TAX

= 660-420= 240 *0.66

= 158.4

(9) OPERATING CASHFLOW = CHANGE IN REVENUE + NONCASH OR NON OPERATING EXPENSES + INCREASE IN LIABILITY - INCREASE IN ASSETS

= 400+330+10+23-170+200+115

=908

We add back non cash or non operating expense because by these transactions actual profit falls , for the accurate profit we have to add back . We minus increase in assets because by purchasing the assets there will be cash outflow and there is same reason for add of liability as inc. in liability leads to inc. in cash flow

(10) CURRENT ASSETS - CURRENT LIABILITIES = NET WORKING CAPITAL

CURRENT ASSETS=412 +900+150=1462

Current liability=1100

Net working capital =1462-1100=362

We have taken current liabilities and current assets because working capital is is recurring nature .

(12) cash flow to creditors = interest payment -long term debt at end +long-term debt at start

420-3100+3200=520

Cash flow to the creditors means the amount payable to the creditors company have to pay interest on the loan and the additional amount t that has raised by the company.

(13) net capital spending = depreciation + asset at begging - asset at end

330+5700-600=30

Capital spending means the amount spend on the fixed assets.

(14)change in networking capital = ending net working capital - opening net working capital

Ending net working capital=362

Opening net working capital=607

Change in net working capital=-245

As we seen before net working capital is current assets minus current liabilities so change in net working means ending working capital minus opening working capital.

(15)cash flow from assets=operating cash flow - net capital spending - change in net working capital

=908 -30 -(-245)

1123

As a new business setup the assets that the owner purchase from the amount that he /she invested or from the borrowed amount that's why

ASSET=CAPITAL+ LIABILITY

(11) cash for shareholder =

Cash from asset = cash for borrower + cash for shareholder

1123=520 + cash for borrower

Cash for borrower=603

As creditors and shareholders put their money in the asset from the return point of view that's why the equation set in .