Titan Football Manufacturing had the following operating results for 2014: sales = $19,950; cost of goods...

Titan Football Manufacturing had the following operating results for 2014: sales = $19,950; cost of goods sold = $13,810; depreciation expense = $2,200; interest expense = $260; dividends paid = $720. At the beginning of the year, net fixed assets were $22,300, current assets were $3,110, and current liabilities were $1,900. At the end of the year, net fixed assets were $26,540, current assets were $3,620, and current liabilities were $1,990. The tax rate for 2014 was 40 percent. (Enter your answers as directed, but do not round intermediate calculations.) Requirement 1: What is net income for 2014? (Round your answer to the nearest whole dollar amount (e.g., 32).) Net income $ Requirement 2: What is the operating cash flow during 2014? (Round your answer to the nearest whole dollar amount (e.g., 32).) Operating cash flow $ Requirement 3: What is the cash flow from assets during 2014? (Negative amount should be indicated by a minus sign. Round your answer to the nearest whole dollar amount (e.g., 32).) Cash flow from assets $ Requirement 4: Assume no new debt was issued during the year. (a) What is the cash flow to creditors during 2014? (Round your answer to the nearest whole dollar amount (e.g., 32).) Cash flow to creditors $ (b) What is the cash flow to stockholders during 2014? (Negative amount should be indicated by a minus sign. Round your answer to the nearest whole dollar amount (e.g., 32).) Cash flow to stockholders $

Solutions

Expert Solution

Answer 1.

EBIT = Sales - Cost of Goods Sold - Depreciation Expense
EBIT = $19,950 - $13,810 - $2,200
EBIT = $3,940

EBT = EBIT - Interest Expense
EBT = $3,940 - $260
EBT = $3,680

Taxes = EBT * tax
Taxes = $3,680 * 40%
Taxes = $1,472

Net Income = EBT - Taxes
Net Income = $3,680 - $1,472
Net Income = $2,208

Answer 2.

Operating Cash Flows = EBIT + Depreciation - Taxes
Operating Cash Flows = $3,680 + $2,200 - $1,472
Operating Cash Flows = $4,408

Answer 3.

Net Working Capital, beginning = Current Assets, beginning - Current Liabilities, beginning
Net Working Capital, beginning = $3,110 - $1,900
Net Working Capital, beginning = $1,210

Net Working Capital, ending = Current Assets, ending - Current Liabilities, ending
Net Working Capital, ending = $3,620 - $1,990
Net Working Capital, ending = $1,630

Change in Net Working Capital = Net Working Capital, ending - Net Working Capital, beginning
Change in Net Working Capital = $1,630 - $1,210
Change in Net Working Capital = $420

Net Capital Spending = Net Fixed Assets, ending + Depreciation - Net Fixed Assets, beginning
Net Capital Spending = $26,540 + $2,200 - $22,300
Net Capital Spending = $6,440

Cash Flows from Assets = Operating Cash Flows - Change in Net Working Capital - Net Capital Spending
Cash Flows from Assets = $4,408 - $420 - $6,440
Cash Flows from Assets = -$2,452

Answer 4-a.

Cash Flows to Creditors = Interest Expense - Net New Debt
Cash Flows to Creditors = $260 - $0
Cash Flows to Creditors = $260

Answer 4-b.

Cash Flows from Assets = Cash Flows to Creditors + Cash Flows to Stockholder
-$2,452 = $260 + Cash Flows to Stockholder
Cash Flows to Stockholder = -$2,712

jeff jeffy answered 1 year ago

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