Question

A)	You are provided with the balance sheet and income statement of the Neuman Corporation:
	Construct a cash flow statement for the year ended Dec 31, 2008. Note that this company has also paid dividends on the common stock, but you need to
	find out how much by yourself. Hint: take a look at retained earnings. The company had no preferred stock (50% of exam grade)

	BALANCE SHEET
ASSETS	2007	2008
Cash	45,000	50,000
Marketable Securities	275,000	160,000
Accounts Receivable	240,000	220,000
Inventories	230,000	275,000
Investments in other companies (long-term, obviously J)	70,000	65,000
Plant & Equipment	1,400,000	1,550,000
Accumulated depreciation	-450,000	-600,000
Net Plant & Equipment	950,000	950,000
Total Assets	1,810,000	1,720,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts Payable	310,000	85,000
Notes Payable (due next month)	65,000	10,000
Accrued Expenses	30,000	5,000
Income tax payable	5,000	10,000
Bonds payable (due in 2020)	800,000	900,000
Common stock (100,000 shares in 2007, 1$ par)	100,000	105,000
Capital paid-in in excess of par	100,000	105,000
Retained earnings	400,000	500,000
Total L+SE	1,810,000	1,720,000
INCOME STATEMENT
Sales	5,500,000
Less: Cost of Goods Sold	4,300,000
Gross profit	1,200,000
Less: Selling and Administrative Expenses	230,000
Less: Depreciation expense	150,000
Earnings Before Interest and Taxes	820,000
Less: Interest expense	70,000
Earnings Before Taxes	750,000
Less: Taxes (at 50%)	375,000
Net Income	375,000
Calculate the requested ratio below for the company for the 2008, make sure you write down the formula
Current ratio
The industry average is written below. Is Neuman doing better or worse than the industry? You need to write only one word
0.7 times
What does this ratio show? How is it interpreted?
Calculate the requested ratio below for the company for the 2008, make sure you write down the formula
Times Interest Earned Ratio
The industry average is written below. Is Neuman doing better or worse than the industry? You need to write only one word
6 times
What does this ratio show? How is it interpreted?

Answer 1