In: Finance
South Sea Baubles has the following (incomplete) balance sheet and income statement.
BALANCE SHEET AT END OF YEAR | ||||||||||||||
(Figures in $ millions) | ||||||||||||||
Assets | 2015 | 2016 | Liabilities and Shareholders' Equity | 2015 | 2016 | |||||||||
Current assets | $ | 96 | $ | 170 | Current liabilities | $ | 62 | $ | 78 | |||||
Net fixed assets | 860 | 960 | Long-term debt | 630 | 810 | |||||||||
INCOME STATEMENT, 2016 | |||
(Figures in $ millions) | |||
Revenue | $ | 1,980 | |
Cost of goods sold | 1,060 | ||
Depreciation | 380 | ||
Interest expense | 246 | ||
a&b. What is shareholders’ equity in 2015 and 2016? (Enter your answers in millions.)
a. 2015?
b. 2016?
c&d. What is net working capital in 2015 and 2016? (Enter your answers in millions.)
C. 2015?
d. 2016?
e. What are taxes paid in 2016? Assume the firm pays taxes equal to 35% of taxable income. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
f. What is cash provided by operations during 2016? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
g. Net fixed assets increased from $860 million to $960 million during 2016. What must have been South Sea’s gross investment in fixed assets during 2016? (Enter your answer in millions.)
a&b :
the balance sheet is diplaying figures of total assets ,liabilities.
as we all know
equity = assets - liabilities
so in 2015 we have:
assets = $956
liabilities = $692
so the equity is = $264
in the year 2015,
assets = $1130
liabilities = $880,000,000
so the equity is $250,000,000.
c&d : the net working capital = ASSETS - LIABILITIES
IN YEAR 2015 = 96 - 62 = $34,000,000
IN THE YEAR 2016 = 170 -78 = 92,000,000.
E&F : the taxes paid on the taxable income will be :
REVENUE = $1908
COGS = $1080
GROSS PROFIT = 920
LESS DEPRECIATION =380
EBIT = $540
INTEREST EXPENSE = $246
EBT (TAXABLE INCOME ) =$294
THE TAX RATE IS 35%
SO THE TAXES PAID WILL BE $102.9 MILLION OR 103,000,000.
F. CASH FROM OPERATIONS IN THE YEAR 2016 IS:
NET INCOME IS = EBT - TAXES
= $191.1
SO OPERATING CASH FLOW = EBIT (1 - TAX RATE ) + DEPRECIATION - CHANGES IN WORKING CAPITAL
= 540 (0.65 ) + 380 - 58
= 351 + 380 -58 = $673
NOTE : THE CHANGE IN WORKING CAPITAL = INVESTMENT IN WORKING CAPITAL OF 92(2016)-34(2015) = 58 IN THE YEAR 2016.
G. NET FIXED ASETS = GROSS FIXED ASSETS - ACCUMULATED DEPRECIATION
THE NET FIXED ASSETS INCREASED BY $100
SO THE GROSS INVESTMENT IS = 100 + 380 ( DEPRECIATION IN THE YEAR 2016 )
= $480,000,000