Question

Cash Flow Analysis -- SAB Technology SAB Technology Corporation increased its sales from $400,000 in 2012 to $500,000 in year 2013 as is shown in the firm’s income statements presented below. Jenny Sands, chief executive officer (CEO) and founder of the firm expressed concern that the cash account and the firm’s marketable securities declined substantially between 2012 and 2013. SAB's complete balance sheets are also shown below. Ms. Sands is seeking your assistance in the preparation of a statement of cash flows for SAB Financial Statements 1 Income statement (in $ Thousands) 2013 2012 2 3 Net sales 500.00 400.00 4 Less: cogs 300.00 240.00 5 Gross profit 200.00 160.00 6 Less: operating exp 46.00 46.00 7 Less: Depr 30.00 25.00 8 EBIT 124.00 89.00 9 Less: Interest 38.50 33.50 10 Income before tax 85.50 55.50 11 Less: Income taxes 30.00 20.00 12 Net income 55.50 35.50 13 14 Cash dividend 20.00 17.00 15 Addition to retained earnings 35.50 18.50 16 17 18 Balance sheet (in $ Thousands) 2013 2012 19 20 Cash 16.00 39.00 21 Account receivable 80.00 50.00 22 Inventories 204.00 151.00 23 Current asset 300.00 240.00 24 Gross fixed asset 290.00 200.00 25 less: accumuled depr 125.00 95.00 26 Net fixed asset 165.00 105.00 27 Total assets 465.00 345.00 28 29 Account payable 45.00 30.00 30 Accrued liabilities 23.00 10.00 31 Short-term notes 27.00 20.00 32 Total current liabilities 95.00 60.00 33 Long-term debt 20.00 15.00 34 Total liabilities 115.00 75.00 35 Common stock 129.50 85.00 36 Retained earnings 220.50 185.00 37 Owners' equity 350.00 270.00 38 Total liabilities and equity 465.00 345.00 ~~~~~~~~~~~~~~~~~~ 1) Study the excel template:1 From question per unit 2 3 computer chips 70 <-- from question 4 plastic casings 15 <-- from question 5 assembly hardware 5 <-- from question 6 direct labor 5 <-- from question 7 total cost 95 <-- from question 8 price 142.5 <-- from question 9 10 Sales 11 Jan Feb Mar 1st Qtr 12 13 units of sales 200 400 800 1400 <-- from question 14 dollar sales ?? ?? ?? ?? <-- from question 15 16 Cost of production schedule 17 18 per unit Jan Feb Mar 1st Qtr 19 Production 500 500 500 1500 <-- from question 20 Production Cost 21 computer chips 70 ?? ?? ?? ?? <-- prodution * unit cost 22 plastic casings 15 ?? ?? ?? ?? <-- prodution * unit cost 23 assembly hardware 5 ?? ?? ?? ?? <-- prodution * unit cost 24 direct labor 5 ?? ?? ?? ?? <-- prodution * unit cost 25 Total production cost 95 ?? ?? ?? ?? <-- prodution * unit cost 26 27 Cost of goods sold schedule 28 29 per unit Jan Feb Mar 1st Qtr 30 Units of sales 200 400 800 1400 <-- from question 31 Sales ?? ?? ?? ?? <-- price * unit of sales 32 Cost of goods sold 95 ?? ?? ?? ?? <-- sales * unit cost 33 Gross profit ?? ?? ?? ?? <-- sales - cost of goods sold 34 35 Inventories schedule 36 Jan Feb Mar 37 Beginning finished goods ?? ?? ?? <-- previous ending inventories 38 Production 39 Materials ?? ?? ?? <-- computer + plastic + assembly 40 Direct labor ?? ?? ?? <-- labor 41 Additions ?? ?? ?? <-- sum of materials and labor cost 42 Total (beg + additions) ?? ?? ?? <-- beginning + additions 43 Less: cost of goods sold ?? ?? ?? <-- cogs 44 Ending finished goods ?? ?? ?? <-- ending inventories 45 46 47 48 49 Jan Feb Mar 1st Qtr 50 Total production cost ?? ?? ?? ?? 51 Sales ?? ?? ?? ?? 52 Cost of goods sold ?? ?? ?? ?? 53 Beginning finshed goods ?? ?? ?? 54 Ending finished goods ?? ?? ?? 2) Cash flow analysis for year 2013 cash flows from operating activities = ?? cash flow from investment activities = ?? cash flow from financing activities = ?? net cash flow = ?? cash at the end of period = ?? 3) Cash flow identity for year 2013 Operating cash flow = EBIT + D&A - Tax = ?? Change in Net Operating Working Capital = Change in NOWC = ?? Net Capital Spending = ?? Cash flow from assets = ?? Cash flow to creditors = ?? Cash flow to Shareholders = ??

Answer 1

cash flows from operating activities = Income before tax​ (+) Non operating exp (+) Non Cash exp (-) Non operating Income.

Particulars $ in thousands

Income before tax ​ - 85.5

+ Non operating Exp & Non cash Exp Interest - 38.5 ​ Depreciation - 30.0 (-) Increase in Current Assets ​ (80-50) Accounts receivales 30.0 ​ (204-151) Inventories ​ 53.0 (+) Increase in Current Liability ​ (45-30) Account payable 15.0 ​ (23-10) Accrued liabilities 13.0 (27-20) Short-term notes​ 7.0

​Less: Tax paid 30.0

Cash in flow from Operating Activity 76.0

cash flow from investment activities:-

Difference in Gross Value I.e, 290 - 200 = -$ 90 Thousands, i.e, $ 90 Thousands outflow Alternatively (2013 ending value - begining Value) + Depreciation = 165-105 + 30 = 90

Cash flow from financing activities:-

Issue of Debt + Issue of Common stock - Interest on Longterm Debt - Divident paid

(20-15) + (129.5-85) - 38.5 - 20 = - $13 thousands, i.e, $ 9 thousands outflow

Net Cash flow = Cash from operating Activities + Cash from Investing Activities+ Cash from​ Financing Activities

= $ Thousands - $ 90 thousands - $ 9 thousands = $23 thousands​ Net out flow

Cash At the end of the period = Cash Balance at the opening of 2013 + or - Net cash flow for the year

39-23= 16, $ 16 thousands​

Cash flow identity for year 2013 Operating cash flow​ = EBIT + D&A - Tax

EBIT ​ = 124

+Depreciation = 30

+Amortisation = ----

-Tax = 30.0

Cash flow identity=124

Details $ (thousands) $ (thousands)

Cash 16.00 39.00

Account receivable 80.00 50.00

Inventories 204.00 151.00

Current asset 300.00 240.00

Account payable 45 30

Accrued liabilities 23 10

Short-term notes 27 20

Total current liabilities 95 60

Working Capital 205.00 180.00

Increase in Net Operating Working Capital $ 35 Thousands

Capital Spending = Ending Net Fixed Assets - Beginning Net Fixed Assets + Depreciation

165-105+30= 90 i.e, $ 90 Thousands

Cash flow from assets​ = Total cash flow of the firm that is $ 23 thousands.

Cash flow to creditors= Begining creditors (Current Liabilities)+Cogs+ Year end Inventory - Begining Inventory -Creditors (Current Liabilities)at Year end

60+300+204-151-95= $ 318 Thousands

Cash flow to Shareholders:-

Cash Flow to Common Stockholders = Dividends Paid- (Ending Common Stock - Beginning Common Stock)

20-(129.5-85)= -$24.5 Thousands