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Question. 1.23u3.3 Item Prior year Current year Accounts payable 8,122.00 7,768.00 Accounts receivable 6,008.00 6,637.00 Accruals...

Question. 1.23u3.3

Item Prior year Current year
Accounts payable 8,122.00 7,768.00
Accounts receivable 6,008.00 6,637.00
Accruals 995.00 1,492.00
Cash ??? ???
Common Stock 11,321.00 11,864.00
COGS 12,796.00 18,277.00
Current portion long-term debt 5,064.00 5,013.00
Depreciation expense 2,500 2,762.00
Interest expense 733 417
Inventories 4,113.00 4,805.00
Long-term debt 14,949.00 13,851.00
Net fixed assets 51,640.00 54,566.00
Notes payable 4,317.00 9,885.00
Operating expenses (excl. depr.) 13,977 18,172
Retained earnings 28,273.00 29,346.00
Sales 35,119 47,552.00
Taxes 2,084 2,775

a. What is the firm's net income in the current year?

b. What is the firm's dividend payment in the current year?

c. What is the firm's cash flow from operations?

d. What is the firm's cash flow from financing?

e. What is the firm's cash flow from investing?

f. What is the firm's total change in cash from the prior year to the current year?

Solutions

Expert Solution

(a). For calculation of the firm's net income in the current year, we need to preapre the Income statement:-

Income statement

for the current year
Sales 47,552
Less- Cost of Goods sold (18,277)
Gross margin: 29,275
Less: Operating Expenses (excl. depr.) (18,172)
Earnings Before Depreciation, Interest and Tax( EBDIT) 11,103
Less: Depreciation expense (2,762)
Earnings before Interest and Tax 8,341
Less:Interest expense (417)
Earnings before Tax (EBT) 7,924
Less:Taxes (2,775)
Net Income- $5,149

(b) Next, we need to find out the firm's dividend payment in the current year:

1. For that we need to find the difference in the amount of retained earnings- Current year- Last year.

= $29,346- $28,273= $1,073. It means the retained the retained earnings is incresed by $1,073 from previous year.

Calculation of Dividend payment= Net Income- Change in retained earnings.

=$5,149- $1,073= $4,076.

Note*= Dividend is the amount that is distributed among the shareholders. If our Net Income is higher than the change in reatined earnings, then excess amount is distributed as dividend.

(c) Next, We need to calculate the firm's cash flow from operations:

Particulars Amount($)
Net profit before tax(wn.1) 7,924
Adjustments for Non-cash and Non-operating items:
Add: Depreciation expense 2762
Interest Expense 417
Operating profit before working capital changes: 11103
less: Decrease in Account payable (CY-LY) (354)
less:Increase in Account receivable (629)
less: Increase in Accruals (497)
less: Decrease in Current portion long-term debt (510)
less: Increase in Inventories (692)
Cash generated from operating activities: 8421
Less: Tax paid (2775)
Net cash generated from Operating activities- $5646

Working notes:-

1. Calculation of Net profit before tax:

Net Income+ Taxes for current year= $5,149+ $2,775= $7,924

(d) Next, We need to calculate the firm's cash flow from financing activities:

Particulars Amount($)
Increase in common stock 543
Increase in long term debt 51
Dividend paid(b) (4076)
Net cash used in financing activities- $(3482)

ekkarill92 answered 1 year ago
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