Question
2..Below are the financial statements from which you'll derive the Free Cash Flows Identity: CASH FLOWS FROM ASSETS CASH FLOWS TO CREDITORS + CASH FLOWS
2..Below are the financial statements from which you'll derive the Free Cash Flows Identity:
CASH FLOWS FROM ASSETS CASH FLOWS TO CREDITORS + CASH FLOWS TO
SHAREHOLDERS
The income statement for each year will look like this:
Income Statement
2014
2015
Sales
$385,724
$470,172
Cost of goods sold
196,619
248,263
Selling and administrative
38,668
50,469
Depreciation
55,506
62,738
EBIT
$94,931
$108,702
Interest
12,067
13,831
EBT
$82,864
$94,871
Taxes
24,859
28,461
Net income
$58,005
$66,410
Dividends
$23,202
$26,564
Addition to retained earnings
$34,803
$39,846
2.The balance sheet for each year will be:
Balance Sheet as of Dec. 31, 2014
Cash
$28,372
Accounts payable
$20,143
Accounts receivable
20,104
Notes payable
22,855
Inventory
38,706
Current liabilities
$42,998
Current assets
$87,182
Long-term debt
$123,607
Net fixed assets
$244,881
Owners' equity
$165,458
Total assets
$332,063
Total liab. and equity
$332,063
Balance Sheet as of Dec. 31, 2015
Cash
$42,865
Accounts payable
$34,091
Accounts receivable
26,078
Notes payable
24,955
Inventory
52,057
Current liabilities
$59,046
Current assets
$121,000
Long-term debt
$140,000
Net fixed assets
$298,350
Owners' equity
$220,304
Total assets
$419,350
Total liab. and equity
$419,350
2..Below are the financial statements from which you'll derive the Free Cash Flows Identity:
CASH FLOWS FROM ASSETS CASH FLOWS TO CREDITORS + CASH FLOWS TO
SHAREHOLDERS
The income statement for each year will look like this:
Income Statement
2014
2015
Sales
$385,724
$470,172
Cost of goods sold
196,619
248,263
Selling and administrative
38,668
50,469
Depreciation
55,506
62,738
EBIT
$94,931
$108,702
Interest
12,067
13,831
EBT
$82,864
$94,871
Taxes
24,859
28,461
Net income
$58,005
$66,410
Dividends
$23,202
$26,564
Addition to retained earnings
$34,803
$39,846
2.The balance sheet for each year will be:
Balance Sheet as of Dec. 31, 2014
Cash
$28,372
Accounts payable
$20,143
Accounts receivable
20,104
Notes payable
22,855
Inventory
38,706
Current liabilities
$42,998
Current assets
$87,182
Long-term debt
$123,607
Net fixed assets
$244,881
Owners' equity
$165,458
Total assets
$332,063
Total liab. and equity
$332,063
Balance Sheet as of Dec. 31, 2015
Cash
$42,865
Accounts payable
$34,091
Accounts receivable
26,078
Notes payable
24,955
Inventory
52,057
Current liabilities
$59,046
Current assets
$121,000
Long-term debt
$140,000
Net fixed assets
$298,350
Owners' equity
$220,304
Total assets
$419,350
Total liab. and equity
$419,350
2..Below are the financial statements from which you'll derive the Free Cash Flows Identity:
CASH FLOWS FROM ASSETS CASH FLOWS TO CREDITORS + CASH FLOWS TO
SHAREHOLDERS
The income statement for each year will look like this:
Income Statement
2014
2015
Sales
$385,724
$470,172
Cost of goods sold
196,619
248,263
Selling and administrative
38,668
50,469
Depreciation
55,506
62,738
EBIT
$94,931
$108,702
Interest
12,067
13,831
EBT
$82,864
$94,871
Taxes
24,859
28,461
Net income
$58,005
$66,410
Dividends
$23,202
$26,564
Addition to retained earnings
$34,803
$39,846
2.The balance sheet for each year will be:
Balance Sheet as of Dec. 31, 2014
Cash
$28,372
Accounts payable
$20,143
Accounts receivable
20,104
Notes payable
22,855
Inventory
38,706
Current liabilities
$42,998
Current assets
$87,182
Long-term debt
$123,607
Net fixed assets
$244,881
Owners' equity
$165,458
Total assets
$332,063
Total liab. and equity
$332,063
Balance Sheet as of Dec. 31, 2015
Cash
$42,865
Accounts payable
$34,091
Accounts receivable
26,078
Notes payable
24,955
Inventory
52,057
Current liabilities
$59,046
Current assets
$121,000
Long-term debt
$140,000
Net fixed assets
$298,350
Owners' equity
$220,304
Total assets
$419,350
Total liab. and equity
$419,350
2..Below are the financial statements from which you'll derive the Free Cash Flows Identity:
CASH FLOWS FROM ASSETS CASH FLOWS TO CREDITORS + CASH FLOWS TO
SHAREHOLDERS
The income statement for each year will look like this:
Income Statement
2014
2015
Sales
$385,724
$470,172
Cost of goods sold
196,619
248,263
Selling and administrative
38,668
50,469
Depreciation
55,506
62,738
EBIT
$94,931
$108,702
Interest
12,067
13,831
EBT
$82,864
$94,871
Taxes
24,859
28,461
Net income
$58,005
$66,410
Dividends
$23,202
$26,564
Addition to retained earnings
$34,803
$39,846
2.The balance sheet for each year will be:
Balance Sheet as of Dec. 31, 2014
Cash
$28,372
Accounts payable
$20,143
Accounts receivable
20,104
Notes payable
22,855
Inventory
38,706
Current liabilities
$42,998
Current assets
$87,182
Long-term debt
$123,607
Net fixed assets
$244,881
Owners' equity
$165,458
Total assets
$332,063
Total liab. and equity
$332,063
Balance Sheet as of Dec. 31, 2015
Cash
$42,865
Accounts payable
$34,091
Accounts receivable
26,078
Notes payable
24,955
Inventory
52,057
Current liabilities
$59,046
Current assets
$121,000
Long-term debt
$140,000
Net fixed assets
$298,350
Owners' equity
$220,304
Total assets
$419,350
Total liab. and equity
$419,350
Cash Flow From Assets: Operating Cash flows - Net Investments + Depreciation - Change in Net
Working Capital
1.Using the OCF equation we have OCF = EBIT- Taxes+ Depr.
The OCF for each year is:
2014 $ _______&2015$_______
2The capital spending and change in net working capital. The capital spending for the year was:
Capital spending
Ending net fixed assets Yr1
$
- Beginning net fixed assets Yr0
$
+ Depreciation
$
Net capital spending$
3..And the change in net working capital was:
Change in net working capital
Ending NWC
$
- Beginning NWC
$
Change in NWC
$
Cash flow from assets
Operating cash flow
$_______
- Net capital spending
________
- Change in NWC
Cash flow from assets
$
==========
5.The cash flow to creditors was:
Cash flow to creditors
Interest paid
$______
- Net new borrowing
$
Cash flow to creditors
$
6.The cash flow to stockholders was:
Cash flow to stockholders
Dividends paid
$______
- Net new equity raised
$_______
Cash flow to Sharekolders
$----------
THEREFORE, Cash flow from assets cash flows to creditor + Cash flow to shareholders.
$ __________$ ___________ +$ ____________
Explain in words the meaning of the above in terms of balance sheet sources & uses of cash as we did in class.
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