a. Britton String Corp. manufactures specialty strings for musical instruments and tennis racquets. Its most recent sales were $880 million; operating costs (excluding depreciation) were equal to 85% of sales; net fixed assets were $300 million; depreciation amounted to 10% of net fixed assets; interest expenses were $22 million; the state-plus-federal corporate tax rate was 25%; and it paid 40% of its net income out in dividends. Given this information, construct its income statement. Also calculate total dividends and the addition to retained earnings. Report all dollar figures in millions. The input information required for the problem is outlined in the "Key Input Data" section below. Using this data and the balance sheet above, we constructed the income statement shown below. Key Input Data for Britton String Corp. 2020 (Millions of dollars) Sales Revenue $880 Expenses (excluding depreciation) as a percent of sales 85.0% Net fixed assets $300 Depr. as a % of net fixed assets 10.0% Tax rate 25.0% Interest expense $22 Dividend Payout Ratio 40% Britton String Corp.: Income Statement 2020 (Millions of dollars) Sales -------------------------------------------------------------------------$880 Operating costs excluding depreciatios----------------$748 EBITDA----------------------------------------------------------------------$132 Depreciation (Cumberland has--------------------------------$30 no amortization charges) EBIT --------------------------------------------------------------------------$102 Interest expense ------------------------------------------------------$22 EBT----------------------------------------------------------------------------$80 Taxes (25%) ------------------------------------------------------------$20 Net income--------------------------------------------------------------$60 Common dividends --------------------------------------------------$24 Addition to retained earnings---------------------------------$36 b. Britton Strings partial balance sheets follow. Britton issued $36 million of new common stock in the most recent year. Using this information and the results from part a, fill in the missing values for common stock, retained earnings, total common equity, and total liabilities and equity. Dollar value of common stock issued (in millions of dollars) $36 Britton String Corp: December 31 Balance Sheets 2020 2019 (Millions of dollars) Assets: Cash and cash equivalents $70 $60 Short-term investments $46 $42 Accounts Receivable $120 $140 Inventories $264 $196 Total current assets $500 $438 Net fixed assets $300 $262 Total assets $800 $700 Liabilities and equity: Accounts payable $73 $64 Accruals $49 $60 Notes payable $30 $39 Total current liabilities $152 $163 Long-term debt $217 $178 Total liabilities $369 $341 Common stock ? $249 Retained earnings ? $110 Total common equity ? $359 Total liabilities and equity ? $700 Always check for balancing (these should be zero): $800.0000 $0.0000

c. Construct the statement of cash flows for the most recent year. Statement of Cash Flows 2020 (in thousands of dollars) Operating Activities Net Income ----------------------------------------------------------------------- ?? Adjustments: Noncash adjustment: Depreciation ---------------------------------------------------------------- ?? Due to changes in working capital: Due to change in accounts receivable----------------------- ?? Due to change in inventories ------------------------------------- ?? Due to change in accounts payable -------------------------- ?? Due to change in accruals ---------------------------------------- ?? ____________ Net cash provided (used) by operating activities ?? ____________

Investing Activities Cash used to acquire gross fixed assets -------------------?? Due to change in short-term investments------------------?? __________ Net cash provided (used) by investing activities ?? ___________

Financing Activities Due to change in notes payable ---------------------------------?? Due to change in long-term debt---------------------------------?? Due to change in common stock--------------------------------?? Payment of common dividends-----------------------------------?? ________ Net cash provided (used) by financing activities ?? ________

Net increase/decrease in cash ---------------------------------------?? Add: Cash balance at the beginning of the year------------?? ______ Cash balance at the end of the year ?? ______ Check: cash balance in statement of cash flows should equal the cash on balance sheets; this value should be zero: $70.000