Activity Participation Thursday Dec 30th 1. Suppose a company's cash flow from assets is negative for a particular period. Is this necessarily a good sign or a bad sign? 2. Could a company's cash flow to stockholders be negative in a given year? (Hint: Yes.) Explain how this might come about. What about cash flow to creditors? 3. In 2019, Procter and Gamble announced that it would write off nearly $8 billion due to a decrease in value of its Gillette brand. Did stockholders in Procter and Gamble loose money when the write-offs were announced? Why? 4. In recent years, Dixie Co. has greatly increased its current ratio. At the same time, the quick ratio has fallen. What has happened? Has the liquidity of the company improved? 5. What is the Dupont identity. Why is it valuable tool for analyzing the performance of firm? Discuss the type of information it revealed compared to ROE considered by itself. 6. Y3K, Inc. has sales of $5,987, total assets of $2,532, and a debt equity ratio of .57. If its return on equity is 11%. What is its net income? 7. Consider the following abbreviated financial statements for Parrothead Enterprises: PARROTHEAD ENTERPRISES 2020 and 2021 Partial Balance Sheets Assets Liabilities and Owners' Equity 2020 2021 2020 2021 Current assets $ 1,327 $ 1,438 Current liabilities $ 530 $ 595 Net fixed assets 5,470 6,587 Long-term debt 2,891 3,075 PARROTHEAD ENTERPRISES 2021 Income Statement Sales $16,831 Costs 7,849 Depreciation 1,499 Interest paid 427 a. What is owners' equity for 2020 and 2021? b. What is the change in net working capital for 2021? c. In 2021, Parrothead Enterprises purchased $2,740 in new fixed assets. How much in fixed assets did Parrothead Enterprises sell? What is the cash flow from assets for the year? The tax rate is 21 percent. d. During 2021, Parrothead Enterprises raised $554 in new long-term debt. How much long-term debt must Parrothead Enterprises have paid off during the year? What is the cash flow to creditors