Question
Big Bang Company reports cash flows for the year ended December 31, 20x2 as follows: Cash payment of dividends................. $(35,000) Acquisition of land........................... (14,000) Cash
Big Bang Company reports cash flows for the year ended December 31, 20x2 as follows:
Cash payment of dividends................. $(35,000)
Acquisition of land........................... (14,000)
Cash payments for interest ................ (10,000)
Cash payments for salaries................. (45,000)
Sale of equipment.............................. 38,000
Purchase of treasury stock.................. (25,000)
Purchase of equipment...................... (30,000)
Cash payments to suppliers................ (85,000)
Cash collections from customers......... 250,000
Cash at December 31, 20x1................ 50,000
- Prepare a statement of cash flows for Big Bang for 20x2. Be sure to classify cash flows as required under GAAP.
- Discuss, from an analysts viewpoint, the purpose of classifying cash flows into the three categories used in part a.
- Discuss whether any of the cash flows should be classified differently for analysis.
- Discuss the significance of the change in cash during 20x2 as an indicator of the firms performance.
- Calculate the companys free cash flow.
- In your calculation of free cash flow, justify your treatment of cash payments for interest and cash paid for acquisitions.
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