Question
During 2015, Rainbow Umbrella Corp. had sales of $590,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $455,000, $85,000, and $125,000,
During 2015, Rainbow Umbrella Corp. had sales of $590,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $455,000, $85,000, and $125,000, respectively. In addition, the company had an interest expense of $65,000 and a tax rate of 35 percent. (Ignore any tax loss carryback or carryforward provisions.)
a) What is the company's net income for 2015?
b) What is its operating cash flow?
c) Explain your results in a) and b).
Suppose also Rainbow Umbrella Corp. paid out $34,000 in cash dividends.
d) Is this possible? Explain your answer.
e) If spending on net fixed assets and net working capital was zero, and if no new stock was issued during the year, what was the change in the Firm's debt position?
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