Financial Statements Britton String Corp.: Partial Balance Sheets as of December 31 (Millions of Dollars) 2022 2021 Assets Cash and cash equivalents Short-term investments Accounts receivable Inventories Total current assets Net fixed assets Total assets $57 56 105 262 $480 300 $780 $52 50 130 188 $420 258 $678 Liabilities and Equity Accounts payable Accruals Notes payable Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Total common equity Total liabilities and equity $66 48 24 $138 225 $363 $60 54 36 $150 180 $330 264 84 $348 $678 a. Constructing Britton String's income statement Britton String: financial information for 2022 Sales Operating costs excl. depr. as a % of sales Depr. as a % of net fixed assets Tax rate Interest expense Dividend payout ratio $880 million 85% 10% 25% $22 million 40% Formulas ! Britton String Corp.: Income Statement for Year Ending December 31, 2022 (Millions of Dollars) 2022 Sales Operating costs excluding depreciation EBITDA Depreciation EBIT Interest expense EBT Taxes (25%) Net income ! ! ! ! ! Common dividends Addition to retained earnings b. Finding the missing values in the balance sheet as of December 31, 2022 Common stock issued in 2022 $33 million Britton String Corp.: Partial Balance Sheets as of December 31 (Millions of Dollars) 2022 Formulas ! ! Common stock Retained earnings Total common equity Total liabilities and equity c. Constructing the statement of cash flows for 2022 2022 Formulas Britton String Corp.: Statement of Cash Flows for 2022 (Millions of Dollars) Operating Activities Net income Noncash adjustments Depreciation Working capital adjustments 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 A ! ! A Investing Activities Cash used to acquire 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 ! ! ! Summary Net increase/decrease in cash Cash at the beginning of the year Cash at the end of the year ! 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. Britton String Corp.: Income Statement for Year Ending December 31, 2022 (Millions of Dollars) 2022 Sales $ Operating costs excluding depreciation EBITDA $ Depreciation EBIT to Interest expense EBT $ Taxes (25%) Net income $ Common dividends $ Addition to retained earnings $ b. Britton issued $33 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. Britton String Corp.: Partial Balance Sheet as of December 31 (Millions of Dollars) 2022 Common stock Retained earnings Total common equity $ Total liabilities and equity $ c. Construct the statement of cash flows for 2022. Britton String Corp.: Statement of Cash Flows for 2022 (Millions of Dollars) 2022 $ Operating Activities Net income Noncash adjustments Depreciation Working capital adjustments 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 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 $ Summary Net increase/decrease in cash Cash at the beginning of the year Cash at the end of the year $