Financial statements The Davidson Corporations balance sheet and income statement are given here: Davidson Corporation: Balance Sheet as of December 31, 2005 (Millions of Dollars) Assets Liabilities and Equity Cash and equivalents $ 15 Accounts payable $ 120 Accounts receivable 515 Notes payable 220 Inventories 880 Accruals 280 Total current assets $1,410 Total current liabilities $ 620 Net plant and equipment 2,590 Long-term bonds 1,520 Total debt $2,140 Common stock (100 million shares) 260 Retained earnings 1,600 Common equity $1,860 Total assets $4,000 Total liabilities and equity $4,000 Challenging Problems 1114 19843_03_c03_p064-099.qxd 12/7/05 9:40 AM Page 92 Chapter 3 Financial Statements, Cash Flow, and Taxes 93 Davidson Corporation: Income Statement for Year Ending December 31, 2005 (Millions of Dollars) Sales $6,250 Operating costs excluding depreciation and amortization 5,230 EBITDA $1,020 Depreciation and amortization 220 EBIT $ 800 Interest 180 EBT $ 620 Taxes (40%) 248 Net income $ 372 Common dividends paid $ 146 Earnings per share $ 3.72 a. All revenues were received in cash during the year and all costs except depreciation and amortization were paid in cash during the year. What was net cash flow? How was it different from reported accounting profit? b. Construct the statement of retained earnings for December 31, 2005. c. How much money has been reinvested in the firm over the years? d. At the present time, how large a check could be written without it bouncing? e. How much money must be paid to current creditors within the next year