1. Financial statements The Davidson Corporations balance sheet and income statement are provided here:

Davidson Corporation Balance Sheet as of December 31, 2008 (Millions of Dollars)

Assets Liabilities and Equity

Cash and equivalents $ 100 Accounts payable $ 100

Accounts receivable 500 Notes payable 200

Inventories 800 Accruals 300

Total current assets 1,400 Total current liabilities 600

Net plant and equipment 2,600 Long-term bonds 700

Total debt 1,300

Common stock 300

(100 million shares)

Retained earnings 1,400

Common equity 1,700

Total assets 3,000 Total liabilities and equity 3,000

Davidson Corporation: Income Statement for Year Ending December 31, 2008 (Millions of Dollars)

Sales $6,000

Operating costs 5,000

EBITDA 1,000

Depreciation and amortization 200

EBIT 800

Interest 200

EBT 600

Taxes (50%) 300

Net Income 300

Common dividends paid 150

Earnings per share 3.00

a.Construct the statement of stockholders equity for December 31, 2008. Retained earnings for December 31, 2007 equaled $1,250.

b.How much money has been reinvested in the firm over the years?

c.At the present time, how large a check could be written without it bouncing?

d.How much money must be paid to current creditors within the next year?

2. Balance sheet Type (1,2, 3, or 4) the following action that will always increase cash as shown on a firms balance sheet

1. It issues $2 million of new common stock.
2. It buys new plant and equipment at a cost of $3 million.
3. It reports a large loss for the year.
4. It increases the dividends paid on its common stock.