Problem 1 (Textbook Reference: P11-4) Analyze statement of cash flows

Name Section Alphabetical Number Week #15-C hapter 11 Homework Assignment Problem 1 (Textbook Reference: P11-4) - Analyze statement of cash flows *Please refer to textbook Problem 11-4*** Required a. Which method did the company use in arriving at net cash flows from operating activities? b. Did current assets other than cash increase or decrease during the year ended February 29, 2012? c. Did current labilities increase or decrease during that year ended February 29, 2012? d. What were the main investing activities during this three-year period? e. What was the main source of cash from financing activities during the three-year period? f. Did th e company pay any interest expense during the year ended Febru ary 19, 2012? Given the following data, calculate the cash flow per share of common stock ratio, the cash flow margin ratio, and the cash flow liquidity ratio. How do these ratios compare with the ratios shown for other companies in the chapter? g. a. Cash flow per share of common stock ratio: b. Cash flow margin ratio c. Cash flow liquidity ratio CHAPTER 1 Analysis Using the Statement of Cash Flows 349 ock repurchases On May 12, 2010, our Board of Directors approved a stock repurchase program that authorizes us to acquire up to 3500 million of our common stock. During fiscal 2011, we entered into brokerage arrangements financial institutions to purchase our common stock in the open market on our behalf. We 10.5 millhoe shares of our common stock for $21S million under these arrangements during fiscal 2911. At March 31, 2N1, we were authorized to purchase an aggregate annount of up to $282 million of of commorn shares under our current stock repurchase program On May 12. 2ourBoard of Directors approved a stock repurchase program that to an additional $500 million of our common 12.2010. We will time to time based on us to acquire on market from stock, in addition to the previous program program with available cash on hand and repurchase shares on conditions and other factors Dividends We have paid cash dividends dach year since July 1990. For fiseal 2011, 2010 and2009, we paid annual cash dividends of SO.16 per share, which have been paid out in quarterly installments of $o.04 per share as and when declaredby our Board of Directors Total cash dividends paid was $82 fiseal 2011, 2010 and 2009, respectively. 83 million and $83 million for On May 12, 2011, we announced an as and when declared by the Board of Di r quarterly dividend to $0.05 per share of the Company's Contractual obligations and commitments We have commitments under certain These contractual arrangements secure the rights to varions assets and services to be used in the future in the normal course of business. For example, we are payments for the use of property under operating lease the future rights and related obligations pertaining to ic contractual arrangements are not reported as assets or liabilities on our Consolidated Balance Sheets generated from operations in the nomal course of business. make future payments for goods and services. committed to make certain minimum lease In accordance with current accounting rules, to fund these contractual arrangements with cash a. Explain why depreciation and d to income from continuingqired were operations when calculating net cash provided by operting activities. Why was the provision for bad debts added to income from continuin s Cach year? b. How does the Company pln to use the fiuture cash generated by operating activities? c. Wh y would the upgrade of the Company's credit rating by Shndard and Poor's result in d. What information ould normally appear immediately below the statement of cash flows e. Does the amot of cash provided by operating activities seem large ehough to continue f. Given the following data, calculate the cash flow per share of common stook ratio, the a decrease in the interst rate applicable to the Company's incremental borrowings? that seems to be missing? the present dividend payments? cash flew margin ratio, and cash flow liquidity ratio. (in millions) Average number of shares of common stock outstanding Net sales Cash and marketable securities Current liabilities 507 4,429 3,124 3,924 Mechan Systems Company develops, manufactures, markets, installs and supports a wide range of standards-based LAN and WAN connectivity hardware and software products. The company's statements of cash flow for the years 2010-2012 follow. Then the relevant portion of Management's Discussion and Analysis of the statement of cash flows is provided. Problem 11-4 Analyze Mechan ystems Company's statement of cash flows (L.O. 5, 6) CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended February 29, 2012, and February 28, 2011 and 2010 (in thousands) 2012 2011 2010 Cash flows from operating activities: $164,418 161,974 $119,218 Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Provision for losses on accounts receivable Loss on disposals of property, plant and equipment Deferred taxes Changes in assets and liabilities: 32,061 356 93 26,832 72 174 17,335 1,734 (38,766) (4,434) 6,151) Accounts receivables (55,10 (27,698) 17,707) Prepaid expenses and other assets Accounts payable and accrued expenses Income taxes payable (50,483) (23,080) 8,758) 1,211 11,336 22,003 3,705 10,476 3,924) $100,347 $152,529 $125,074 (18,844) (3,123) 62,908 Net cash provided by operating activities Cash flows from investing activities: Capital expenditures Purchase of available-for-sale securities Purchase of held-to-maturity securities Maturities of marketable securities (65,035) (63,091) (39,399) (79,427) (71,598) (30,097) (205,852) (282,712) (258,517) 208,922323,682197406 Net cash used in investing activities $(141,392) (93,719)(130,607) Cash flows from financing activities: Repayment of notes recelvable from stockholders Repurchase of common stock Tax benefit of options exercised Common stock issued to employee stock purchase plan Proceeds from stock option exercise $ 174$13166 (1,173) (13,070) 5,712 2,287 4,887 7,215 3,323 6,980 1,637 7,185 Net cash provided by (used for) financing activities 16,021881 -$ 25,560 $ (53) $ 15,868 Effect of exchange rate changes on cash Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year Cash paid during the year for: 166 712 161 10,496 114,032 54,563 44,067 $ 98,713 114,032 54,563 (15,319) 59,469 $ 105,233 68,420 67,263 Income taxes Management's Discussion and Analysis Net cash provided by operating activities was $100.3 million in fiscal 2012, compared to $152.5 million in fiscal 2011 and $125.1 million in fiscal 2010. Capital investment for fiseal 2012 of $65.0 million included $9.8 million for building costs of which $3.4 was for the purchase of an enineein building. $21.4 million for engineering computer and computer related softwane and equipment, $5.5 million for mannfacturing and related equipment and $19.0 million for expanding global sales operations. During fiseal 2011, capital expenditures of $63.1 million included approximately $8.2 million for building costs related to expanding manufachuring and distribution capacities and enlarging worldwide sales operations, $12.5 million for manufacturing and manufacturing support equipment and $15.0 million for engineering computer and computer related equipment. Another S15.0 million was spent in support of expanded global sales activities. During fiscal 2010, capital expendinures of $39.4 million included $3.9 million on buildings, $10.1 million on engineering qpment, $7.8 million on manufacturing capacity expansions and S2.0 million to equip new sales offices Cash, cash equivalents and marketable securities increased during fiscal 2012 to $407.0 million-from $345.9 million in the prior fiscal year. State and local municipal bonds of approximately $264.2 llion, maturing in approximately 1.5 years, were being held by the Company at February 29, 2012. At February 29,2012, the Company didnot have any short or long term borowing or any significant financial commitments outstanding, other than those required in the normal course of business. In the opinion of management, intenally generated funds from operations and existing cash, cash equivalents and marketable securities will be adequate to support the Company's working capital and capital expenditures requirements for both short and long tem needs. CHAPTER 11 Analysis Using the Statement of Cash Flows 351 a. Which method did the company use in arriving at net cash flows from operating activities? b. Did curent assets other than cash increase or decrease during the year ended February 29, 2012? c. Did current liabilities increase or decrease during the year ended February 29. 2012? d. What were the main investing activities during tis three-year period? e. What was the main source of cash from financing activities during the three-year period? f. Did the company pay any interest expense during the year ended February 19, 2012? g. Given the following data, calculate the cash flow per share of common stock ratio, the cash flow margin ratio, and the cash flow liquidity ratio. How do these ratios compare with the ratios shown for other companies in the chapter? (in thousands) Average number of shares of common stock outstanding Net sales Cash and marketable securitles Current liabilities 71,839 1,069,71S 253,540 164,352 The following comparative balance sheets and other data are for Dayton Tent & Awning Sales, Inc Problem 11-5 Prepare working paper and statement of cash flows under the indirect method (Appendix) (L.O. 7) DAYTON TENT & AWNING SALES, INC. Comparative Balance Sheets June 30, 2013 and 2012 2013 2012 Assets Cash Accounts receivable, net Merchandise inventory Prepaid insurance $441,800 332,600 432,900 850,200 5,850 351,000 2,184,000 1,209,000 468,000 750,750 819,000 3,900 312,000 Buildings Machinery and tools Accumulated depreclation-machinery and tools Total assets 858,000 (809,250)(510,900) 4,560,200 3,138,650 Liabilities and Stockholders' Equity Accounts payable Accrued liabilities payable Bank loans (due in 2016) Mortgage bonds payable Common stock $100 par Paid-in capital in excess of par Retained earnings Total liabilities and stockholders' equity 185,800 56,550 382,200 1,755,000 58,500 1,895,400 226,750 275,500 111,700 66,300 185,250 585,000 ,914,900 4,560,200 3,138,650 1. Net income for the year was $128,000. 2. Depreciation for the year was $356,850. 3. There was a gain of $7.800 on the sale of land. The land was sold for $46,800. 4. The additional mortgage bonds were issued at face value as partial payment for a Additional data building valued at $975,000. The amount of cash paid was $778,050 5. Machinery and tools were purchased for $448,500 cash 6. Fully depreciated machinery with a cost of $58,500 was scrapped and written off. 7. Additional common stock was issued at $105 per share. The total proceeds were $1.228.500 8. Dividends declared and paid were S147.500. 9. A payment was made on the bank loan, $9,750 10. The company paid interest of $9,000 and income taxes of $75,000 a. Prepare a working paper for a statement of cash flows. b. Prepare a statement of cash flows under the indirect method. Also prepare any Reguired necessary supplemental schedule(s)