Rowan also provided the following information:

The company sold equipment that had an original cost of $16 million and accumulated depreciation of $9 million. The cash proceeds from the sale were $11 million. The gain on the sale was $4 million.

The company did not issue any new bonds during the year.

The company paid a cash dividend during the year.

The company did not complete any common stock transactions during the year.

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Required:

1. Using the indirect method, prepare a statement of cash flows for the year.

2. Calculate the free cash flow for the year.

3. To help Rowan assess its liquidity at the end of the year, calculate the following:

Current ratio & Acid-test (quick) ratio

4. To help Rowan assess its asset management, calculate the following:

Average collection period (assuming all sales are on account) & Average sale period

A comparative balance sheet and an income statement for Rowan Company are given belovw Rowan Company Comparative Balance Sheet (dollars in millions) Ending Beginning Balance Balance Assets Current assets: Cash and cash equivalents $ 70$91 572 580 ?, 243 1,656 480 1,176 $2,305$2,419 Accounts receivable 536 620 1,226 1,719 640 1,079 Inventory Total current assets Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment Total assets Liabilities and Stockholders' Equity Current liabilities: $ 205 18e 105 Accounts payable Accrued liabilities 94 Income taxes payable Total current liabilities Bonds payable Total liabilities Stockholders' equity: 373 310 683 180 55103 Common stock Retained earnings 800 Total stockholders' equity Total liabilities and stockholders equity 800 936 1,736 $2,305 $%2,419 1,754 Rowan Company Income Statement For the Year Ended December 31 (dollars in millions) Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Nonoperating items: Gain on sale of equipment Income before taxes Income taxes Net income $ 4,350 3.470 880 820 60 4 64 $ 42